Web3 101: Part V- Crypto Wallets and Data
Sep 27, 2021
Last updated on Sep 27, 2021
Forget everything you know about your data and the internet. Web3 is finally flipping this relationship on its head.
Today’s Fractionalized Web
Interacting with our current web is more cumbersome than we realize. Think about your daily internet activity for a moment. How many sites do you log into? How many passwords do you have written down somewhere? How many email accounts do you have floating around, all connected to different parts of your life?
We have gotten used to this fractionalized web experience. We create separate user accounts for every site and app, and hand over bits of our personal information along the way. This personal information is necessary to verify our identities, but it will be used for some....ulterior purposes as well. As we covered in a previous Web3 101 article, our personal data gets packaged up, rented out, and used to sell ads. A good portion of this data will also make its way into the hands of cyber criminals via data breaches, putting our digital lives at risk.
Sooo, can blockchain change all of this?
Of course it can. This all starts with wallets.
Your wallet is your portal to the decentralized web. But, what exactly is it?
Wallets might seem like complicated new tech at first, but using them is similar to simply sending an email or adding a file to a folder. Let’s think of the blockchain as a community-owned cloud storage service. Within this cloud, you have your own digital folder. And like any digital folder, this one has a name.
This digital folder is your crypto wallet, and its name is your public key.
Your public key, which appears as a long string of letters and numbers, acts similar to an email address. Instead of sending and receiving emails, though, your wallet is used to send, receive, and store digital assets like NFTs and cryptocurrencies. Anyone who knows your public key can send a digital asset directly to your wallet. In the same way it is generally safe to give someone your email address, it is safe to give someone your public key.
But actually accessing your wallet is another story. In order to “log into” your wallet and use or remove the assets stored inside, you need its private key. This is your wallet’s password. Without this private key, there is no way of accessing your wallet. It is very important to keep your private key somewhere safe and never share it with anyone. If it were to fall into a pair of malicious hands, your entire wallet could be wiped out in seconds.
So, our wallets hold our digital assets. Our public keys are the names of our wallets. And our private keys are the passwords to our wallets. Not all that groundbreaking.
What is groundbreaking is how wallets work behind the scenes.
One Account To Rule Them All
Generally speaking, when we store assets and information online, we are at the mercy of a centralized company whose servers our content is saved to. As we have seen over the years, safeguarding digital assets and info is a tricky job. Even the largest tech companies - Facebook, Google, Yahoo, Amazon, and the like - have seen their fair share of data breaches.
Blockchain aims to remove the need for centralized companies to take and store your info in the first place. Unlike a Facebook or Dropbox account, your crypto wallet is not owned or controlled by any company or centralized organization. It exists on the very bottom layer of the blockchain itself, which is owned and managed by the entire community.
Think of your wallet as a universal internet account. When you log onto the decentralized web, you log in with a wallet like MetaMask, Rainbow, or Phantom. Then, every site or application you use simply verifies your identity via your wallet. There is no need to make separate accounts across this new web, all with their own usernames and passwords.Your wallet is your master key to the entire decentralized web.
This not only makes your web experience smoother and easier, it makes it safer.
Controlling Your Data
On this new decentralized web, you are in control of your own data.
When you interact with a website or app, it will ask to connect to your wallet. You will then have the option to approve or reject that connection. Every subsequent transaction will also require its own approval, although you can allow your wallet to approve transactions automatically when interacting with applications you trust.
These might just seem like extra steps, but let’s examine what's actually happening here.
Let’s say you want to buy some artwork from NFT marketplace, OpenSea. When you first land on the site, you will see a wallet button in the top right. When you press it, you are not prompted to create or sign into an “OpenSea account.” Instead, it simply asks for you to connect your wallet. Your wallet will then ask if you are okay with that connection, at which point you approve or reject it.
Essentially, OpenSea is asking you for a tiny bit of info, just enough to identify your wallet’s public key and see if you have any NFTs. You are opening your digital folder and showing OpenSea only what you absolutely have to. And that’s it, you’re in.
When we juxtapose this with creating many traditional web accounts, which typically require your full name, email address, phone number, and DOB, the difference is night and day. The decentralized web does not require you to leave a breadcrumb trail of your data everywhere you go.
Your data stays safe and sound in your wallet, and can only be accessed with your approval.
Owning Your Data
When we last discussed how our data is used on the traditional web, we looked at how valuable it is. As it turns out, it is extremely valuable. On the decentralized web, this hasn’t changed much. What has changed is who owns it.
Now that our data belongs to us and only us, we get to decide what we do with it. We are finally the owners of our own data. Many decentralized applications ask for minimal info, giving you the option to keep your data and personal info all to yourself if you’d like. But if you want to monetize your data like big tech does, while reaping the rewards yourself, you can do that too.
Monetizing Your Data
Even on the decentralized web there is demand for data. Everything from marketing to AI to healthcare relies on a constant feed of new data from individuals. Now that we own this data, though, we can choose who gets to access it.
Projects like Ocean Protocol are creating decentralized data marketplaces. The goal here is to create P2P markets where users can aggregate and sell their own data directly to companies who find it valuable. To drastically oversimplify, these marketplaces allow users to upload data in exchange for payment, usually in the form of the project’s native cryptocurrency, without a company in the middle to store that info or take a slice of the profits. This harkens back to the core ethos of decentralization - cutting out the middleman.
Now that we can facilitate peer-to-peer transactions in a trustless manner, we no longer need middlemen reaping the lion’s share of our data’s value. Finally, we can protect or capitalize on our data ourselves. Regardless of the path you choose to take, the fact that the ball is rolling into our court is a massive step in the right direction.
As revolutionary as monetizing our own data is, this infrastructure is still being built out. Ocean Protocol and other similar projects not only have to work out the kinks of a complicated peer-to-peer marketplace, but they have to attract both data providers and data consumers. If either side of this equation strikes you as particularly interesting, though, this may just be the perfect time to hop in. As understanding around our data and its value continues to grow, demand for ways to cash in on that data will grow along with it.
Digital Identity With Wallets and NFT Domains
While wallets are helping open the doors to the decentralized web, they can still be a little messy. Your public key is unfortunately a complex alphanumeric string, which looks something like 0x4he966EA31913177dahH524C93900A0321…….yah, it’s not ideal. If these wallets are supposed to represent us, our data, and our assets, then they need to be a bit more personal and a lot more user friendly. This is where NFT domains enter our picture.
By claiming an NFT domain from Unstoppable Domains and adding it to your wallet, you can effectively change your public key into something personal and easy-to-read. Instead of existing as a string of letters and numbers, you can now be brad.crypto, or, you know, whatever your name is. NFT domains not only make it easier for others to send you cryptocurrencies and NFTs, they help you form your identity on the decentralized web. Wallets are becoming the new usernames.
Now that your data and digital assets have a personalized place to call home, what else might we see wallets used for?
The Future of Crypto Wallets
Currently, most of the things we keep in our crypto wallets are digitally native. Cryptocurrencies and digital art come to mind first, but this is just the beginning of what wallets are capable of. The crypto wallet’s ability to store info and content in a highly secure, accessible, and convenient manner makes it the perfect tool for storing all types of sensitive info.
In 2021, does it still make sense for hyper-important paperwork to exist mostly on...paper? Birth certificates. Driver’s licenses. Diplomas. Deeds and leases. All of these could one day make their way into our wallets. With places like South Korea and Delaware already putting digital driver's licenses into action, this future could be closer than we think.
For these things to make their way into our crypto wallets, though, they would need to be NFTs. And that is exactly what we’ll be talking about in our next Web3 101 article!