Bitcoin exchange Coinbase, Inc. has taken what could be at mildly best described as an interesting move by filing patents for many of the key aspects of the current existing Bitcoin marketplace.
The number of filings by Coinbase with the United States Patent & Trademark Office (USPTO) come to nine and include:
- Hot wallet for holding Bitcoin
- User Private Key Control
- Bitcoin Private Key Splitting for Cold Storage
- Instant Exchange
- Personal Vault
- Send Bitcoin to Email Address
- Bitcoin Exchange
- Tip Button
- Off-Blockchain Transactions in combination with On-Blockchain transactions
If you’re not fully aware of what a patent is, or what it does, or more importantly in this case what the ramifications are, here’s the definition from Wikipedia (emphasis added is ours):
A patent is a set of exclusive rights granted by a sovereign state to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention. An invention is a solution to a specific technological problem and is a product or a process.
Coinbase is, without question, claiming ownership and exclusive rights over key parts of the Bitcoin industry as it stands today, despite the fact that the company was founded in June 2012.
Coinbase Chief Executive Officer Brian Armstrong is spinning the move, telling Coindesk that that the filing is one of providing protection for Coinbase against others who might try to do the same thing, and despite the fact they’ve raised $106.7 million in venture capital, they wouldn’t be using the patents against others:
“While it would be irresponsible for Coinbase not to apply for patents (we need to protect ourselves from larger companies engaging in patent warfare), we can certainly commit to not using patents offensively against smaller companies.”
While there is perhaps an argument that preventative patent filing has some small amount of merit, for Coinbase to file for effectively exclusive ownership of basic Bitcoin ideas such as a Bitcoin exchange is wrong, no matter how much they promise to not use those patents to shut down competitors, or charge them to operate, today.
Words mean little when you’re a venture capital-backed company, and your investors will see that if these patents are awarded they will literally give you market dominance overnight because you’d be able to own the entire Bitcoin space in the United States.
Suffice it to say, much of the goodwill Coinbase once held in the broader Bitcoin community just disappeared overnight.