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What is a universal digital wallet?
The new generation digital wallet is the previous step to the universal wallet, the solution to store and manage, beyond cryptocurrencies, any type of digital asset
We recently started a new project based on blockchain technology with LTO Network, a hybrid blockchain to secure, verify and exchange critical business information.
LTO Network and Wealize's new challenge is the development of a next-generation digital wallet with which users will be able to store and manage not only their cryptocurrencies and other digital assets, such as NFTs (non-fungible tokens), but also their verifiable digital identity credentials.
Currently, LTO Network has a digital wallet on its website that allows its users to manage and trade cryptocurrencies and digital assets.
The main innovations of the work that LTO and Wealize are undertaking lie in two areas: first, that this wallet operates not only on the web, but also on mobile, i.e., that it is portable; second, that it is also a digital identity wallet, in addition to being able to manage and operate with cryptocurrencies and other assets.
LTO Network brings a summary on this partnership in its note ‘LTO Network announces partnership with Wealize to develop a next-generation unified wallet to store and manage Coins, Digital Identity Credentials and NFT2.0 Ownables’.
A new generation digital wallet, why is this project so exciting?
Our CEO, Miguel Calero, put it in these terms after signing the agreement with LTO Network:
“LTO Network has an excellent set of technologies which we are excited to develop products around. We are thrilled to have partnered together to work on their upcoming wallet. From our initial discussions and plans, we believe that together we will deliver a world-first product of its kind that ties assets together in a way that has not been done before”.
The key is in the idea of linking digital assets in a way that has not been done before. The creation of a digital wallet that combines the functionalities of a crypto wallet and those of a self-managed digital identity wallet is something truly novel and opens the door to the universal wallet.
The universal digital wallet is today more of a desideratum in the minds of people, companies and organizations that see in blockchain a way to transform the economy and the way we relate to each other, and this project is a step forward in the materialization of that concept.
In this article we tell you what a universal wallet is and explain its importance for the development of blockchain systems and this new economy that experts and researchers have called the token economy.
What is a universal digital wallet?
Not all wallets are the same. Digital wallets can be implemented in very different ways and not all of them follow the principles of self-sovereign identity and decentralized data models. There are cloud wallets, which are hosted and provided by a third party. They are wallets that are outside the effective control of their owners. That is not what we are talking about here.
The idea of universal wallet is built on the use of decentralized data systems based on blockchain and the implementation of the self-sovereign identity (SSI) model.
In the article "Self-sovereign identity, what is it and why do we need it?" we explain with simple examples this concept. In any case, SSI means that the individual is the real owner of his or her digital identity attributes and credentials, i.e., that he or she can present and manage them with full autonomy, security and privacy.
The digital wallet is a key tool to make self-sovereign identity a reality, as we discussed in "What is an SSI wallet?". There we explain why it is a necessary piece to identify ourselves and access multiple services without having to register as users over and over again, as well as to share information about our identity when we want and in a secure way.
The SSI wallet will allow us, for example, to request a birth certificate, file a tax return, open a bank account, store a medical prescription, check into a hotel or rent a car using a digital driver's license, as required by the European eIDAS regulation. And we will do so with the guarantee that our personal data is private and shared securely and whenever we choose.
We would say that the self-sovereign wallet is like our leather wallet, which we used to open and close whenever we wanted, to carry the documentation for identifying ourselves and obtain access to certain services, but even more secure and private thanks to blockchain technology.
But isn't it true that in our wallet we carry many other things besides documents to identify ourselves and obtain certain accesses and services?
Imagine the hassle of moving around the physical and digital world with several wallets, one to store our credentials and identity attributes; another for money; another for credit cards; another for health insurance cards; another for our properties, such as that photo we love of a family member or the last discount voucher with which we have been rewarded for our loyalty...
The universal wallet is the solution to store, manage and perform transactions with any type of digital asset, not only cryptocurrencies, but also other non-fungible tokens, as well as all kinds of identifiers and credentials. It is a wallet that has to serve us anywhere, just like our wallet.
Importance of universal digital wallet in blockchain systems and token economics
At first glance, the comparison with the everyday wallet may lead us to see the universal wallet concept from a simplistic perspective, as a place to store cryptocurrencies and credentials. But its significance is much greater, because it is the tool to access all kinds of functionalities in blockchain networks and a whole world of opportunities for new services that have emerged with blockchain technology.
Kim Peiter Jørgensen and Roman Beck published in early 2022 a very interesting paper - Universal Wallets - in which they call for more research in wallet-related fields for blockchain-based solutions, such as as digital identities, self-sovereign identity management, tokens, and innovative uses for digital wallets and crypto wallets. Current research seems predominantly to focus on crypto wallets which, as we have seen here, offer only a fraction of the capability of universal wallets.”
In the opinion of these authors and the literature they have reviewed - we have to say we agree with them entirely - many new services will emerge, with significant social effects and will revolutionize the way companies do business, as well as the role of users and customers.
For example, universal wallets will make it possible through NFTs to share ownership of a car or an art piece, and authorization to buy or sell any digital asset managed by the wallet can be given on the fly. This is the scenario that is being drawn for us with Web3 and the token economy.
