Is MasterCard’s new patent centralizing the decentralized?
American payment services may be trying to compete with Ripple and IBM who already offer centralized financial blockchain solutions
Credit giant MasterCard looks set to enter the crypto space following the approval of an application with the US Patent and Trademark Office. The newly-approved patent is for a system that uses blockchain to link digital assets to fiat-currency-based accounts while also speeding up transactions.
The patent application, originally filed in May, was granted this week and has been described as a “description of systems and method for managing fractional reserves of blockchain currency”. The company is touting the new system as one that speeds up transaction times for crypto-currencies and provides security for the payee, thus benefiting its customers.
This will be achieved by MasterCard holding reserves in digital currencies which it will use to assist transactions. Traditional banks also employ this ‘fractional reserve’ method when they choose whether to invest or lend money that customers deposit with them. Stablecoin Tether (USDT) has also been accused of operating this way due to the lack of transparent audits. Tether continues to deny this and asserts that the coin is backed by US$2.7 billion in reserves.
To elaborate on the new method MasterCard wrote: “While blockchain currencies can often provide such safety and security for the payer’s information, such security may be limited for payees, particularly due to the limitations of the blockchain. For example, it often takes a significant amount of time, around ten minutes, for a blockchain-based transaction to be processed, due to the computer processing time and resources required to verify and update the blockchain.”
The financial services conglomerate went on to state that consumers have become accustomed to extremely fast transactions for traditional fiat payments and that they are “forced to wait a significant amount of time for a blockchain transaction to be conducted, or the payee must rely on the payer’s good faith that their transfer will be valid.”
It seems that this will lead to MasterCard managing all accounts, both crypto and fiat, a situation which some critics say negates the premise of decentralized currencies. The company claims that consumers may be more inclined to use crypto-currencies if the decentralized nature of transactions was removed. “There is a need to improve on the storage and processing of transactions that utilise blockchain currencies,” it added.
In essence what MasterCard would appear to be trying to do is compete with the likes of Ripple and IBM, both of which offer centralized blockchain financial sector solutions.
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