Square Crypto Payment Patent May Put Pressure On BitPay

Thursday, 8/30/2018

Jack Dorsey isn't giving up on his bid to make bitcoin a universal currency, if a recent patent is any indication. His mobile credit card processing company, Square Inc., secured a patent on August 21 for a cryptocurrency payment network.

Specifically, the patent describes a method and system "of settling a point of sale transaction between a customer and a merchant, wherein the customer provides cryptocurrency and the merchant receives fiat currency."

Similar technology already exists. BitPay's payment processing system allows for quick settlements of transactions made in bitcoin and bitcoin cash. According to its website, by September 2013, 10,000 merchants were processing BTC payments via BitPay. More recent adopters of the network run the gamut from satellite service company DISH to the Seminole County Tax Office in Florida.

While the tech may be similar, the types of currencies to be accepted are not. The abstrusely worded patent application states:

"The disclosed technology addresses the need in the art for a payment service capable of accepting a greater diversity of currencies including fiat currencies (US dollars, Euro, Rupee, etc.) and non-fiat currencies including virtual currencies including cryptocurrencies (bitcoin, ether, etc.), commercial paper (loans, contracts, forms, etc.) and securities (stocks, bonds, derivatives, etc.), than a traditional payment system in a transaction between a customer and a merchant."

In short, Square wants to provide a payment settlement service that can work with blockchains outside of Bitcoin or Bitcoin Cash.

This is notable for two reasons. First, and most obviously, it would give Square a comparative advantage over BitPay; users could choose payments in a variety of cryptocurrencies.

Second, there's a technological consideration: transaction times. As the patent notes, "It is not practical for a coffee shop to sell a coffee in a transaction that could take hours before the transaction is confirmed by recording the transaction to the block chain [sic]." The technology Square is developing will apparently "process and approve a cryptocurrency transaction in near real time, i.e., in seconds. In some embodiments, cryptocurrency transaction approvals can be similar to the amount of time taken to approve a credit card transaction." How exactly it will do that is unclear.

BitPay approaches the problem differently, instead locking in an exchange rate at the time of payment. The actual settlement is quite a bit slower than Square's described method; a client quote published on the BitPay website enthuses that "the bitcoin transfer was completed in less than one hour."


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