Digital currency hardware wallets and the essence of money

TL;DR

This paper critiques current digital currency hardware wallet designs, emphasizing the importance of holding digital assets independently of custodians and proposing alternative architectures for more efficient, user-centric digital payments.

Contribution

It challenges existing assumptions about digital wallets, advocating for designs that enable offline storage and online transactions without relying on trusted hardware.

Findings

Current proposals ignore the core nature of digital money.

Account-based and hardware-dependent solutions have significant limitations.

Offline storage with online transactions offers a better approach.

Abstract

Many proposals for the design and implementation of digital wallets assume that the purpose of the wallet is to enable offline payments via custodial accounts, ignoring the real problems faced by individuals and businesses that engage in retail payments, such as the anticompetitive behaviour of payment platforms and the decline of cash. More importantly, the proposals ignore the raison d'\^etre of digital currency as a kind of digital money that can be held independently of custodians. Finally, the proposals demonstrate a profound lack of imagination about the nature of digital money and the devices that could be used to hold, manage, and exchange it. From these presumptions flows a set of architectural requirements that stifle the promise of digital currency to deliver novel and efficient ways to exchange value in the digital economy. In this article, we critically assess the essential problems that digital currency solutions are being proposed to solve, particularly with respect to the future of payments and the future of cash. We assess the validity of common justifications for account-based payments and certified hardware in the context of alternative designs, limitations, and trade-offs. We conclude that the interests of consumers would be better served by design approaches to digital currency that anticipate that digital assets would be held outside accounts, stored offline, but transacted online, without requiring the use of trusted hardware.