Visa International has filed a patent application for digital currency on a blockchain, that could replace physical currency, with the United States Patent and Trademark Office.
According to the application, which was published on 14 May, Visa’s patent is for a “digital fiat currency” that will be using a “private permissioned distributed ledger platform”, and controlled by a central entity computer. The application also lists two records which will be kept – one that indicates the amount of digital currency created, and another which records the “removal of the physical currency from circulation in a fiat currency system”.
The patent application further describes the process by which the stablecoin’s value would be maintained:
“Every time a dollar worth of digital fiat currency is generated, the central entity ensures that a corresponding physical dollar bill is removed from circulation, in order to regulate the value of the digital fiat currency.”
The application also describes the key roles in the system, which are central entities, validating entities, redeeming entities, and users. Central entities could be a central bank that “regulates a monetary supply”, while validating entities will be blockchain nodes, “which may be peers such as banks”. Redeeming entities “may accept physical currency for exchange for digital fiat currency”, which could be ATMs or bank branches.
While a consensus mechanism was not chosen for the blockchain system, proof of stake, Byzantine fault-tolerant algorithms, and crash-fault tolerant algorithms were given as an example of potential ones. The patent further explores the possibility of using a copy of Ethereum, Hyperledger Fabric, and zero-knowledge proofs.
The application specifically mentioned the U.S. dollar as one of the potential fiat currencies to be used. Forbes, however, reported that the patent could apply to a variety of central bank currencies, such as the British pounds, Japanese yen, and Europe’s euro. Forbes further wrote:
“The physical currency of a central bank anywhere in the world could be digitized.”