Toward the pan-European Universal Access Device

This is a first step toward a pan-European blueprint for a Universal Access Device, or, to put it more simply, toward a pan-European e-wallet. Many thanks to Bruno Schneider - Le Saout for sharing his insights on this!

In their first version, digital wallets allowed us to keep our personal data and to share it in a secure way on a blockchain, for example, in order to exchange bitcoins for tezos. A Universal Access Device is an evolution of that concept, enabling a Secure Interaction between simple users, such as exchanging some amount of Central Bank Digital Currency, or of any crypto-currency.

Europe owns all the technology needed for defining such a standard product, from hardware to software, but that effort is quite beyond the capabilities of a single player alone. But a Union-led cooperation effort could easily reach that result.

A little history

Even before the Roman Empire, coinage has been not only a medium of commercial exchange, but also the way Emperors asserted their sovereignty. The invention of banknotes gave artists more space for representing Kings and Democracies. Despite some early uncertainties, the story of the Euro itself shows that money is a powerful tool for reminding people about their common European roots.

So, this proposal of a common infrastructure (hardware+services platform) for crypto is not science fiction, but the logical consequence of an evolution lasting thousands of years. Few people may know that the Galileo European Consortium is operating a smaller, European version of the Global Positioning System (a technology developed by the U.S. in the Seventies). Galileo is considered a milestone in developing the concept of a European digital sovereignty, and we are using it every day (along with U.S.-supplied GPS) on our smartphones.

A fortiori, an everyday-use object like a UAD may become a powerful symbol of European integration. Moreover, enforcing everyone to use a standard tool (like banknotes and coinage) for commerce, could reduce physical, income-based or culture-based inequalities.

What's inside an e-wallet?

In its simplest form, an e-wallet enables the secure storage of the information needed to operate on a blockchain. Clearly, we may write this information on some other storage media, but those solutions could be both error-prone and insecure.

Entry-level products still look like some usb stick, and may depend on a personal computer or a smartphone to interact with the user. More complex solutions are based on a two components-approach, a pocket calculator-like device (for keying the amount) and a contactless card, that provide user identification. In their latest evolutionary step (the UAD), these devices may also implement many other functions, like contactless transfer of digital currency between two users.

The systemic approach to UAD's

This paper is advocating a pan-European UAD infrastructure, based on a standard hardware platform and a software distribution service. The main difference with smartphones is that UADs will run only the software distributed by the software distribution service. Depending on the software, individual UADs can be tailored for specific applications, either for crypto-currencies or for CBDCs.

The lesson learned from smartphone development confirms that only standard hardware+services infrastructures can foster the development of a lively software industry. Many market practices of these proprietary platforms (Google-based Android and Apple-based iOS) are now under investigation by both the U.S. Government and the European Commission. This should be reason enough for not depending only on them.

European digital sovereignty is based on the ideas of complementarity and cooperation and should not be seen as protectionism. A common pan-European infrastructure offering hardware+services for UADs could give fresh impetus to the European DeFi (Decentralized Finance) sector. On the contrary, the success of any foreign UAD infrastructure will only mean more problems for EU-based companies and more conflictuality between all the players.

The process leading to the adoption of a CBDC will take time, as some basic alternatives are still to be evaluated (should it be wholesale or retail, should it be account- or token-based ?). That is a good reason for starting now the development of a pan-European UAD: refining and experimenting it in present crypto projects, it will be ready in time for the CBDC implementation of the Euro.

Available architectures for digital wallets are sharing the same basic components, but intellectual property issues and trade secrets have fragmented the market and scattered development efforts. In the same way, everyone agrees that secure software distribution platforms are capital for the software industry, but only few companies have the critical mass for operating them at a profit (Google, Apple, Microsoft, Amazon). Definitely, only an EU-led cooperation effort can overcome these two frictionalities.

The human factor

Nordic Countries are eager for Central Bank Digital Currencies: Canada and Sweden are both working on CBDCs. Very low population densities make the physical movement of cash risky and uneconomical. Paying with plastic is fashionable among the younger, and all these trends are clearly expanding in other countries (i.e. Japan, Korea, Singapore). Central Bankers know that the image of National Currency is losing its appeal, and that they need to do something about that.

But there are better reasons than image for developing a Universal Access Device. Natural calamities (floodings, earthquakes or pandemics) can impair power distribution and communication networks, blocking access to cash for long periods of time. A solution for these contingencies could be an UAD-based system for handling small-value transactions even when banking services are not available. The same system could also be used for delivering money to the needy in a secure way.

