Coinbase Patent Shows Exchange Is Refining Security for Bitcoin Payments

A patent by U.S. crypto exchange and wallet provider Coinbase proposes a new mechanism for further securing Bitcoin (BTC) payments, according to a filing published by the U.S. Patent and Trademark Office (USPTO) August 14.

The filing claims that existing systems do not adequately address concerns “that the private keys of [users’] Bitcoin addresses may be stolen from their wallets,” when making payments, and in particular when checking out on a merchant page. 

Coinbase is therefore applying to patent a so-called “key ceremony” solution, which would involve encrypting private user passphrases into “masterkey key shares.” These shares are then combined into an “operational masterkey” that would be used to generate an encrypted private key upon checkout and then a decrypted private key when signing transactions.

The proposed system would also allow for administrators to deploy a “freeze logic” to suspend all payment processes in case of a security alert.

The filing also proposes a method of application programming interface (API) key generation in order to provide an extra layer of security when the system is used across the web. As the patent outlines, the API would be stored in two parts, one on the Coinbase web service, and the other on the user/host server. Transactions would be confirmed “only if the API key received from the web server matches the API key stored by the service.”

As Coinbase looks to bolster security within crypto transactions, MasterCard has recently been pursuing a patent that would use blockchain to secure consumer payment credentials at the point of sale.