What is a Wallet?
Firstly, most of us tend to first think of ‘money’ in the forms of metallic coins (e.g., copper, silver, gold) then in fiat paper currency or anything else of portable value that can be placed in a small portable purse, pocket or physical wallet. The wallet is easily accessible by being on or near the person and available almost instantly to facilitate purchases. Our wallets held intrinsically valuable precious items.
Source: www.marshalhistorical.cz
The wallet or purse was intended for relatively small and frequent purchases. It was mostly seen as being portable and easily carried on the person. The bearer of the wallet was assumed to be the legal owner of the wallet's contents as ‘possession being 9/10 of the law’ was well represented in statute. The contents of such wallets were traditionally coins and therefore ‘fungible’ e.g. one was the same as another of the same type and representing the same stored value. The combination of the wallets portability and the contents intrinsic value recognised by others facilitated commerce between all parties who had trust in the value of the assets being presented for payments.
Medieval wallets evolved to become verified financial contracts e.g. tax receipts
As society progressed new forms of money transactions emerged, e.g. using tax receipts instead of coins. The “split” tally stick became a prevalent technique in medieval Europe, a time characterised by a scarcity of coinage and widespread illiteracy, to document bilateral exchanges and debts.
Typically fashioned from squared hazelwood, the tally stick was inscribed with a series of notches before being split lengthwise. Each party in the transaction retained one half of the marked stick, both pieces bearing identical records. Over the years, this method was refined to the point of becoming virtually impervious to tampering. One such refinement was to make the two halves of the stick of different lengths. The longer part was called ‘stock’ and was given to the ‘stockholder’, which had advanced money (or other items) to the receiver.
The shorter portion of the stick was called ‘foil’ and was given to the party which had received the funds or goods. Using this technique gave each of the parties an identifiable record of the transaction. The natural irregularities in the surfaces of the tallies where they were split would mean that only the original two halves would fit back together perfectly, and so would verify that they were matching halves of the same transaction. If one party tried to unilaterally change the value of his half of the tally stick by adding more notches, the absence of those notches would be apparent on the other party's tally stick. The split tally was accepted as legal proof according to English Gratis “in medieval courts and the Napoleonic Code (1804) still makes reference to the tally stick in Article 1333. Along the Danube and in Switzerland the tally was still used in the 20th Century in rural economies.”
Source: Winchester City Council Museums
Tax receipts become the wallets
The most prominent and best recorded use of the split tally stick or "nick-stick" being used as a form of currency was when Henry I introduced the tally stick system in medieval England in around 1100. The tally sticks recorded a payment of taxes, but soon began to circulate in a secondary discount market, being accepted as payment for goods and services at a discount since they could be later presented to the treasury as proof of taxes paid. Then tally sticks began to be issued in advance, in order to finance war and other royal spending, and circulated as "wooden money". These wooden wallets held extrinsic value dependent on the government continuing to tax thus reinforcing the long relationship between fungible items, tax and the value of state sponsored ‘money’. Outside the tax jurisdiction the wallets were of little value.
Bringing us all to the current day where the advent of ‘digital wallets’ is quickly revolutionising the way we manage and execute financial transactions by offering convenience, trust, instant liquidity and enhanced security.
Digital Wallets
Most of the principal features of today’s asset wallets verify and confirm the ownership to the digital contents that they contain e.g. the wallet verifies to VISA/MASTERCARD the owner of the wallet. Below is a selection of notable digital wallets, each with unique features that cater to diverse user needs.:
1. Apple Pay: Exclusive to Apple devices, Apple Pay enables users to make secure contactless payments in stores, apps, and online. It also supports the storage of boarding passes, tickets, and loyalty cards.
2. Google Wallet: Compatible with Android devices, Google Wallet allows users to store payment cards, loyalty cards, and boarding passes, facilitating seamless payments and ticketing.
3. Samsung Wallet: Designed for Samsung devices, this wallet supports payment, membership, and reward cards, as well as ID cards and digital keys, all protected by Samsung Knox security.
4. PayPal: A widely recognized platform, PayPal enables online shopping, in-person payments via QR codes, and money transfers, with robust data encryption and buyer protection policies.
5. Curve: This wallet consolidates multiple cards into one, offering features like cashback from selected brands, no foreign transaction fees, and an 'Anti-Embarrassment Mode' for declined payments.
In effect all of the above digital wallets are able to store e-money but as we begin to see the rise of digital money such as stablecoins, central bank currencies, asset coins and tokenised assets such as real estate, tokenized funds, equities, commodities etc… that new types of secure ‘digital asset wallets’ are now required that can recognise the uniqueness of the assets that they contain.
The Rise of Digital Asset Wallets
Examples of the new Digital Asset Wallets include, MetaMask, one of the early digital wallets which is a popular choice for cryptocurrency enthusiasts. Ledger Nano S Plus, a hardware wallet providing enhanced security and supports a wide range of digital assets and offering staking capabilities. Trust Wallet, a mobile wallet that supports a vast array of digital assets, enabling users to store, manage, and trade digital assets directly from their smartphones. The new TPX™ / Cheyenne Mint military grade digital asset wallets enabling atomic settlements at points of sale and the Coinbase exchange wallet that allows users to store and manage a variety of digital assets (enabling integration to the Coinbase exchange for easy trading). There is also XDEFI, a wallet tailored for NFT enthusiasts, that offers support for multiple blockchains.
Prototype Example of the TPX™ / Cheyenne Mint AI Digital Asset Wallet
Modern Digital Asset Wallets
In the past, wallets used to host paper or wooden representations of tax receipts (extrinsic value) or coins (intrinsic value). The only decision required to use the wallet was the denomination selection of the paper currency or coins it contained.
Today's smart or AI (artificial intelligence) digital asset wallets must now include a plethora of decision points for transactions, here’s just a small sampling:
· Managing a multitude of on wallet assets.
· Determine the tax profile for each asset.
· Determine which asset to exchange.
· Where the transaction takes place.
· Where assets are exchanged.
From tally sticks to digital wallets, the journey of the wallet reflects humanity's and our economy’s evolving relationship with value. As wallets have evolved to encompass innovations in technology (e.g. tally sticks to permit extrinsic assets, tax receipts, debt receipts) and an ability to hold both intrinsic as well as extrinsic value assets now in modern times so there are the digital asset wallets evolving to hold bitcoins, stablecoins, real estate asset coins, tokenized equities, debt, derivatives, a veritable cornucopia of other digital assets.
What began as a simple tool as a ‘wallet’ to carry intrinsic wealth like coins, the ‘digital asset wallet’ of today has now transformed wallets to securely carry both instruments of extrinsic value (tax receipts, debt contracts, bitcoins) as well as intrinsic value assets (real estate and gold) and this capability is increasingly shaping economies and their liquidity along the way. The result of this is that digital asset wallets are not just storage tools but decision-making hubs. Modern digital asset wallets can increasingly manage cryptocurrencies, stablecoins, and tokenized real world assets (RWAs) in real time in a world where value can be as intangible as it is diverse.
As our digital asset wallets adapt to hold an ever-expanding range of assets, one key question looms for us all: will they empower individuals to navigate the complexities of modern finance, or will they become another gatekeeper in an increasingly fragmented digital economy? The true future of value exchange may nit reside in just what we hold, but increasingly how we then choose to hold it.
This article first appeared in Digital Bytes (26th of November, 2024), a weekly newsletter by Jonny Fry of Team Blockchain.