Block’s crypto banking gameplan

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Plus: A peek at eBay’s NFT machine; Booz Allen’s AI watermark;

Happy Monday and welcome to Patent Drop! 

Today, we’ll dive into a patent application from Block for collateral crypto, Booz Allen Hamilton’s tech to put a name on AI models, filings from eBay that lay out how NFTs and vintage watches could go hand in hand…. or hand on wrist. 

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Let’s check it out. 

#1. Block’s crypto collateral plan 

Block may be fattening its crypto piggy bank. 

The parent company of Square is seeking to patent tech for crypto asset “collateral management.” To break it down: Block’s system allows users to put up blockchain assets, like cryptocurrency, as collateral for a loan and uses a distributed ledger to track things like loan amount, interest rate, payment due dates, payment histories and accrued interest. 

Block’s proprietary tech attempts to solve two of the biggest risk factors that deter loan providers from lending against crypto: The erratic fluctuations in value and the “low barriers to transaction” (a.k.a., how easy it is to transfer your assets to someone else).

To prevent a borrower from transferring assets held as collateral to someone else, a new account is created “over which the borrower has diminished control.” Block’s tech also monitors the value of the crypto asset being held as collateral and then adjusts it if it passes a certain threshold. For example, it will also automatically add cryptocurrency from the borrower to a collateral account if the “loan-to-value ratio” drops too low. 

“Holders of virtual assets …  often find it difficult to borrow against those assets, using them as collateral,” Block said in its filing. “Often asset-owners wish to retain ownership of the virtual cryptographic assets to avoid tax consequences of a sale or to maintain exposure to price changes in the assets and participate in appreciation.” 

While Block referenced crypto throughout the application, the company noted that this tech could be applied to NFTs and other virtual assets as well. 

In the aftermath of last year’s crypto crash, crypto lending firms were hit particularly hard. Major crypto lenders like Celsius, Genesis and BlockFi all filed for bankruptcy, leaving their users in limbo and owing creditors tens of billions of dollars. 

But after its name change from Square to Block, co-founder and CEO Jack Dorsey staked the company’s future on crypto, telling investors at a presentation last May that the currency is “open standard for global money transmission,” allowing its “entire business to move faster globally.” 

Despite the volatility in cryptocurrency over the past year, Block seems to want to lead the charge in the tech’s development. Since that presentation, Block has been hammering away at a number of fanciful crypto-related projects, including a Bitcoin mining development kit and a physical crypto wallet that looks like a literal rock.  

This patent filing marks the latest of Block’s crypto shift, and it could manifest in a few different ways. It could be integrated into the existing infrastructure, like Block subsidiary Cash App (which already offers crypto trading), packaged as a product to be sold to other companies, or created into a whole new platform entirely. 

One potential problem is that several other companies offer services eerily similar to that of Block’s patent, Stuart Sim, head of marketing at blockchain real estate company Fabrica, told me. On the NFT side, there are platforms like NFTfi, Arcade and BendDAO, and on the crypto side, lenders like Aave, Compound and Nexo are leaders. 

“This looks like services that already exist, from platforms that are doing hundreds of millions of dollars in NFT loans,” said Sim. If granted, Block’s patent may put these businesses in a precarious spot. 

#2. EBay’s nonfungible dreams 

While we’re on the topic of blockchain, a few of eBay’s recent patent filings show how it wants to be a one-stop shop for both luxury sneakers and NFTs.

First up, eBay filed a patent application for a system for “fingerprinting physical items to mint NFTs.” Basically, this tech uses several photos of a product to create and mind a “digital twin NFT,” as well as to authenticate the item. Once it’s authenticated, a user can create a combined listing for both the item and the NFT. 

According to eBay, blockchain can be a helpful tool in selling physical products, particularly luxury goods, due to its “ability to uniquely identify an asset from other assets and … the functionality to record every transaction involving the asset.” 

The company also wants to patent tech for “digital content control” based on NFTs. This essentially allows eBay sellers to offer NFT holders exclusive content, like digital artwork, videos, or even redeemable discounts for other products, by “twinning” the NFT, or simply creating a corresponding digital item (similar to its plan for physical fingerprinting). 

Adding this functionality, eBay, said, “encourages retention of the NFT and thus functionality made available via the NFT.”