DMG’s Intellectual Property Update and Blockchain Applications

Rhea-AI Summary

DMG Blockchain Solutions Inc. (DMGGF) has updated its intellectual property (IP) status, highlighting its patent-pending technologies related to blockchain analytics and compliance. Blockseer, DMG's subsidiary, offers innovative solutions for tracking cryptocurrency transactions. The company emphasizes its first-mover advantage in compliance technologies amid increased institutional interest in Bitcoin. DMG plans to monetize Blockseer’s Pool Technology through licensing and partnerships, enhancing transparency in mining pools, which face regulatory challenges.

Positive

• DMG owns exclusive patent-pending blockchain technologies focused on compliance and analytics.
• Increased institutional interest in Bitcoin enhances market demand for DMG's technologies.
• Blockseer’s Clean Block Mining technology offers a solution for transparency in Bitcoin mining pools.

Negative

• Existing centralized mining pools lack regulatory standards, posing potential compliance risks.
• Dependence on evolving regulatory frameworks may impact DMG's operational capabilities.

VANCOUVER, British Columbia, March 09, 2021 (GLOBE NEWSWIRE) -- DMG Blockchain Solutions Inc. (TSX-V: DMGI) (DMGGF:OTCQB US) (FRANKFURT:6AX) (“DMG” or the “Company”), a vertically integrated blockchain and cryptocurrency technology company, is pleased to announce an update on its intellectual property (IP) status and the use of this IP for developing innovative software solutions on the blockchain ecosystem. DMG’s US technology company, Blockseer, founded in 2013, was one of the first companies operating in data analytics of both the Bitcoin and Ethereum blockchains. With many governments signaling for both tighter regulations in cryptocurrencies as well as their greater acceptance of this technology entering the mainstream, Blockseer’s data and DMG’s overall IP is proving to be current and valuable in many new ways for these evolving market conditions.

DMG’s IP and Patent Portfolio

To date, DMG exclusively owns and controls blockchain-specific patent pending technology registered in the United States. A brief summary of DMG’s (including Blockseer) key patents filed are as follows:

1. SELECTION OF CRYPTOGRAPHIC IDENTIFIERS IN A BLOCK: Filtering inbound transactions of a blockchain node against a list of cryptographic identifiers, excluding transactions that involve cryptographic identifiers that our data indicates are nefarious activity.
   
   
2. OFF NETWORK IDENTITY TRACKING IN ANONYMOUS CRYPTOCURRENCY EXCHANGE NETWORKS: A method of facilitating identity information exchanged in cryptocurrency transactions using cryptographically verifiable addresses in a cryptocurrency exchange network along with identity information between the transmitter wallet service system and the recipient wallet service system.
   
   
3. PROVIDING DATA PROVENANCE, PERMISSIONING, COMPLIANCE, AND ACCESS CONTROL FOR DATA STORAGE SYSTEMS USING AN IMMUTABLE LEDGER OVERLAY NETWORK: A system for data provenance and data storage that allows multiple independent parties (who may not trust each other) to securely share data, track data provenance, maintain audit logs, keep data synchronized, comply with regulations, and handle permissioning and control who can access the data.
   
   
4. CRYPTO TAINT TRACKING: A method for detecting and tracking tainted cryptographic wallets. The method measures a wallet's propensity to engage in criminal or suspicious activity. Naturally, transacting with a criminal is tantamount either to funding crime or laundering its proceeds, so it is in our collective interest to identify – and then monitor or quarantine – any wallet with criminal association. The method also automatically flags risky withdrawal requests in real-time for further review before committing them to the blockchain.
   

First Mover Advantage for DMG and its Blockseer Subsidiary

DMG’s acquisition of Blockseer in 2018 was a strategic move based on the future of compliance and good governance in the cryptocurrency space. Blockseer highlights DMG’s foresight to ensure the Company was developing the right technology and products to unlock adoption in advance of regulatory compliance.

Recently, with Bitcoin and Ethereum prices at all-time highs, along with major announcements of corporations, funds and others taking large positions in Bitcoin, there has been renewed interest in the provenance and traceability of Bitcoins. DMG’s Blockseer was one of the first products to focus on crypto transactions and the provenance of Bitcoin through its tracking and labelling software. This technology was at first focused on wallet-to-wallet transactions on the Bitcoin blockchain but is now being repurposed to look at the Bitcoin blocks themselves during the process of ‘mining’ for Bitcoin and posting Bitcoin ‘blocks’ to the Bitcoin blockchain (transaction processing).

