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eBay Files Patent Application for Programmable Money

Op-ed - eBay Files Patent Application for Programmable Money

Gift giving during the holidays just took on a whole new meaning. eBay, the parent company of PayPal, filed patent application 20130339188, “Gift Token” with the United States Patent and Trademark Office (USPTO) on June 18, 2012. The USPTO published the application on December 19, 2013. The technology was invented by its engineers from Tamilnadu, India and assigned to eBay Inc. of San Jose, California.

The innocuous sounding application “Gift Token” was probably written in such a way as to shield trade secrets from competitive intelligence gathering. It is common for companies to obfuscate their filings to make them harder to decipher. Just like Subway’s Footlong doesn’t have to be a “foot long,” buried in the patent application eBay states that “Gift Token” does not have to be a gift:

“…Systems and method are disclosed for giving gifts or payment instruments in the form of security or payment tokens…The token can {be} a gift token. The token does not have to be a gift… the token can be a payment made by the user to the recipient, such as for goods received or services rendered…”

the application abstract is more general in nature:

“…Systems and methods are disclosed for giving gifts in the form of secure tokens. A gift can be given from a user of a payment provider to a gift recipient. The recipient can be a member of the user’s family, a friend, or any other person or entity. The recipient can use the token to purchase a product using a checkout though the payment provider. The purchase can be made without requiring the user to create the user’s own payment provider account…”

Before I delve into the application itself I would like to describe what it is I believe eBay is trying to do with this technology. While the application makes no mention of Bitcoin or cryptocurrencies for that matter they appear to be after “programable money.” While this technology is not a digital currency, it is a wrapper around a currency….any currency.

eBay appears to be creating a cross between “colored coin” (more on this later) and a whitelist for a currency. Examples of a whitelist include Payment Pathways’ “Greenlist”, IBM’s “e-Currency Validation Authorization Services Platform” and Coin Validation.

Interest in programmable money has taken off since this introduction of the popular Bitcoin protocol. Bitcoin itself has been called programmable money because it is a protocol like HTTP or “Hypertext Transfer Protocol.” More specifically Bitcoin (capital case) is the protocol while bitcoins (lower case) are the units of currency that move across this protocol. The movement of bitcoins across the Bitcoin network was just the initial use for the protocol (hat tip toRichard Brownand Andreas M. Antonopoulos [YouTube] for explaining this). Additional applications being developed include certification such as Proof of Existence and escrow and multisignature authorization found on Bitrated arbitration.

On June 16, 2010, Satoshi Nakamoto, the founder of Bitcoin, stated in the BitcoinTalk Bitcoin Forum that this type of functionality was native to Bitcoin and was essentially dormant until developers begin integrating it:

“…The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc. If Bitcoin catches on in a big way, these are things we’ll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later…”

Mastercoin Executive Director Ron Gross (YouTube) may have very well conceived of the colored coin analogy in a BitcoinTalk discussion on November 11, 2011:

“…the special “asset tokens” satoshis are colored, and don’t relate at all to normal satoshis. The one who owns the colored satoshi owns the asset.”

BitcoinX, now known as Colored Coin group, explains that it is a “a colored bitcoin minting and exchange protocol that works on top of an existing blockchain infrastructure” and further explains what a colored coin is in its Colored Coins – BitcoinX Whitepaper (which is also co-authored by Bitcoin Magazine’s very own Vitalik Buterin):

“… by carefully tracking the origin of a given bitcoin, it is possible to “color” a set of bitcoins to distinguish it from the rest. These bitcoins can then have special properties supported by either an issuing agent or by public agreement, and have value independent of the face value of the underlying bitcoins…”

Back to eBay’s Patent:

“…Systems and method are disclosed for giving gifts or payment instruments in the form of security or payment tokens, according to an embodiment. A gift or payment instrument can be given from a user of a payment provider, such as PayPal, Inc., to a gift recipient. The recipient can be a member of the user’s family, a friend, a sub-contractor, or any other person or entity. The recipient can use the token to purchase a product using the payment provider. The purchase can be made from a brick and mortar store or an online store. The purchase can be made without requiring the user to create the user’s own payment provider account…”

While being able to send a payment to someone who is not already a pre-existing account holder within the payment platform may sound like an innovation it must be stated that Paypal already has this functionality. As a Paypal Employee explains in the PayPal Community Help Forum:

“You can send money to anyone with an email address but in order to claim the funds they would have to open a PayPal account. What happens is that you send the money to their email address, they get an email letting them know they have received funds. They are then instructed to follow the directions to open an account to receive the funds into their PayPal balance.”

and similar to PayPal, “The token can be given without the user sharing the user’s credential with the recipient.“ also has similar functionality with their Send To Anyone:

“Send Via Send Bitcoins using Email, Facebook & SMS…Send To Anyone Send Bitcoins to anyone via Email, SMS or Facebook even if they don’t have a bitcoin address or a My Wallet account.”

However, “Gift Token” has an additional feature that makes it particularly flexible:

“..a person who does not have an account with the payment provider {can} use the token…Whether the recipient has a payment provider account or does not have a payment provider account has no impact upon the recipient’s ability to use the token.”

This is extremely important feature and the reason why I determined that this particular patent application even merits discussion (not to mention that eBay had a monumental year for the sheer number of patent applications submitted to the patent office).

If this technology were to become ubiquitous, it could very well change our relationship with money.

The Colored Coin white paper explains how “A company may wish to create a corporate currency, such as Air Miles rewards points, or even plain coupons.”

