PayPal has taken a significant step towards creating its own blockchain ecosystem by filing a patent application for a system that allows the purchase and transfer of nonfungible tokens (NFTs), both on- and off-chain. The patent application, which was filed in March and published on September 21, describes a system where users can buy and sell NFTs through a third-party service provider. Although not specified, the text mentions Ethereum as a potential provider.
PayPal aims to leverage the full potential of NFTs for tokenization, extending beyond the exchange of digital collectibles. The application states that NFTs can represent any unique piece of digital data that can be tracked using a decentralized blockchain ledger. Examples of such assets include digital images and videos, music, collectibles, digital art, deeds to personal property, event tickets, legal documents, and other real-world items.
The system described in the patent application can be customized in various ways. For example, it can support fractionalized purchases through the distribution of governance tokens, which can then be traded. Additionally, a decentralized autonomous organization associated with the service provider can be used to enhance NFT liquidity through a dedicated platform. NFTs could also generate income from royalties.
Processing by the service provider may include compliance and risk management. While users can have their own digital wallets, it is not mandatory. An alternative option is to use a third-party broker that offers storage and checkout services. Off-chain transactions can be handled within an “omnibus wallet” associated with the service provider, which contains the wallets of both the buyer and seller. This avoids the need to register the transfer on the blockchain or pay gas fees for on-chain transactions.
The system supports the use of any currency. In August, PayPal introduced its own stablecoin called PayPal USD (PYUSD), which is built on Ethereum.