Blockseer’s Mining Pool Technology

Late last year DMG announced the launch of its beta Bitcoin mining pool using Blockseer products. An aspect many cryptocurrency users did not understand about mining pools was, and still is, the lack of transparency in how pools work, and why miners should care about which pool they connect to. Using Blockseer’s IP and the capability to understand the nuances of the Bitcoin blockchain, Blockseer created a process called ‘Clean Block Mining’ together with many other improvements to existing Bitcoin mining pools.

Current centralized mining pools face significant regulatory challenges and security issues which have already negatively affected perception of the industry by policy makers and governments around the world. Many of the existing pools have the following shortfalls:

• No industry organization substantially involved to ensure, outside of the Bitcoin Protocol itself, any norms, guidelines, rules or regulations are in place and enforced for all to follow. It is common for many industries to self-regulate or take on standards such as ISO specific standards which are industry focused.
  
  
• No third party, independent and/or professional audit or auditing standard specific to this new industry to ensure individuals and companies are reporting operations accurately.
  

• No simple, conclusive way to verify existing mining pool operators, who offer their services to North American miners, are correctly calculating block rewards and transaction fees in line with mining shares provided by pool subscribers.
  
  
• No real KYC or AML as a focus by any of the vast majority of mining pools on the market today showing they take any responsibility in disallowing or at least highlighting transactions their pool is involved in from illicit sources and/or criminal actors and that said transactions are against their pool’s policies or operations.
  

Existing centralized Bitcoin mining pools are lacking regulatory standards and auditable transparency, and therefore miners may be inadvertently aiding nefarious or criminal users of Bitcoin. DMG’s proprietary KYC and AML technologies represent one of the industry’s best available solutions to provide a legally compliant solution and a regulatory acceptable path forward for Bitcoin miners and the underlying users of Bitcoin in general, without censorship of non-criminal transactions.

DMG intends to monetize Blockseer’s Pool Technology through licensing it to other parties and pools and/or partnerships with other companies and pools. As previously disclosed, DMG will provide updates on the terms and conditions of any potential transaction involving Blockseer’s Pool Technology. DMG is encouraged by the February 16, 2021 announcement of the transaction involving 500.com Limited and BTC.com and believes the market demand is there for robust and technologically advanced Bitcoin mining pools.

Censorship vs. KYC, AML, and Responsible Transactions

In general, miners connect to the Bitcoin protocol via mining pools, the vast majority of which are based in jurisdictions that do not regulate mining pool activities. To date none of these existing pools provides their mining clients with third-party audits, and they may inadvertently be enabling transactions that might not be KYC, AML or Office of Foreign Assets Control (OFAC) compliant. This will increasingly become an issue, especially at the institutional level for all entities involved, when the participants are domiciled in the U.S. or other western countries which are more likely to make KYC and AML mandatory standards.

Censorship - Is It Real?

Many who have been involved with Bitcoin in the early days were, and still are, against government censorship. Bitcoin has its core roots in decentralization and being devoid of Governmental control or manipulation. By filtering transactions based on risk or propensity of risk related to the counterparties’ past history or current activities against known information from reliable sources (including up to 100% verified sources) creates the feeling, whether true or not, of censorship. However, there are multiple arguments to make that Blockseer’s Clean Block technology is not really censorship of the Bitcoin blockchain. The first argument, which is fundamental, is that any transaction that Blockseer may reject can easily be included by any pool which does not use Blockseer’s Clean Block technology and included in its block of transactions. In this regard, transactions that Blockseer would not accept can easily be accepted by any other pool which does not adhere to the same KYC and AML principles. With the number of mining pools active and the split of hashrate between them all, there is no present risk of transaction never being verified by a pool. Additionally, looking back at the spirit of the Bitcoin Protocol, there was no mention for or against adding criminal activities, yet in today’s society people, companies, governments and nations are all focused on weeding out and eliminating the means (whatever it may be) of allowing corruption and criminal activity to thrive and grow. Bitcoin is not immune to this.

DMG’s COO, Sheldon Bennett commented, “Our Blockseer team has continuously focused on strategically targeting the progression of the crypto industry and how Blockseer can ensure its blockchain technology will create industry needed products. Recent changes, along with greater institutional interest moving into Bitcoin, and the regulatory signals in the market, show that this is both a rapidly developing and cutting-edge space for which our products are tailor-made. Blockseer is well positioned to help pioneer this industry with our first two products, Explorer and Walletscore, which allow users to be properly informed, aware and protected in an otherwise often grey space. Expanding on Explorer and Walletscore, Blockseer launched its Pool Platform which will be integrated with Blockseer’s Mine Manager and Walletscore’s Clean Blocks, as one unified platform.”

About DMG Blockchain Solutions Inc.

