PayPal files patent application for NFT ecosystem, allowing on-off chain trading

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PayPal has unveiled a patent application for an on- and off-chain NFT trading system in partnership with an undisclosed third-party service provider.

PayPal filed the patent application in March and announced it on September 21. While the specific provider remains unnamed, the patent application references Ethereum (ETH), the second-largest blockchain network.

PayPal is planning to utilize NFTs for tokenization beyond trading digital collectibles. In a statement, the payment platform said, “The NFT in this example may 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, and other digital art along with deeds to personal property, event tickets, legal documents and other real-world items.”

The system offers customization options. It can facilitate fractionalized purchases through tradable governance tokens and harness the power of decentralized autonomous organizations (DAOs) affiliated with the service provider to boost NFT liquidity on a dedicated platform.

Users have the option to use their personal digital wallets. Alternatively, a third-party broker could step in to provide storage and checkout services. Off-chain transactions are conducted through an “omnibus wallet” connected to the service provider, which houses both buyer and seller wallets.

PayPal emphasized in a statement that no transfer is registered on the blockchain, and there is no requirement to broadcast the transaction to the blockchain network or pay gas fees for making on-chain transactions. The system accepts any currency, according to the patent application.

PayPal adds on-off ramps for Web3 payments

On September 11, PayPal introduced on- and off-ramps for Web3 payments in the United States, allowing users to convert their cryptocurrencies directly into U.S. dollars within their PayPal balance.

The off-ramp feature is now available for wallets, decentralized applications, and NFT marketplaces.

PayPal said in a press release, “Once integrated, web3 merchants can help grow their user base by connecting to PayPal’s fast and seamless payments experience trusted by millions, while leveraging PayPal’s robust security controls and tools for fraud management, chargebacks and disputes.”

A YouTube video showcasing PayPal’s on- and off-ramp features displays a screenshot of a user sending 0.0015 BTC ($50) to an external wallet, with a $5 network fee and a $2.19 transaction fee. The video does not specify the wallet used for the transaction.

PayPal introduces stablecoin PYUSD

In August, PayPal introduced its stablecoin, PayPal USD (PYUSD), built on Ethereum. PYUSD has been integrated into Venmo, a well-known American mobile payment service founded in 2009.

“In the few weeks since its launch in the open market, PYUSD is already present on select exchanges including Crypto.com, Bitstamp, Coinbase, and Kraken; leading wallets like MetaMask, Ledger, and Phantom; custodians and institutional service providers like Fireblocks, Copper, Paxos, and Fordefi; crypto payment service providers like Bitpay; and already supported by some of the most widely used decentralized applications,” PayPal said.

Venmo began supporting PYUSD on September 20. However, only “select users” can use PYUSD for transactions for now, and no date for a full-scale launch has been announced.

According to a press release, Venmo users can buy PYUSD and send it to others through PayPal, Venmo and compatible external wallets. Individuals with compatible external wallets and merchants accepting PYUSD payments can receive funds from Venmo users with network fees.