Jack Dorsey is a busy man these days.
Most people know Dorsey as the CEO of the social media giant, Twitter (TWTR.NYSE), and a more select few know him as the CEO of fintech company Square (SQ.NYSE). He’s also a huge blockchain and cryptocurrency proponent, on record for wanting to introduce a decentralized twitter, and also for integrating bitcoin access on his Square CashApp as early as 2018. The service generated $190 million in revenue over the first two quarters, pulling in a little under $3 million in gross profit.
Earlier this month, Dorsey secured a crypto-related patent that registers a system for converting payments in fiat to “non-fiat instruments.”
If you’re at all curious, here’s what abstract from their patent application:
“In one embodiment, a method includes receiving a request for payment associated with a transaction between a first user and a second user, where the request specifies a payment amount in a fiat currency and identifying an indication that the first user intends to satisfy the request for payment using a non-fiat instrument. The method also includes initiating a first transfer of a value corresponding to the payment amount in the non-fiat instrument from a first balance of the first user to one or more service balances of a payment service and initiating a second transfer of a value corresponding to the payment amount in the fiat currency from the one or more service balances of the payment service to a second balance of the second user.”
In laymen’s terms, it allows users on the cryptocurrency payment network to pay with fiat, while recipients can choose to receive their funds in digital currency. The exchange happens on the network itself, and requires no extra steps from the parties involved in the transaction. The networks works in reverse as well, giving someone the opportunity to pay for something in Bitcoin while requesting that the payout be given in fiat for the other person. This could potentially be a way for retail customers to use cryptocurrency to purchase their goods at traditional online shops, as well as brick and mortar stores.
A scalable solution
The patent lists several advantages to the technology, including a proposed answer to Bitcoin’s scalability issue. The patent document apparently has the bottleneck scalability problem cut down from 10 minutes to a matter of seconds, finally making Bitcoin transactions comparable to credit cards.
Forget about global instability. Forget about the multiple country led coalition against the widespread adoption of cryptocurrency as global currency of exchange. The biggest stumbling block for widespread full-adoption of Bitcoin is the 10-minute waiting time for the block to close. Every company runs into it eventually, and most do their utmost to allude to having answers, or are at least working on one, but so far none have come close. Some companies, like Netcents (NC.C) get around this problem by partnering with banks and other financial lenders to provide temporary in what is essentially a float. In the case of counterparty risk, wherein the buyer runs off with the product and claws back his cryptocurrency offering (like you can do with PayPal), the float covers the transaction while the messy details are hammered out. This isn’t exactly the greatest solution, but it’s something.
Dorsey apparently has an alternative answer.
Square’s crypto arm—called Square Crypto—released the Lightning Development Kit (LDK), which is designed to ease the process of integrating Lightning technology into businesses and projects, creating custom experiences for each client. It also comes with several tools including demonstration applications and language bindings for Bitcoin developers.
Fast as lightning
Without going too far down the rabbit-hole of technical specifics, the lightning network is a system designed to allow Bitcoin transactions happen off-chain. This would theoretically speed up Bitcoin transactions and push them through in seconds, thus eliminating the scalability problem.
The Lightning Network is a fledgling system designed to improve on the world’s number most popular cryptocurrency network by allowing smaller Bitcoin transactions to occur off-chain. The idea is to speed up Bitcoin transactions and push them through in as little as a few seconds.
There’s a wrinkle, though. The network has difficulties with transactions more than $200, and can only guarantee transactions of $0.03 or less. There’s the possibility that we could theoretically buy our morning coffee using bitcoin in the future using this technology, but if you want to buy your entire office lunch, then you may want to consider whipping out your credit card.
—Joseph Morton