Patenting Fintech: ArentFox Schiff Obtains a Patent for Acronis International GMBH for Securing Crypto-Asset Transactions Using Smart Contracts

Crypto-asset transactions are rapidly growing in popularity. However, a surge of cybersecurity breaches and hacker attacks on cryptocurrency exchanges and cryptocurrency wallet service providers has caused billions of dollars in crypto-asset losses to its owners.

ArentFox Schiff has obtained, for Acronis International GmbH, a global cybersecurity and backup solutions provider, a US patent for a method of securing crypto-asset transactions using smart contracts.

A crypto-asset is a digital object that has undergone tokenization, which is a process of transferring the object’s value to a blockchain. In blockchain-based operations, a user’s crypto-asset wallet is typically represented by an “address,” which is a unique identifier or value derived from a public encryption key used to control the respective wallet (e.g., hash of their public key). Private encryption keys of a public/private key pair are maintained as secrets. A public/private key scheme works well when users are executing transactions on their own. Often times, however, the user may be a customer of a financial organization (e.g., a cryptocurrency wallet service provider) that performs crypto-asset transactions on the user’s behalf. In such cases, proper user management becomes difficult because of the security risks and inefficiencies involved in the transfer of a user’s private keys to the financial organization.

Acronis’ US Patent No. 11,410,168 addresses this problem using smart contracts for managing user’s crypto wallets and facilitating secure crypto-asset transactions. In particular, a user wallet is represented by a user-wallet smart contract published on a distributed ledger maintained by a blockchain network, rather than by a simple address in a blockchain transaction data structure. The user-wallet smart contract includes an owner field that holds a reference to the public encryption key of the wallet owner (e.g., the user) or some financial organization that holds the user’s wallet (e.g., a wallet service provider). In addition, a crypto-asset (e.g., a token, coin, etc.) is represented by a token smart contract, which is also published on the distributed ledger. The token smart contract includes transfer functionality that defines rules and procedures for transferring the crypto-assets from one user’s wallet to another user’s wallet.

When the user decides to change the ownership of his wallet (e.g., in order to direct a third-party organization, i.e., custodian, to perform the crypto-asset transactions on his behalf), a blockchain transaction data structure is generated that specifies the user-wallet smart contract. The transaction data structure is configured to invoke a change of ownership functionality of the user-wallet smart contract, which in turn transfers, using the public encryption key of the new owner (e.g., another user or another financial organization), the ownership of the user’s wallet to the new owner without transferring a copy of the user’s private encryption key to the new owner. The blockchain transaction data structure is then published to the distributed ledger to validate the change of ownership. In this manner, the original user’s private encryption key to their crypto wallet remains a secret.

When the user decides to transfer crypto-assets from his wallet to another user’s wallet, another blockchain transaction data structure is generated that includes a plurality of data fields for facilitating and validating the transfer of crypto-assets from a sender wallet to a recipient wallet. In particular, a recipient wallet field specifies the address of the token smart contract that defines the crypto-asset. A data payload field of the blockchain transaction invokes transfer functionality of the token smart contract with parameters that specify the recipient wallet address. In doing so, the user-wallet smart contract handles verification of whether a given party (e.g., a user or authorized financial organization) is allowed to perform such a transfer. In this manner, the use of smart contracts significantly improves the security of crypto-asset transactions.

ArentFox Schiff is a market leader in helping clients to navigate the business and legal issues surrounding blockchain technology, particularly in the software and fintech industries. Top technology and software companies turn to ArentFox Schiff for our expertise in the intellectual property law to assist them with protection of their innovative blockchain solutions using patents, trademarks, and copyrights in the United States and worldwide. In addition, our attorneys routinely counsel global fashion brands, professional sports teams, athletes, media companies, and NFT creators on leading-edge deals relating to venture financing, token protocol development, licensing/royalty structures, and SEC regulatory compliance. We also advise on-chain/blockchain natives like token issuers, decentralized autonomous organizations (“DAOs”), blockchain tech developers, NFT artists, and content creators, in addition to off-chain or traditional companies looking for advice around entry and protection.


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