Digital Wallets: The Financial Gateway
Resistance merges proven technology to solve transactional inefficiencies.
During the past few years, the buzzword within the entrepreneurial community has been ‘disruption’. In its simplest form, disruption refers to a technological or market advance that fundamentally transforms or creates entirely new markets. But how exactly does the term apply to blockchain and cryptocurrency?
According to research conducted by Ark Invest, technology breakthroughs will advance significantly over the coming year. They claim the top three evolutions in 2019 will result from deep learning, digital wallets, and cryptocurrencies. Since our team has built a decentralized exchange, it was natural for us to explore the importance of digital wallets and cryptocurrency in today’s evolving technology landscape.
Digital Wallets
They are paramount in the evolution of value transfers because they a) facilitate seamless transactions, and b) simplify the user experience. They are quickly becoming gateways for financial services such as wealth management, banking, and personal finance. Below are a selection of recent success stories where digital wallets took a key role:
(1) By the end of 2018, Venmo (digital wallet) became the fourth largest manager of US customer accounts, trailing only Bank of America, Chase, and Wells Fargo.
(2) In China, digital wallets like Alipay and WeChat Pay have revolutionized the delivery of banking products at scale in both rural and urban areas throughout the country. Their ease of use and accessibility have caused mobile payments to soar 12 fold to $24 trillion in 2018.
Many believed that digital wallets could upend traditional banks within five years, however, to make this happen, they need to solve the following challenges.
The Interoperability Dilemma
Currently, interoperability is a huge problem in the exchange of cryptocurrencies due to the fact that individual blockchains employ different protocols, algorithms, and security procedures to conduct transactions.
There are countless numbers of blockchain and cryptocurrency projects on the rise, each built with a specific purpose in mind. Therefore, an individual who uses crypto assets for his or her business needs to store multiple assets, which requires multiple wallets. This makes the management of their funds burdensome.
Here’s an example:
Let’s say a retail store uses a specific cryptocurrency for its operation. We’ll call it StoreCoin. That retail store’s supplier offers a discount if they are paid in VeChain tokens for their logistic services. However, the storekeeper only owns StoreCoin, because it is the only digital payment option they offer to their customers.
The ideal scenario for the store owner in this case is to have a frictionless transaction, meaning the store owner can send StoreCoin from his StoreCoin wallet to the supplier’s VeChain wallet, which will automatically swap to VeChain, thus completing the transaction. The owner pays in his StoreCoin, and the supplier receives the equivalent value in VeChain. Everyone wins.
However, things aren’t this simple. Due to the use of different ledger technology, different blockchains are unable to communicate — or share information — with one another. Therefore, in such a case, the store has to rely on a centralized exchange to manage the transfer.
Free movement of digital currencies in a peer-to-peer environment has been a key industry goal. In other words, we need the ability to exchange different cryptocurrencies independently with little or no oversight from a central entity. We’ll get to why a bit further down.
Today, most cryptocurrency assets are exchanged between peers across multiple cryptocurrency exchanges. Just think of the fee structures in place that go towards making a simple transaction possible; maker fee, taker fee, withdrawal fee, transfer to exchange wallet fee, and so on. The whole complicated process is time-consuming and expensive.
Atomic swaps, which we will describe in future articles, solve the interoperability problem by creating a seamless transaction between two different cryptocurrency blockchains. But there’s still an entirely different problem, your privacy.
Where does privacy enter the debate?
It is necessary to maintain privacy in commercial and enterprise transactions through exchanges for several reasons. For starters, individual end users typically do not want the details of their income and spending to be exposed.
Consider yourself in a retail store paying for your items in bitcoin. The store owner in that instance knows your BTC address and can check your financial details.
In a recent survey by Greenwich Associates, 56% of the 134 market participants surveyed cited transaction confidentiality as a major security concern.
This concern is driven by several factors. In many cases, confidentiality and privacy are enforced by legislation and regulation (e.g. EU General Data Protection Regulation or client confidentiality) and recent memories of data breaches by enterprises like Facebook and Google.
Several cryptocurrencies like ZCash and Monero offer privacy features, however, when it comes to the exchange of assets, such as converting ZEC to USD, individuals are dependent on cryptocurrency exchanges where their data (and trading behavior) is monitored and stored.
Resistance solves these challenges
Sometimes you don’t have to reinvent the wheel to fix a problem. By bringing together several proven models you can solve a complicated issue. This is exactly what we’ve done at Resistance.
For instance, our digital wallet, contained within the Resistance Desktop Application, eliminates the need for a trusted third party (TTP) or central authority for exchanging different crypto assets. This in turn reduces transaction costs and keeps a user’s assets under their control. In order to accomplish this, we employ several methods:
Atomic swaps
Atomic swaps have the potential to completely revolutionize the way money is transferred in the blockchain industry. It’s a smart contract enabled technology that gives individuals the ability to exchange about ~95% of all digital assets seamlessly and securely without the involvement of a TTP.
With the atomic swap feature in ResDEX, individuals can transfer peer-to-peer with a minimum fee and reduced friction from beginning to end.
Privacy
Users have the option to enable or disable enhanced privacy features on ResDEX, meaning anyone operating on the exchange has control of their transaction information and can decide whether or not it will be seen by others.
If users select this feature, rather than posting sensitive trading information on the public blockchain, transactions are encrypted and validated using zk-SNARK. Additionally, users of ResDEX have the option to route network traffic through TOR, further protecting their IP addresses and completely shielding themselves from outside surveillance.
Atomic swaps are the next disruptive innovation in cryptocurrency because they impose new benefits for current-day money transferring. Along with the privacy features we provide on ResDEX, we are creating a fair and ethical financial platform that is easy for anyone to uses. The possibilities are endless!
Links
Website: https://resistance.io (U.S. visitors restricted)
Whitepaper: https://docs.resistance.io/Resistance_Whitepaper_v1.5.pdf
Resistance Pool: https://respool.io
FAQ: https://www.resistance.io/faq
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