When critics of cryptocurrencies talk about digital assets, they first bring up a skeptic argument about the impossibility of using Bitcoin and other coins in everyday life. “Cryptocurrency cannot be used to paid in a regular grocery store; non-existent money cannot be spent using a card”—this reflects the reality of the implementation of crypto payments in financial activities. The introduction of digital money in Apple Pay, Samsung Pay, or Android Pay, however, can change the attitude.
Fantasy or Reality?
“Apple releases iOS 13.0 with major updates including the Apple Pay Vault: Apple’s first product enabling the storage and transactions of digital assets such as Bitcoin, Ethereum & Monero. Through the Vault app pre-installed on iOS devices, 1.2 billion customers now have access to a secure way to store cryptocurrency private keys. Users can transfer funds to friends via iMessage or deposit/withdraw from their wallets in Coinbase (acquired by Apple in May 2019).”
No, this, unfortunately, is not a reality. This is how entrepreneur and technology enthusiast Danny Sheridan fantasizes in his blog on Medium. Of course, there was no announcement on the release of the Vault, let alone the Coinbase acquisition. Similarly, the author of the article is trying to raise important issues for improving cryptocurrency—namely, its safe storage and adaptation to real life. With the help of Apple Pay Vault, as suggested by Sheridan, it would be possible to make daily transactions.
“The Apple Pay Vault is modeled after a traditional wallet used to pay for smaller, everyday transactions. Users will keep a small amount of cryptocurrency on their device stored in the Secure Enclave, which sits near the A11 chip. While secure and convenient, if a customer loses their phone, there is no way to recover the private keys,” as Sheridan writes.
Speaking in favor of such a cryptocurrency wallet, Danny Sheridan says that the desire to steal an iPhone with cryptocurrency stored on it will be minimized. After all, the fraudster does not have physical access to encrypted data since it becomes useless without Face ID or Touch ID authentication.
“Today, your fingerprint or facial scan is not uploaded to the cloud, but is instead stored locally on your device within the Secure Enclave. The biometric data is stored in an encrypted form which — according to Apple — can only be decrypted by a key available by the Secure Enclave thus making fingerprint data walled off from the A11 Chip and the rest of iOS. With this update, Apple enables secure digital asset storage for to 1.2 billion customers worldwide. We are excited to offer this software update that continues to add value for our users,” as Sheridan continues to fantasize on behalf of Josh Robbins, an imaginary Apple Pay Global Business Development representative making a statement on February 1, 2019.
Among the thoughts on the future integration of instant crypto payments into smartphones, however, there are real cases of interaction between technology giants and crypto companies. For example, in April 2018, Apple introduced the Payment Request API technology for transactions in the Apple Pay payment system. The extension of this system includes the Interledger technology from Ripple, which will be used in Safari 11.1 browser on macOS and iOS 11.3.
“Interledger is an open source protocol aimed at making payments between different registries. In addition, the protocol includes a number of standards that can be applied to any method of making payments, with an address, two-factor authentication, and signatures. Payment networks often face the problem of incompatibility between themselves. It can be solved by Interledger. It is a minimal protocol with an open architecture that allows interacting with transfer systems with different types of values contained in them. Moreover, Interledger allows making payments between different digital assets, eliminating the risk of mediation errors,” as said in a Finance Magnates article.
After a while, the authors at CryptoCrimson noticed that the payment request API was not specific to any payment method. All major browsers will implement an API and support payment using the main card. This means that Apple can use Ripple Interledger technology, but so far, this development is not being implemented. Despite this, attempts at integration exist, which means that the use of cryptocurrency to pay via Apple Pay will be available in the near future.
How Do Token-Based Contactless Payments Work?
Tokenization (not the one to which the crypto community has become accustomed), as a process involving the replacement of a confidential data element with a non-confidential one in the form of a token, is increasingly being introduced in the payment industry. Tokens do not have an external or useable value for direct use, as they cannot be spent like money, so hacking the system using a direct attack, crypto analysis, exposing the token matching table, and even brute force will not work.
In the context of credit cards and Apple Pay, Samsung Pay, and Android Pay, tokenization is used to replace the Primary Account Number (PAN) or credit/debit card number. The token looks like a regular card number, although it is not the original PAN because the tokenization process, due to the safety and security of confidential data, does not allow the use of the original card number during transactions.
To make a contactless money transaction, users need to add card information to the mobile payment system by scanning or manual data input. It is then transferred to Apple, Samsung, or Android servers. After that, the companies transfer information about the received card to the appropriate payment system: Visa, MasterCard, AmericanExpress, and others. Then, the network of cards checks the card information in the issuing bank.
After verification, the card system acting as the Token Service Provider (TSP) creates a token (which is called DAN, or Device Account Number in the context of Apple Pay) and a token key. This DAN is generated using tokenization and is not a valid card number.
The verified information is sent back to Apple, Samsung, or Android servers. After this, the data is stored in a protected device element (SI). Thus, the card becomes activated and ready for one-touch payments.
When using the Europay + MasterCard + VISA or EMV contactless mode (international standard for banking chip operations), an Apple device is connected to a terminal in accordance with the EMV contactless specification mode. The security element on the device uses a token to generate a dynamic cryptogram for each transaction, then creates a token key, and calculates the amount and other information related to the payment. Further on, this dynamic cryptogram is sent to the payment processor along with a token (DAN), transaction amount, and other necessary information for processing.
Contactless payments have become available thanks to the technology of short-range wireless data transmission—NFC or Near-Field Communication—which was announced in 2004. The technology works at a distance of no more than 10 cm, at a frequency of 13.56 MHz, and always includes an initiator and a target. The initiator generates the radio frequency field itself, which can affect the passive target.
Due to the compact size and low power consumption, NFC can be used in small devices. In smartphones, the antenna is often mounted on the back of the gadget, under the cover. To prevent users from asking how to apply a gadget for data transfer (such a problem is typical for tablets because of their large size and a small range of the tech), the location of the chip is often marked with a special sticker on the case.
Contactless Crypto Payments
The above example of integrating the Ripple protocol into the Apple system shows that the representatives of two clusters (crypto and advanced corporations) are ready for cooperation. It will help develop and strengthen the link between the “two worlds” of digital assets and technologies that are not related to the digital economy. At the moment, companies like Apple and Samsung are working on expanding their developments, which are used for the system of financial relations “seller–buyer.” The lack of support for various payment methods creates a number of difficulties in the provision of services and goods that society wants and can acquire due to the availability of funds.
The introduction of payment purchases using contactless crypto payments will be the impetus for the development and adaptation of digital assets. The consciousness of ordinary users will change. The time when Bitcoin and the rest of the “non-existent” money come into use on par with fiat money will mean that the world economy has moved to a new, more technological stage of development. Developing a crypto industry and adjusting it to society will be helped by easy-to-understand-and-apply designs from modern projects.
After all, NFC technology and its structure are not difficult. For daily use, one needs to take a smartphone, add card’s data, and then tap the device against the NFC-enabled payment terminal. That’s how cryptocurrencies will come into use. Solutions to introduce digital assets into contactless payment systems already appear in the crypto market.
The BIP Wallet from the Minter project will allow users to issue and use branded virtual plastic cards in conjunction with Apple Pay and Android Pay.
Thanks to the BIP Wallet, it will be possible to use coins issued on the platform in real life. After all, the conversion of crypto-BIPs into U.S. dollars and euros will occur in seconds. And this means that all transactions will be performed the same way as with ordinary cards of banking institutions, and all fantasies about the security and ease of use of cryptocurrencies—which were voiced at the beginning of this article—will become a reality.