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Block chain – from crypto currency to corporate cog

Block chain – from crypto currency to corporate cog

By Kate Voller, patent attorney at Gill Jennings & Every

Crypto currency has a volatile history. The glory days of late 2017 – where the price of bit coin came close to reaching $20,000 – are long past. Indeed, with prices dropping by more than 80 percent in the following year, its decline was so dramatic that many sceptics felt vindicated in their belief that the surge indicated a bubble about to burst. After all the initial hype, the public appeared to have fallen out of love with crypto currency.

Kate Voller

Kate Voller

While the value of bit coin has been heading downwards, however, the number of applications for patents related to block chain, originally designed to serve as a public transaction ledger, moved in the opposite direction. Large corporations such as IBM, MasterCard and Bank of America are becoming increasingly interested in the use of block chain in applications such as smart contracts, biometric security solutions, and data storage.

When you consider the cost implications of filing a patent, in terms of R&D and legal fees alone,this uptick in patent applications can be read as a good indicator of investment. So, despite its detractors, it appears that block chain may well have a future – although not necessarily related to currency, as was first intended.

Don’t believe the hype?

An open, distributed ledger, block chain is used to permanently and securely record transactions between two parties. It’s little surprise, therefore, that many of the patent applications have come from sectors such as online retail and financial services that depend on visibility and trust around the sharing of information.

Only a year ago, however, Gartner suggested that the technology was not yet capable of justifying the extreme hype around it, and was not yet sufficient for mission-critical use within the enterprise. A lack of standardisation, for example, could prove problematic. A study found that the cloud-based code repository GitHub contained more than 6,500 active block chain projects, using different protocols, platforms, and privacy measures, and written in different coding languages.

Despite such reservations, the number of applications for block chain-related patents almost doubled between 2017 and 2018. The majority of these came from large international corporations, suggesting that they may see a potential in block chain where others do not. Facebook, of course, announced its own intentions to launch a crypto currency called Libra, earlier this year.

However,the majority of organisations are pursuing applications not related to crypto currencies,and some are even doing so while warning the public against crypto currencies. Take the Bank of America, which banned customers from buying crypto currencies using credit cards in 2018 . Yet, its Chief Operations & Technology Officer,Catherine Besant previously told CNBC that having block chain-related patents is “very important […] to reserve our spot even before we know what the commercial application might be”. Indeed, Bank of America is one of the top five global patent holders for block chain technology, suggesting a vast divergence between its attitude toward crypto currency and its private intentions for the underpinning block chain technology.

Monetisation and protection

Ahead of Bank of America, the top international block chain patent holders are IBM, Alibaba, Intel, MasterCard, China Union Pay and Siemens – some of the largest corporations in the world. Of course, this raises a potential risk that, with so many patent applications being filed, block chain could soon be monopolised by a few giants of enterprise. This would be quite a turn for a technology that was often lauded for its potential to decentralise control away from the likes of large banks.

There is also a question over the motivation for these companies in filing these patents.One possibility is that these organisations are securing patents with the intention of licensing the technology out to other companies. If their block chain application successfully addresses a market need, this could prove extremely lucrative for the licensor.

Another potential motivation, which is potentially more disturbing for those who see a promising future in block chain, is that these large organisations are actually filing patents to stop “disruptors” from developing the technology. In some cases, companies will file several patents but never develop the corresponding products or services, knowing that no one else can either because they would be infringing. As block chain becomes more popular, this technique is likely to become more widespread.

Looking ahead

Less than a decade ago, the terms block chain and crypto currency were inseparable, and the public was the general user. Since then, block chain has moved away from its original purpose, and has become increasingly regarded as an enabler for digital businesses. Companies across a range of industries are now exploring how it can be applied to a variety of specific use cases, which will undoubtedly bring some innovative products to market.

However, examining the filing data exposes that the main parties of interest in block chain are some of the largest corporations in the world. It remains to be seen whether their motivations are to genuinely pursue innovative applications of the technology, or actually to block the block chain to avoid its potential for disruptive harm to potential business models. Nevertheless, the movement of block chain from a public tool into corporate hands is important to track, because it will undoubtedly shape the future of the technology.

Global Banking & Finance Review


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