Vulnerable members of our society (the elderly, the unbanked, the digitally-impaired) may not own a smartphone or may not know how to use it. But they are all the same entitled to the use of state-issued money. According to the Italian Constitution [ art. 117, comma 1, lett. e) ] “(the Italian) State owns exclusive right to legislate on the following issues: currency, saving and market protection, competition issues, currency controls, fiscal policy and accountancy principles, equal access to financial resources”.

Unit cost, weight, autonomy and usability of a UAD could be drastically improved beyond present smartphone levels, thanks to the extreme specialization of the device. All these advantages will be shared among all the citizens: as an example, an improved display designed for the visually impaired could benefit anyone using the device during night hours or with no illumination.

A market analysis

Last year, the global market for hardware wallets was around 160 million dollars. Compound Annual Growth Rate in the next five years is estimated between 12 % and 24 %. According to these expert opinions, the UAD market in 2025 should be somewhere between 290 and 700 million dollars.

Paris-based Ledger is probably the biggest company in the market. The firm launched in 2014 and is present in 165 countries. Their wallets (more than a million units sold) feature a proprietary chip (running the crypto software in a secure environment) and a common microcontroller running the User Interface and other non-critical parts of the software.

Ledger's Blockchain Open Ledger Operating System (BOLOS) may be considered the first effort of developing a universal platform for e-wallet applications. BOLOS enabled Ledger and Gemalto (a company of the Thales Group dealing with identity management and cybersecurity) to develop an enterprise solution used by banks for the custody of customer-supplied blockchain keys.

Last year, the IOTA Foundation and STMicroelectronics announced an alliance for porting IOTA-provided software into STM's 32-bit microcontrollers. Berlin-based IOTA is a not-for-profit organization delivering a scalable, feeless and fully-decentralized distributed ledger technology. STMicroelectronics is an italo-french global semiconductor leader active in the field of consumer-oriented embedded applications.

The real competitor of hardware wallets and UADs is the smartphone. Low-technology solutions based on smartphones are common both in the Far East and in Northern Europe. They require consumers to scan a QR-code on their smartphone for sending payment instructions to a central computer. As consumers have no means to know who is the real owner of the QR-code they are scanning, it is a very insecure technology and has already been leveraged in thousands of scams.

Security

Security issues can be controversial, but e-wallet security is a case in point: notification of exploits and flaming refutes are a time-honored tradition. The history of security is one of the best examples of a disruptive progress: technology is constantly changing, while finance, law, politics and philosophy issues are discussed all at the same time.

One of the few agreed principles is that security software needs to be updated constantly, and that should be done through a secure distribution network. It has been theorized that a blockchain-based platform could be used for the authoring/distribution of software, but the resources involved are again beyond the capabilities of a single player.

In my opinion, the architecture of smartphones and their present software distribution platforms are simply not good enough for DeFi applications. Asking these companies to enforce a good security level is probably hopeless, as their target is offering as many products as possible, as long as this competition doesn't threaten their own products. It is no surprise that along with the highly specialized “trojans” favored by enforcement agencies, we find an ever-growing population of fancy applications that access our personal data and share them without any control.

A possible candidate for a pan-European secure software distribution platform may be the EBSI (European Blockchain Services Infrastructure). The European Blockchain Partnership (EBP), created in April 2018, joins all EU Member States plus two States of the European Economic Area (Norway and Liechtenstein). The EBSI is the technical arm of EBP, and manages a network of 21 blockchain nodes covering 19 states, with other 14 nodes expected to join the network by the end-of-year.

Integration is the way to go

European hardware industry is steadily threatened by foreign competition, sporting lower manufacturing costs and large-scale investments. One strategy against this is to focus on high-technology and innovation.

As described, all the technologies enabling a Universal Access Device are already available in Europe, but they are not integrated at the consumer level. This integration effort is not going to be easy, but it is reasonable enough, and it could be both far-sighted and remunerative. Should the proposal for a pan-European Decentralized Finance sandbox be approved, the UAD infrastructure could be a powerful tool for monitoring and controlling the sector.

Euro-Banking sector has already taken stock of the DeFi landscape, and decided they like it: hopefully, the hardware industry could do the same.

This article is one of a series outlining a detailed proposal for a pan-European Universal Access Device.

https://www.dhirubhai.net/pulse/iot-plus-uad-less-chaos-rosa-giovanna-barresi

https://www.dhirubhai.net/pulse/universal-access-device-deployment-self-sovereign-identity-barresi