PayPal took a significant step toward developing its own blockchain ecosystem by filing a patent application for a nonfungible token (NFT) purchase and transfer mechanism.

The application, filed in March and published on September 21, describes a method for performing transactions with NFTs both on and off-chain.

The pending patent application presents a system in which users can buy and sell NFTs through a third-party service provider. Although Ethereum is mentioned in the text, the provider is not stated.

PayPal envisioned utilizing the full tokenization potential of NFTs, going far beyond the exchange of electronic collectibles:

“The NFT in this example may represent any unique piece of digital data that can be tracked using a decentralized blockchain ledger. […] Examples of such assets include [...] digital images and videos, music, collectibles, and other digital art along with deeds to personal property, event tickets, legal documents and other real-world items.”

The system could be tailored in a number of ways. For example, it may support fractionalized purchases by distributing governance tokens, which could then be exchanged

A decentralized autonomous organization "associated with the service provider may also be used to promote NFT liquidity through a dedicated platform." NFTs could also profit from royalties.

Compliance and risk management may be handled by the service provider. Users may have their own digital wallets, but they are not compelled to do so. As an alternative, a third-party broker might provide a variety of storage and checkout options.

Off-chain transactions could be handled in a "omnibus wallet" affiliated with the service provider and containing the wallets of both the buyer and seller:

“Therefore, no transfer is registered on the blockchain and there is no need to broadcast the transaction to the blockchain network or pay the gas fees associated with such an on-chain transaction.”

Sources:

https://cointelegraph.com/news/paypal-nft-marketplace-patent-asset-trading

https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/20230298001