On March 1, 2018, the USPTO published a utility patent for PayPal's "Expedited Virtual Currency Transaction System." Sandy Lynn Godsey, senior director of innovation and IP portfolios, and Cheng Tian, a staff software engineer, are listed as inventors on the August 2016 patent application, but according to their LinkedIn profiles, neither works for PayPal anymore. The pre-grant publication is publicly viewable here (Appl. No.: 15/251464).
PayPal's transaction system proposes a secondary wallet architecture to address the traditionally slow nature of virtual currency transactions (e.g., bitcoin). The filing explains, "The decentralized nature of such virtual currencies is accompanied by a need to confirm transactions, and those confirmation processes introduce a time delay or latency period between the initialization of the transaction and the point at which the transaction has been confirmed."
"In many transaction situations, a 10 minute wait time will be too long for payers and/or payees, and those payers and/or payees will instead choose to perform the transaction using traditional payment methods rather than virtual currency. Issues like this have slowed the adoption of virtual currencies despite their advantages," the filing adds.
PayPal would ostensibly create a back-end architecture with secondary wallets that contain various denominations of the virtual currencies (e.g., 10 units, 1 unit, 0.1 units, 0.01 units, etc.). By passing private keys to these secondary wallets from senders to receivers, PayPal would be able to reconcile the transactions without interacting with the bitcoin blockchain or other relevant virtual currency systems.
The filing provides an example:
"If the instruction is received to transfer 14.56 electronic coins to the second user, the systems and methods may operate to allocate to the second user a first user secondary wallet private key included in a first user secondary wallet that is associated with 10 electronic coins, first user secondary wallet private keys included in four first user secondary wallets that are each associated with 1 electronic coin, first user secondary wallet private keys included in 5 first user secondary wallets that are each associated with 0.1 electronic coins, and first user secondary wallet private keys included in 6 first user secondary wallets that are each associated with 0.01 electronic coins."
It might be easier to think of this as a checking and a savings account. While users would always retain control of their savings account (primary wallet), each time they dip into their holdings, they would trade small sub-divisions of their checking accounts (secondary wallets).
In essence, PayPal would become the intermediary for these virtual currency transactions, which arguably defeats the stated purpose of cryptocurrency.