DMG is a vertically integrated blockchain and cryptocurrency company that manages, operates, and develops end-to-end digital solutions to monetize the blockchain ecosystem. DMG’s businesses are segmented into three main divisions: data centre operations, data analytics and forensics and developing enterprise blockchains. DMG’s data centre operations focus on earning revenues from block rewards and transaction fees by mining primarily bitcoin as well as providing hosting services for industrial mining clients. DMG’s data analytics and forensic services provide technical expertise software products such as Blockseer Pool, Mine Manager and Walletscore, as well as working with auditors, law firms, and law enforcement organizations. DMG’s permissioned blockchain technology is focused on developing enterprise software for the supply chain management of controlled products. DMG’s strategy is to become the domain experts across the business verticals it focuses on. DMG’s management team includes seasoned crypto experts, forensic & financial professionals and blockchain developers with deep relationships throughout the industry.

For more information on DMG Blockchain Solutions visit: www.dmgblockchain.com

On behalf of the Board of Directors,

Daniel Reitzik, CEO & Director

For further information, please contact:

DMG Blockchain Solutions Inc.
Email: investors@dmgblockchain.com
Web: www.dmgblockchain.com

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Cautionary Note Regarding Forward-Looking Information

This news release contains forward-looking information based on current expectations. Statements about the Company’s plans for the Blockseer Pool and its continued development and expected outcomes and benefits, the monetization of the Blockseer Pool, potential transaction(s) with the Blockseer Pool, patent pending technology and its intended uses and outcomes, to increase petahash (PH) by self-mining, price of bitcoin, plans and intentions, other potential transactions, acquisition of customers, product development, events, courses of action, and the potential of the Company’s technology and operations, among others, are all forward-looking information. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such information can generally be identified by the use of forwarding looking wording such as “may”, “expect”, “estimate”, “anticipate”, “intend”, “believe” and “continue” or the negative thereof or similar variations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, business, economic and capital market conditions; the ability to manage operating expenses, which may adversely affect the Company’s financial condition; the ability to remain competitive as other better financed competitors develop and release competitive products; regulatory uncertainties; access to equipment; market conditions and the demand and pricing for products; the demand and pricing of bitcoins; security threats, including a loss/theft of DMG’s bitcoins; DMG’s relationships with its customers, distributors and business partners; the inability to add more power to DMG’s facilities; DMG’s ability to successfully define, design and release new products in a timely manner that meet customers’ needs; the ability to attract, retain and motivate qualified personnel; competition in the industry; the impact of technology changes on the products and industry; failure to develop new and innovative products; the ability to successfully maintain and enforce our intellectual property rights and defend third-party claims of infringement of their intellectual property rights; the impact of intellectual property litigation that could materially and adversely affect the business; the ability to manage working capital; and the dependence on key personnel. DMG may not actually achieve its plans, projections, or expectations. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the demand for its products, the ability to successfully develop software, that there will be no regulation or law that will prevent the Company from operating its business, anticipated costs, the ability to secure sufficient capital to complete its business plans, the ability to achieve goals and the price of bitcoin. Given these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements.

The securities of DMG are considered highly speculative due to the nature of DMG’s business.

Factors that could cause actual results to differ materially from those in forward-looking statements include, failure to obtain regulatory approval, the continued availability of capital and financing, equipment failures, lack of supply of equipment, power and infrastructure, failure to obtain any permits required to operate the business, the impact of technology changes on the industry, the impact of Covid-19 or other viruses and diseases on the Company’s ability to operate, secure equipment, and hire personnel, competition, decrease in the price of Bitcoin and other cryptocurrencies, security threats including stolen bitcoins from DMG or its customers, consumer sentiment towards DMG’s products, services and blockchain technology generally, failure to develop new and innovative products, litigation, increase in operating costs, increase in equipment and labor costs, failure of counterparties to perform their contractual obligations, government regulations, loss of key employees and consultants, and general economic, market or business conditions. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made by third parties in respect of the matters discussed above.

FAQ

What is the latest update on DMGGF's intellectual property?

DMG Blockchain Solutions has announced updates to its intellectual property status, focusing on blockchain-specific patent-pending technologies.

How is DMGGF planning to monetize Blockseer’s Pool Technology?

DMG intends to monetize Blockseer’s Pool Technology through licensing agreements and partnerships with other companies.

Why is DMGGF's Blockseer significant for Bitcoin miners?

Blockseer offers compliance technologies that enhance transparency and reduce regulatory risks for Bitcoin mining pools, which are critical as regulations tighten.

How does DMGGF address compliance in the cryptocurrency space?

DMG's patented technologies provide methods for tracking cryptographic identifiers and ensuring compliance with KYC and AML regulations.

What challenges do existing Bitcoin mining pools face according to DMGGF?

Existing mining pools face regulatory challenges and lack third-party audits, which DMG aims to address with its proprietary technologies.