The universal wallet is a fundamental element for Web3. We talked about the implications of this new internet in "Web3, towards a decentralized internet thanks to blockchain".
Web3 is a decentralized internet based on blockchain, more secure and open. And the wallet stands as a necessary tool for this to become a reality and move forward through the web3 towards what is called token economy, an economy based on the production and exchange of tokens.
A token is a unit of value based on cryptography and issued privately on a blockchain. Cryptocurrencies are tokens. But as we pointed out above, there are more types of tokens with different uses. For example, they can represent a work of art (a popular case of NFT), a right to vote (it would be a governance token in a DAO), a data assignment, an incentive, or a payment for a job. They are units of value.
Universal wallet and token-economy go hand in hand. Like any unit that represents a value, tokens need to be housed in a secure, private place that allows their owners to manage them autonomously. Hence the role of the universal digital wallet.
We need a digital wallet for the storage and exchange of tokens. And this digital wallet should allow all types of tokens, not only cryptocurrencies, but any digital asset, such as the aforementioned NFTs and SSI credentials. The token economy requires universal wallets.
We can say that there are tokens without blockchain, but there will be no token economy without blockchain because it is the blockchain that allows transactions of tokens, i.e. goods and services, to be traceable, immutable, transparent and decentralized. And it is also what allows tokens to be securely exchanged for cryptocurrencies, which "reside" on the blockchain too.
Envisioning new services and the transformation of existing ones thanks to the universal digital wallet
At a Wealizers team meeting recently, we had a brainstorming session in which we asked ourselves how our lives as users would change with a universal digital wallet.
Now that summer is approaching, the first thing that came to mind was vacation planning. And it made a big difference.
The advantages of traveling with a universal digital wallet
First of all, to start searching for destinations in our favorite apps, we would no longer need to log in with a username and password in each of them. We confirm our identity with a digital wallet application on the computer or smartphone. The digital wallet is already in our mind the tool we use to log in to all websites, mails, mobile apps etc. We no longer have a profile on each site, we access all services with the digital wallet.
Our wallet also has stored loyalty points from one of the apps that are immediately added as a discount to our trip budgets, without having to insert discount codes. We have decided that we will tour Spain as a group in a large van. We make reservations for the vehicle and the hotels where we are going to stay.
The best thing is how quickly everything goes when the person who has offered to be the driver comes to pick up the rental van. Your travel documents are confirmed and unified in a scannable QR code. The rental company agent scans the QR code and instructs you to use a biometric facial scanner. The agent no longer looks at an ID photo to compare it to your face; the biometric facial scan is compared to your digital credential, the agent gets a green light. All in order.
Arriving at the hotel, we use the digital wallet to confirm our identity, and with the payment solution connected to the identity and the hotel, we check in without waiting in line at the front desk. A kiosk has given us a room that the digital wallet on the cell phone will unlock during our stay.
We arrive quite thirsty to the room and we open the minibar with the digital wallet, just as we have opened the door of the room, and we buy several bottles of water and some snacks, the transaction is made between our wallet and the hotel wallet and to do so we use loyalty points. The hotel wallet also communicates with the minibar, and the latter notifies the need to replenish what we have consumed, so that room service immediately replenishes the minibar.
From the convenience of an automated purchase to the pleasure of sharing an evening with friends in the metaverse
The idea of the mini-bar fridge communicating with a digital wallet leaves some of us excited... and brings us back to the scenario of a working day when you get home and discover or remember that the fridge is empty. You have to go shopping or spend an hour ordering online, selecting preferences and looking for the best deals... We've stopped traveling.
But we keep imagining and now we turn our fridge into a smart machine connected to our wallet and our favorite supermarkets. When our fridge detects that we need to restock, it makes the necessary purchase with the wallet. The web3 has that, not only is it decentralized, more secure, traceable and user-centric, it is also a web that fosters the use of diverse technologies such as AI or the Internet of Things.
One of our colleagues tells us that he has shared with his favorite retailer some information about his identity attributes for a customer service research. By providing him with some of his data, he gets some interesting revenue in his digital wallet that he can employ in this and many other partner establishments.
Other colleagues moved to a metaverse that was a place for friends to meet and celebrate. There, their avatars were able to share a virtual coffee and play a game of bowling, which they paid for with their digital wallet. Many took advantage of the meeting to exchange NFTs of their favorite esports.
This may sound like a bit of a movie, but it's where we're headed. And as we said at the beginning, a first step is to bring together in our digital wallets the ability to store, manage and transact not only cryptocurrencies, but also other digital assets, including, why not, our identity attributes, which until now we have shared on many occasions, unknowingly and without any benefit in return.
A new way of relating to each other and a more transparent and secure form of economy is emerging. In this economy, the individual as a user is placed at the center with privacy and autonomy. The universal digital wallet is a key tool for realizing all the possibilities this offers.
If your company or organization wants to apply blockchain technology to face digital identity challenges or develop products and services in which transparency, privacy, autonomy or traceability are key, in Wealize you will find an expert ally to respond to your needs.