Shaurya Malwa · 20 hours ago · 2 min read
Payment titan Mastercard was awarded a patent for developing a method of linking cryptographic forms of money to fiat currency accounts.
Mastercard Aims to Augment Cryptocurrency Adoption
Granted by the United States Patent and Trademark Office (USPTO) on July 17, 2018, the patent details a structure that manages “fractional reserves of blockchain currency.”
Filed in May 2018, Mastercard touts the plan to serve customer interest in cryptocurrencies and provide a gateway for those concerned about the security of existing digital token payment frameworks, in addition to speeding up the infamous slow transactions.
Mastercard noted blockchain technology serves a limitation to customer security regardless of its famed immutability, which can potentially act as resistance for payees. The firm singled out Bitcoin’s ten minute transaction time – due to verification, block size, and extensive resource use – as a limiting factor in bringing cryptocurrency payments to fruition.
Consumers are accustomed to the “nanosecond” processing times of the current payment mechanisms, which undoubtedly triumph over cryptocurrencies. Due to this aspect, customers either wait for the latter’s payments to actualize or rely on trust that a payment is made.
However, this may lead to increased fraud in the sector as blockchains are inherently anonymous and the customer’s identity remains unknown in such retail transactions, noted Mastercard.
With the aforementioned issues, the company believes its blockchain solution can help augment the adoption of cryptocurrencies by retailers, warehouses, and even consumers, who are willing to use the digital tokens if provided with robust security.
The payments giant noted:
“The use of traditional payment networks and payment systems technologies in combination with blockchain currencies may provide consumers and merchants the benefits of the decentralised blockchain while still maintaining security of account information and provide a strong defence against fraud and theft.”
Regarding technical aspects, Mastercard’s patent micro-manages a digital currency account.
As described, two accounts are required by a user to implement the solution; A private bank account with fiat reserves linked to a cryptocurrency account with some amount of digital funds present.
For security purposes, details of a user’s account profile, including all relevant data about transactions with at least one fiat account, a personal identifier, and a home/business address, will be stamped on Mastercard’s blockchain.
During a transaction, a “receiving device” must adhere to security standards as set by regulators, including “at least a data element reserved for private use including a specific address and a transaction amount.”
The system then matches the identifiers of the two accounts and validates the presence of similar funds. After this occurs in the final step the specified cryptocurrency amount – as included in the transactional message – will be updated on the receiver’s device.