Accounts vs. Wallets: Importance of self-sovereignty in the digital world
This post is not about blockchain or crypto but it applies to practically everything in the digital world. These terms are used very loosely and so let us start with trying to understand what they really should mean.
Account /əˈkaʊnt/ (noun)
An arrangement by which a user is given access to a computer, website, or application, typically by entering a username and password. A body that gives this access generally holds data or funds on behalf of a user/ client or supplies goods or services to them on credit.
If you really think about it, currently our entire existence on the internet is based on accounts — bank account or email account or phone number account. And by definition these are arrangements controlled by gatekeepers. We cannot really interact on the internet without going through the gatekeepers. As a result, all these gatekeepers have managed to gather a lot of power and even visibility into what we do and in many instances control over what you do.
So is there an alternative?
This is where wallets and wallet based approach comes in. Wallets are tools with data that you have full sovereignty and agency over. Very much like having a physical wallet with cash in your pocket. You can have many wallets depending on the applications.
Wallets store key data items like your identification, preferences, keys to unlock your data sets and other permission keys. Your data can be stored anywhere but can only be unlocked (decrypted) if the relevant keys are provided. These keys can be for full access to the data, viewing access only or access only for a limited time or for only a limited set of data. So even if the data is with a third party, they can't access, view or change the data. This has huge implications on the entire digital world.
Let’s take the example of Facebook. In the context of a social network what it will mean is that though the company Facebook stores a blob of your data, it will have no visibility of it as it is encrypted with your keys and without keys it is just a bunch of random characters. However, your friends may have viewing keys which means that they can view your data and the updates you post. Facebook then is no longer a data company trying to monetise your data but rather a software platform provider. They cannot run algorithms on top of your data and influence your views depending on your taste.
In the financial space, the example would be of e-cash that gets unlocked for transactions only with the keys in your wallet. Cryptocurrencies function in this way. This will mean that intermediaries cannot view, censor or control your money as they cant perform transactions on your behalf. Most importantly they cannot hypothecate or lend out money they don’t have. Many believe that this will help reduce certain risks native to the current financial setup.
Convenience trumps everything
But let us be honest, accounts are damn convenient and we don’t have to worry about accidental loss as there is always a way to recover your access. Or in the case of a bank account recover the funds if they are stolen as there are several layers of insurance protecting them. We have essentially managed to shift the problem of storing value (anything of value — data or money) to someone else. In return we have just given them full access and control over, well… everything.
There is still hope
With the increase in understanding and application of topics like cryptography and distributed data storage, digital wallets have become more advanced, resilient and ready to be used for everything digital. It is not difficult to imagine a future where you have different wallets for different applications which you can store and access easily on your phones like any other app. Aside from self-soveriginity and privacy, there can also be other practical benefits of this approach. Some are:
- These will also be inherently more secure than your bank accounts which get hacked all the time as they are central honey pots.
- Costs of doing online activities will reduce as companies do not have to provide for insurance for the loss of data or theft of money as the individual completely owns the wallet keys.
- The data any AI company can access will be only the data you have given explicit permission over which will help in decentralising the development of AI.