{"id":22509,"date":"2018-03-02T23:07:10","date_gmt":"2018-03-02T23:07:10","guid":{"rendered":"http:\/\/ci027cfe6fb00926c3"},"modified":"2018-03-02T23:07:10","modified_gmt":"2018-03-02T23:07:10","slug":"there-bitcoin-patent-war-going-initiative-could-end-it","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/culture\/there-bitcoin-patent-war-going-initiative-could-end-it","title":{"rendered":"There Is a Bitcoin Patent War Going On, but This Initiative Could End It"},"content":{"rendered":"
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Bitcoin and patents have never been natural allies. However, long-held controversy in the industry may finally be at an end with the introduction of the Blockchain Defensive Patent License. <\/p>\n

Bitcoin is considered by many to be the culmination of the decades-old cypherpunk movement, rallied around predominantly anarchist and libertarian ideals regarding freedom of information. The original Bitcoin software, meanwhile, was released as free and open-source software (FOSS), and operates today under the MIT License known for its permissive nature. Many would agree that its open, permissionless ethos has helped make Bitcoin the success it is today.<\/p>\n

Much of this ethos is in stark contrast with international patent law. Where FOSS is fundamentally about free distribution, patents grant individuals or companies exclusive property rights or ownership of an invention. Through the Patent Cooperation Treaty<\/a> (PCT), the patent holder holds those same rights over a patented invention in up to 152 countries (with non-signatories to the treaty being countries with low global economic standing or those with a history of systemic intellectual piracy).<\/p>\n

The very notion of patents, therefore, does not sit well with many of the cypherpunks and libertarians who initially embraced Bitcoin. They tend to consider patents to be unethical, state-granted monopolies at worst \u2014 or barriers to innovation at best.<\/p>\n

\u201cCore to the Bitcoin ethos is permissionless innovation,\u201d James Murdock, VP of corporate development and general counsel at Blockstream, argued in a company blog post<\/a> on the topic. \u201cWe firmly believe that in order for Bitcoin and related technologies\u2019 potential to be fully realized they must be underpinned by a global platform that is free for any innovator to use without hesitation.\u201d<\/p>\n

Types of Bitcoin Patents and Their Controversies<\/h2>\n

While all the major Bitcoin software implementations are completely open-source and licensed under the MIT License, this democratized sense of intellectual property protection is not true for all applications and companies built on top of and around Bitcoin. Patexia Research found<\/a> that the number of Bitcoin\u2013 and blockchain-related patents has grown significantly over the past years, from several dozen in 2015 to several hundred in 2017. Top patent-holding companies include big names like IBM, Bank of America (BofA) and Mastercard. <\/p>\n

The controversy surrounding patents has also dogged several major startups in the space: companies including Coinbase<\/a>, BitGo<\/a> and Blockstream<\/a> have been subject to social media outrage for their patent applications.<\/p>\n

But regardless of ideology, there is a good reason to file for patents: failing to pursue patent protection opens up inventors to becoming victims to patent trolls. <\/p>\n

As Coinbase CEO Brian Armstrong explained in a blog post<\/a>:<\/p>\n

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I\u2019d personally prefer to see a world where software patents don\u2019t exist (I think they hurt innovation, and waste a lot of time\/money), but since they do exist, we have to take them seriously. […] Our ultimate goal in obtaining bitcoin related patents is to keep them out of the hands of bad people, use them defensively to protect Coinbase from patent trolls, and help ensure the bitcoin ecosystem continues to grow.<\/p>\n<\/blockquote>\n

The Problem With Patents for Miners<\/h2>\n

Where typical concerns with patents are often ideological, patents can pose a more practical risk in the mining industry. Here, patents may threaten Bitcoin\u2019s decentralization properties and therefore its security assumptions.<\/p>\n

Bitcoin mining<\/a> is sometimes described as a lottery, albeit a fair lottery, with no organizer to take a share of the prize money. Importantly, the process of mining is completely random: finding a new block is a matter of trial and error. Since miners are competing with each other on small margins, those that mine with the most energy efficiency will outcompete those that expend more resources. The latter category will have to improve to remain competitive \u2014 or eventually drop out of the race.<\/p>\n

This sort of disparity among miners is why patents can be such a risk. Should one miner have a systematic advantage over others, which is exactly what a patent can offer, all the other miners might eventually have to drop out of the race. In the long term, this could well lead to a mining ecosystem where only one miner dominates, which would, in turn, allow that lone miner to cheat the Bitcoin system by reversing or double-spending transactions and launching other types of 51 attacks. It would represent a fundamental threat to Bitcoin\u2019s security guarantees.<\/p>\n

As explained<\/a> by the research arm of cryptocurrency exchange BitMEX:<\/p>\n

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A patent on a cryptocurrency mining technology […] could undermine the whole point of mining, which requires a degree of competition in order to be useful. If a miner or mining coalition achieves a significant proportion of the hashrate, they could censor some or all of the transactions, or even attempt to reverse transactions, potentially rendering the blockchain useless.<\/p>\n<\/blockquote>\n