The eBay patent application further explains:

“…the token can be limited to use at a specified store, a specified group of stores, or a specified chain of stores. The token can be limited to use in purchasing a specified product. The token can be limited to use geographically. For example, the token can be limited to use within a specified city or group of cities, within a specified state or group of states, within a specified country or group of countries, and/or at any location or group of locations. The token can be limited to use temporally. For example, the token can be limited to use on weekdays, on weekends, from 11:00 AM to 1:00 PM on weekdays, and/or at any other time…”

“Open Money”

The technology behind this patent is reminiscent of Ericsson’s Open Money patent application 20130166398 “System And Method For Implementing A Context Based Payment System.” which includes LDC$ or Location Dependent Currency which I previously discussed on Let’s Talk Bitcoin. Those with a dystopian eye will be just as alarmed. While this technology can be used for good …as Ericsson put it… for the “good of society”…it can also be used for evil…to control society. There are very serious ramifications behind manipulating the fungibility of money.

An innocuous illustration that eBay provided was that a parent can issue the Gift Token to their children with restrictions.

An example I can think of is that a child is given an allowance and that the technology would allow the parent to determine how it is used. For instance Gift Token can be programmed to allow the child to purchase anything that is legal for a minor to purchase with the exception of no more than one sugary drink per day.

eBay’s filing further explains how it can be used to restrict and prohibit certain vices such as cigarette and alcohol consumption:

“…Products can be specified for which the token cannot be used to purchase. For example, a limitation upon the use of the token can specify that the token cannot be used for the purchase of alcohol or cigarettes. Rather than not allowing such items altogether, a limit can be placed on the amount of such purchases in a given time period. For example, $20 worth of beer and $10 worth of cigarettes can be purchased in one week…”

and further it explains how this technology can be changed based on local laws and ordinances:

“… the recipient’s ability to purchase alcohol or cigarettes with the token can change automatically due to a change in the legal age for purchasing alcohol or cigarettes when the change in the law goes into effect…”

However it isn’t hard to imagine a scenario where a company could use this to make restrictions on the salaries of their employees. For example if a organization wanted to cut down on healthcare costs, they could program their employee’s paycheck so that their salary cannot be used to purchase cigarettes. Though this sounds far fetched, remember that eBay’s goal is for this (or any) technology to become ubiquitous and that anyone (even non-account holders) can send, receive and spend this “Gift Token.”

“Whether the recipient has a payment provider account or does not have a payment provider account has no impact upon the recipient’s ability to use the token”

Similar to Bitcoin an algorithm is used to secure the Gift Token. Bitcoin uses sha-256 (a.k.a Secure Hash Algorithm) while the Bitcoin-Qt client uses AES-256-CBC to encrypt the private keys in the bitcoin wallet. eBay suggests using AES-256:

“…the token can be encrypted. The token can be encrypted using any cryptographic algorithm, such as AES 256 for example… The payment server or an administrator can determine the strength of the encryption…”


I spoke with David Birch, Global Ambassador and founding Director of Consult Hyperion. Mr. Birch is an internationally-recognized thought leader in digital identity and digital money.

For those of you concerned about the patentability of this technology Mr. Birch stated that, “The patent is trivial and obvious” and “I am baffled as to why the US Patent Office allows companies to patent this sort of thing.”

While Bitcoin is a technological achievement, the same probably cannot be said for eBay’s Gift Token. However, whether or not this technology has any merit is up to USPTO and perhaps the legal system to figure out. Even if it is determined that Gift Token is not worthy of a patent being granted doesn’t mean the technology is vaporware nor does it mean that eBay would not try to pursue it.

Mr. Birch did question my comparison of Gift Token to Bitcoin and said that:

“The patent is about pre-paid “e-gift cards” (and is unrelated to Bitcoin). It is, essentially, tokenized Visa Buxx…The idea of programmable coins in Bitcoin is new and interesting. The idea of sending “restricted” funds is very different.”

Gift cards typically exist in walled gardens that restrict spending within an ecosystem. For example one cannot spend a Target gift card at Walmart. Prepaid access cards such as “Visa Buxx” allow more flexibility but require the cardholder to use the card within a particular payment network. However, eBay’s gift token is special because it can be used virtually anywhere because anyone can accept it. While the spirit of the patent application may indeed be that of an e-gift card, its versatile nature permits it to be used for so much more. The difference between eBay’s Gift Token being a simple payment instrument and means to program money is not so black and white.

A Tangled Web We Weave

Pierre Omidyar, the founder of eBay, recently wrote a piece for the Huffington Post “WikiLeaks, Press Freedom and Free Expression in the Digital Age” which revisited PayPal’s cutting off of WikiLeak’s PayPal account. Mr. Omidyar referred to the severance of services as a “suspension…for a period of several months” which baffled WikiLeaks (Twitter) who considers the ban to be indefinite. However, WikiLeaks was able to circumvent the financial blockade using Bitcoin.

Julian Assange, founder of WikiLeaks has still not been charged with any crime in the United States…and yet PayPal cut off WikiLeak’s services. One has to wonder how a so called “enemy of the internet“ might use Gift Token much less the United States.

The US government supports freedom on the internet through grants to the Tor Project.Examples include the US Department of State Bureau of Democracy, Human Rights, and Labor and the National Science Foundation. Tor was originally a U.S. Naval Research Laboratory project and states that it is used “every day by a wide variety of purposes by normal people, the military, journalists, law enforcement officers, activists, and many others.” One has to wonder if the Dark Wallet “Your keys. Your privacy. Your sovereignty” to “…preserve Bitcoin’s principles of privacy and freedom of financial speech” will be held in the same regard as the Tor project. With proposals like “Gift Token” I hope they are.

Note, Vitalik Buterin and Mihai Alisie of Bitcoin Magazine both are contributors to the Dark Wallet project.

Bow portion of Graphic via Vector Free