Blockchain's future & the real Satoshi, revealed by 3+ decades of patent data


Cryptography Machine
On 01 March 2018, Walmart’s patent protecting a blockchain-based smart package was published. It got me thinking… every blockchain patent might as well be a betting slip, worth millions in R&D spend. Will the future make Luddites of the doubters or fools of the believers?

I don’t know… but there is something Walmart can do to skew the odds in its favour—track the inventive steps of blockchain technology from their source to their (likely) destination, and hedge its bets in all the right places.

Patent data is a revelatory and easy-to-understand resource for decrypting the past and future of any technology area. When I built a blockchain-focussed search query in PatSnap’s IP intelligence platform, I found a trail that leads to the Japanese inventors who likely contributed (directly or indirectly) to today’s blockchain. But I also found breadcrumbs culminating in a different part of Asia, as the place where blockchain will hit top gear.

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Blockchain Patents Portfolio OverviewBlockchain patents portfolio overview (Source: PatSnap)

So, sit back and let the data take you on a journey that begins in Japan, passes through America, and ends with a dramatic surge in China.

The past: who are you, Satoshi Nakamoto?

In this section, I will act only as a messenger of the data. And of all the ways people have tried to identify Satoshi Nakamoto, patent data remains conspicuous by its absence.

My blockchain search query reveals that the earliest patents filed in relation to this technology were in Japan—with the very first in 1986.

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(Map) Blockchain Patents up to 2008Geographical spread of blockchain patents1986-2008 (Source: PatSnap)

Wait, wasn’t blockchain invented in 2008? Apparently… but this is worth investigating. In fact, the first work on a cryptographically secured chain of blocks was apparently described in 1991.

There are usages of the term “block chain” which are unrelated to the cryptographic distributed ledger now associated with Bitcoin. These include:

  • Bar-link chain or “block chain” (in machinery)
  • Cipher block chain or “blockchaining” (also in software engineering)
  • Block chain as pertains to polymers (in chemistry)

But my search query excluded all these and more, by blocking irrelevant keywords and the technology classifications into which associated patents fall.

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Blockchain Wheel of InnovationMost common concepts in blockchain patent search results (Source: PatSnap)

So, this 1986 patent stands a chance of being relevant. The patent relates to a "stacking system for hash table in block unit", and covers an invention by Asai Yoshiaki for NEC Corporation.

A person skilled in the art of blockchain and the language of Japanese would have to tell us how far removed is this invention from today’s blockchain.

Many usages of the term “block chain” before the announcement of block chain in 2008 were in relation to more efficient processing and storage of information.

However, a 2005 patent protecting an invention by Kazuhiro Fukuda (for Seiko) describes a process that sounds conceptually proximate to today's blockchain technology. Here’s the machine translation of the patent abstract, from PatSnap’s platform:

PROBLEM TO BE SOLVED: To provide an encryption method using an encryption block chain where it is difficult to decode/presume an encrypted sentence by generating a different encrypted sentence each time even from the same plaintext. SOLUTION: A random number is added before a plaintext, and it is encrypted by an encryption block chain system so that encrypted sentence strings to be generated from the same plaintext are different. A bit operation is added to the encryption processing result of a block Ai-1 before it is used for the encryption processing of the next block Ai, so that the relevancy between random number or an encrypted sentence B0 of the random number and generated encrypted sentence series B1, B2 to Bn can be made difficult to understand.”

In fact, of all the 15 patents filed in relation to blockchain before 2008, 46.67% (7) were filed in Japan. In the number 2 spot is China, with 20% of the patents (3). Fortunately, PatSnap’s unrivalled patent coverage of the Asia-Pacific (APAC) region means China’s significant role in the future of blockchain will also be laid bare.

But back to Japan for now… and the fact that many people doubt Satoshi Nakamoto is even Japanese. Apparently, this enigma’s mastery of the English language and his sleeping patterns disqualifies all Japanese people. But Japanese people can learn English to a degree higher than most native speakers… and they can certainly move countries.

Why would Satoshi Nakamoto introduce himself as a Japanese man? Why is such a large majority of blockchain-related patents filed before 2008 in Japan? Why are all (but one of) the inventors associated with these technologies Japanese men? Why did Satoshi call his invention “block chain” (language consistent with the Japanese forebears)?

Perhaps because even if he is not literally Japanese (which is far from decided), his technological ancestry lies in Japan.

Here are the top Japanese blockchain inventors leading up to 2008:

  1. Asai Yoshiaki, whose patent (filed by NEC) is linked above
  2. James Tea Brady (ジェームズティーブラディー), who is not Japanese but whose patent was filed by IBM in Japan—could he be this James Brady?
  3. Maezono Kazuo, another NEC affiliate
  4. Nakajima Jun, on whose invention OKI Electric filed a patent—an invention that also seems conceptually proximate to today’s blockchain technology
  5. Seto Koichiro, an affiliate of Hitachi cable

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Blockchain Top Inventors up to 2008Top Japanese blockchain inventors 1986-2008 (Source: PatSnap)

3 of these inventors—Asai Yoshiaki, James Tea Brady and Nakajima Jun—have patents describing cryptographic sequences involving some kind of “block chain”.

