15:30 07 Jun 2018
In this guest editorial Gabriele Giancola, co-founder and chief executive of qiibee, a blockchain-powered loyalty ecosystem, explains what a digital wallet is and why they are essential for cryptocurrency
There were some 21mln digital wallet transactions last year
Cryptocurrencies have been capturing the attention of investors, users and bystanders alike, which was largely driven by the steep incline in their values.
As a result, the demand for blockchain wallets has been increasing as well.
According to Statista, over 21 million users have been reportedly using wallets for digital transactions in 2017, with Experian reporting that the transaction volume grew to around USD 721 billion in the same year.
Find out more about qiibee, a blockchain-powered loyalty ecosystem
Now what exactly is a blockchain wallet and how can it improve customer experience?
A blockchain, or cryptocurrency wallet is a secure digital gateway for users to see and transfer their digital currencies. To be able to use any cryptocurrency for transactions, users are required to set up a cryptocurrency wallet first.
While Bitcoin is undoubtedly the most popular digital currency, hundreds of new cryptocurrencies (also known as altcoins) have been developed, each with a unique ecosystem and infrastructure.
Numerous different wallets have emerged over the past few years, some more convenient but less secure, and vice versa.
One wallet is not necessarily worse than another and it really depends on the purpose of the cryptocurrency.
In contrast to traditional wallets, these wallets do not “save” the digital currencies in a central database.
In fact, cryptocurrencies do not exist anywhere in any physical form.
Rather, a record of all the transactions related to the currencies is stored on the blockchain.
Every piece of cryptocurrency has a private key, which is required to write in the public ledger and to do transactions with the currency.
There are two keys that matter here: A public key is how a user is identified in the crowd (like an email address) and a private key is how a user approves a digital interaction (like a “PIN” number).
But, just like with any other wallet, if the private key is lost, the money is lost with no way to reclaim the cryptocurrency.
Also, should the wallet be hacked and funds are taken, there is no way to get the money back.
Therefore, the key aspect of keeping cryptocurrencies safe is to have the private key under full control.
This, arguably, is one of the biggest hurdles standing in the way of mainstream adoption, given that people lose their passwords all the time.
Despite this, blockchain’s transparent nature allows everyone to see exactly what is happening, which provides some sort of protection.
The technology of crypto wallets is still in its adolescence and to most of the world still rather confusing.
Similar to the early Internet, the blockchain technology is novel and somewhat complicated, making it hard for people to fully grasp the concept and its implications.
Consequently, many consumers are hesitant to use crypto wallets.
However, it is expected that crypto wallets are going to improve significantly in their technology and security.
And, with the growing adoption of blockchain and a new generation of e-payments, what does the future hold in store for the crypto wallet?
First and foremost, users will benefit from the integration of multiple services, all on a single platform.
Also, users will benefit from either minuscule transaction fees, the option to choose their own fee structure or not to pay any fees at all.
Generally speaking, transaction fees on the blockchain are a tiny fraction of the fees banks currently charge.
Moreover, everything that is put onto a blockchain system is translated into a digital code, which makes it possible to store anything that can be digitised.
One important use case would be a user’s identity, which would make it significantly more convenient to access different services or execute transactions.
While these are only a number of benefits blockchain’s wallets will bring, the technology is likely to change the way money is handled.
Cryptocurrencies are currently enjoying an increased level of attention and it only takes one service to reach critical mass to legitimise a technology.
Although some people still need some convincing, the tremendous potential for the blockchain services is apparent.
Gabriele Giancola is chief executive and co-founder of qiibee, a blockchain-powered loyalty ecosystem