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Coinbase Files for Patent to Secure Bitcoin Private Keys

Lester Coleman on 05/12/2016

Coinbase has filed a patent for a bitcoin host computer security system for private keys that it says addresses private key security concerns. The application, filed with the U.S. Patent & Trademark Office, noted a key ceremony application creates bundles that each contain a master key share. The master key shares each store a master key used for private key encryption during a checkout process.


Existing systems do not maintain security over private bitcoin keys while allowing users to check out on a merchant page and make payments using their wallets, the application noted.

Instructions For Custodians


The invention provides a computer-readable medium that stores a set of instructions for key custodians.


At any point after the master key is loaded, the system can be frozen. It can be unfrozen using keys from the key ceremony.


The checkout process can be carried out when the system is frozen and unfrozen. The payment process can only be carried out when the system is unfrozen.

Coinbase Courts Controversy


Coinbase sparked controversy within the largely open-source bitcoin industry after filing for nine patents last year. Some bitcoiners suggested Coinbase sought to create a monopoly over key bitcoin services. CEO Brian Armstrong claimed this is not the case.


Armstrong noted in a Medium blog last year that the company’s goal in obtaining bitcoin related patents is to keep them out of the hands of bad people, use them defensively to protect Coinbase from patent trolls, and help ensure the bitcoin ecosystem continues to grow.


As Coinbase grows, it will not be a matter of if, but when, patent trolls come after the company trying to extract hundreds of millions of dollars, Armstrong noted. One of the best ways to defend against patent trolls is to build your own portfolio of patents.


Also read: Coinbase could go the Tesla route with patents, CEO confirms

No Blockchain Patents Granted


The U.S. Patent Office has yet to grant any blockchain patents, according to Fortune. Should a patent be granted, the holder could seek millions in dollars for damages from other blockchain users. Goldman Sachs, Bank of America and Morgan Stanley are among many companies that have sought blockchain-related patents.


“Patent trolling” refers to sitting on patents and using shell companies to file lawsuits against parties that violate the patents.


Justin Hill, a patent attorney at the law firm Olswang, recently wrote in Techrunch that the emergence of clusters of blockchain patents could be similar to what occurred in the telecom industry where companies pay intellectual property to holders to access technology.


A federal judge recently approved an Internal Revenue Service summons requiring Coinbase to  of bitcoin users between January 1, 2013 and December 31, 2015. Coinbase said it will fight the request.

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