Bitcoin Mining Patents: The Controversies So Far<\/h2>\n

The existential risk that mining patents could pose to Bitcoin also explains why such patents have been the most controversial ones so far. <\/p>\n

To date, the biggest controversy<\/a> in mining patents concerned AsicBoost<\/a>. Invented by former CoinTerra CTO Timo Hanke, AsicBoost can be implemented in specialized mining chips: application-specific integrated circuit (ASIC) chips. <\/p>\n

AsicBoost takes advantage of a quirk in the implementation of Bitcoin\u2019s proof-of-work algorithm. This quirk lets miners take a sort of \u201cshortcut\u201d to finding a valid block, which can give them up to a 30 percent efficiency advantage \u2014 though 15 to 20 percent is more likely. In a competitive industry like Bitcoin mining, where small margins make a large difference, this advantage can be enormous.<\/p>\n

The catch: AsicBoost is patented, pending approval. That patent was initially held by Hanke and RSK founder Sergio Lerner. Perhaps unsurprisingly, the announcement of the innovation \u2014 and importantly, the accompanying patent \u2014 immediately spawned controversy. <\/p>\n

As Bitcoin developer Peter Todd stated in response to<\/a> Hanke\u2019s revelation of AsicBoost: <\/p>\n

\u201cThe fact that [Hanke has] chosen to patent this improvement could be a centralization concern depending on the licensing model used. For example, one could imagine a licensing model that gave one manufacture[r] exclusive rights.\u201d <\/p>\n

Later, Todd even proposed<\/a> to rendering AsicBoost useless as part of a hard fork protocol upgrade \u2014 though this never materialized.<\/p>\n

After an initial spate, an impasse rendered the controversy dormant until about a year ago. In what was considered at the time to be a bombshell revelation, Bitcoin Core developer Gregory Maxwell discovered that major Chinese mining hardware manufacturer Bitmain had included<\/a> AsicBoost technology in its ASIC chips \u2014 a claim confirmed<\/a> by Bitmain. It was suggested the mining manufacturer may have also used the technology covertly, but Bitmain has always denied this was the case.<\/p>\n

Whether or not this constituted a patent infringement remained a point of contention<\/a>, but the issue was, to large extent, rendered moot as the Segregated Witness upgrade activated on the Bitcoin protocol in August 2017. This soft fork limited the potential upside of using the covert application of AsicBoost, and it is clear that no one ever used the overt version of AsicBoost on Bitcoin\u2019s mainnet.<\/p>\n

Much more recently, in February 2018, Bitmain found itself at the center of yet another<\/a> patent controversy. <\/p>\n

After leaving the company in 2016, Bitmain\u2019s former director of design, Yang Zuoxing, started his own company, Shenzhen-based Bitewei, which manufactures the Whatsminer. This Whatsminer uses a serial power supply circuit layout to efficiently supply electricity to the mining chip and was patented as such. This is a fundamental aspect of chip design and would make any ASIC chip more efficient.<\/p>\n

Bitmain is now suing<\/a> Zuoxing and Bitewei; the hardware manufacturer claims to hold the patent to this chip design feature. If Bitmain were to win this lawsuit, it could gain a significant benefit over all other ASIC producers. A patent such as this cannot even be blocked by protocol changes.<\/p>\n

The Bitcoin Defensive Patent License Solution<\/h2>\n

There have been several attempts to resolve the problems that patents pose to the Bitcoin industry. Coinbase, for example, signed a patent pledge<\/a>. Although not legally binding, this pledge indicates that the company publicly renounces the aggressive use of software patents on startups.<\/p>\n

Blockstream went a step further; besides committing to a patent pledge, it also became part of the Defensive Patent License<\/a> (DPL). By signing the DPL, the blockchain development company promised to share all its patents with other license holders, on condition that those companies share their patents as well.<\/p>\n

However, none of these measures are specifically designed for Bitcoin or blockchain technology. Importantly, these agreements have loopholes that could be abused, as a new initiative contends. This new initiative, the Blockchain Defensive Patent License<\/a> (BDPL), represents an updated version of the DPL.<\/p>\n

As William Ting, former counsel to TSMC and an intellectual property lawyer interested in fixing the original flaws with the license, opined on February 4, 2018, \u201cUpon review of the current version of the DPL, several sections and various wordings need to be revised to give substance to a more robust defensive patent license suited to the unique needs of miners of Bitcoin or other blockchain protocol(s).\u201d <\/p>\n

The BDPL states that one of the best ways to prevent the rise of a dominant blockchain mining consortium is to \u201cencourage mining individuals or entities to grant their respective mining patents under a mutually defensive patent license that is tailored to address the unique needs of the Bitcoin or other blockchain protocol(s) and prevent any one mining consortium from obtaining the dreaded ability to launch majority (or near majority) attacks.\u201d<\/p>\n

The BDPL offers improved protection and blocks potential circumvention over the DPL in several ways: <\/p>\n