All inventions are increments—linear or exponential—to existing technologies, so blockchain must have a technical footprint. It didn’t suddenly appear out of nowhere the way the media hype machine likes to present. The inventors here appear to be among the candidates for being the forefathers of blockchain technology—regardless of whether one or all of them is Satoshi Nakamoto.

Fast forward to 2008 and, for the first time, we see more than 2 INPADOC patent families relating to blockchain. In 2014, we see 14. In 2016, we see 293.

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Blockchain Patents Innovation RateWorldwide blockchain patent filing rate over time (Source: PatSnap)

What happened? China.

The future: made in China

Today, America and China dominate the blockchain patent landscape—of 688 INPADOC patent families, 28% are filed in America and 27% are filed in China. But China’s filings are accelerating faster than America’s. For example, in 2015, there were 5 filings in America and 1 in China. In 2017, there were 149 in China and 122 in America.

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Blockchain Patent Filings Over Time (China vs America)
China vs US blockchain patent filing rate over time (Source: PatSnap)

Walmart—and anyone else interested in blockchain—needs to watch China. The use cases to which China is applying blockchain are also interesting. When I limited my analysis to patents filed in China, 3 specific applications dominate the rest:

  1. (G06Q20) Payment architectures, schemes and protocols
  2. (H04L9) Arrangements for secret or secure communication
  3. (G06Q40) Finance/insurance/tax strategies

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Blockchain China Yearly Patent Filings by IPC
Top IPCs for blockchain patents in China (Source: PatSnap)

Although the Chinese government is throwing cold water on cryptocurrencies, it’s undeniably hot on blockchain. During the “Two Sessions” political event which started just days ago (on 03 March 2018), Chinese political and business leaders urged the country’s innovators to find real applications for blockchain.

If China flawlessly executes its development of blockchain for “secret or secure communication”, the political implications could be significant. If it does so for “payment architectures, schemes and protocols”, this could transform cryptocurrencies—which are still thriving, despite government resistance.

The blockchain landscape also shows Walmart’s patents have as bosom buddies several patents filed in China.

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Blockchain Patent Landscape
Worldwide blockchain patent landscape (Source: PatSnap)

A China-filed patent relating to "blockchain crowdsourcing” is close to Walmart’s “prescription home delivery” patent.

A China-filed patent relating to a "blockchain-based certificate authority” and a Taiwan-filed patent relating to a “blockchain electronic ticket system”, are close to Walmart’s blockchain-related patent on “vector-based characterisations of products”.

Walmart’s “smart package” patent is close to the China-filed patent relating to a “trusted power grid transaction platform based on block chain.”

Also, IPC codes show us in which tech specialisations most blockchain-related patents are being filed worldwide. 3 jump out to me:

  1. (G06Q20) Payment architectures, schemes or protocols
  2. (G06Q40) Finance/insurance/tax strategies
  3. (G06Q30) Commerce, e.g. shopping or e-commerce

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Blockchain Key Technologies
Top IPCs for worldwide blockchain patent filings (Source: PatSnap)

eCommerce is likely the most interesting to Walmart here—although anyone keen on cryptocurrencies should look into what these finance types are doing with blockchain.

The new players within blockchain for eCommerce also include a Chinese contingent:

  1. Nchain Holdings Limited
  2. Coin Plug (코인플러그)
  3. Digital Asset Holdings
  4. Shenzen Fanxi Electronics (深圳市樊溪电子有限公司)
  5. GSC Secrypt LLC
  6. Manifold Technology

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Blockchain eCommerce New Companies
New players within blockchain for eCommerce (Source: PatSnap)

Shenzen Fanxi is a Chinese company active in the “Silicon Valley of China”, home to "the world’s most amazing gadget market”.

I believe China (and Asia) will be a key link in the chain of events yet to unfold. Of course, infringement is not the main issue here, as patents are being filed across different jurisdictions. But if Walmart is serious about a blockchain future, then it would be wise to follow Google’s lead and strengthen ties in China.

With China starting to join the global leaders in patent filings, Chinese organisations becoming one of the top recipients of US patents, and Chinese courts getting better at enforcing patent rights, Walmart may want to practice “reciprocal filing”.

If Walmart doesn’t protect its technological interests in China, Chinese companies will likely beat it to the “one-two” punch—by protecting their inventions in the US and lookalikes of Walmart’s in China.

Research methodology

This analysis was conducted using the Boolean search query:

TAC:("block chain" OR "blockchain" OR "distributed ledger") NOT ("polymer" OR "block cipher" OR "I/O" OR "cipher block" OR "bar link") AND IPC:("G06" OR "H04") NOT IPC:("G06F12") NOT CPC:("B" OR "C")

Potential sources of noise in my search results include unsuitable usages of the term “block chain”, such as:

  • Bar-link chain or “block chain” (in machinery)
  • Cipher block chain or “blockchaining” (also in software engineering)
  • Block chain as pertains to polymers (in chemistry)

I have excluded these usages from my query using “NOT” operators and by blocking results belonging to irrelevant IPCs. I’ve also restricted all results to just 2 IPC areas—those falling under “computing, calculating, counting” and “electronic communication technique”.

However, some of these unsuitable results may have slipped through my precautions. I encourage you to improve on my base query and uncover even deeper insights.

Download the guide on using patent data for market research and investment

In this paper, we explore four key areas in which intellectual property (IP) data can support rapid and comprehensive market research.