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Cardano Ecosystem

Genius Academy

03/02/2023

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The Future of Digital Wallets: How NFTs and Tokenization Can Eliminate the Need for Credit Cards and Prevent Identity Theft

Non-Fungible Tokens (NFTs) have been making headlines in recent months as a revolutionary new way to own and trade digital assets. But what exactly are NFTs, and how do they relate to the concept of tokenization? In this article, we'll explore how NFTs, and tokenization can be used to eliminate the need for credit cards and prevent identity theft in the digital world.

The Future of Digital Wallets: How NFTs and Tokenization Can Eliminate the Need for Credit Cards and Prevent Identity Theft

Non-Fungible Tokens (NFTs) have been making headlines in recent months as a revolutionary new way to own and trade digital assets. But what exactly are NFTs, and how do they relate to the concept of tokenization? In this article, we'll explore how NFTs, and tokenization can be used to eliminate the need for credit cards and prevent identity theft in the digital world.

What are NFTs?

An NFT, or non-fungible token, is a unique digital asset that can represent anything from artwork and memes to tweets. Each NFT is identified by specific numbers and digital signatures and is stored in a smart contract, preventing it from being exchanged for any other NFT. The signatures on an NFT act as evidence of ownership, and the most reliable way to purchase and sell NFTs is through the Ethereum blockchain, which keeps public transaction logs for the tokens. With NFTs, creators and buyers can own original digital creations, and the finite supply of NFTs appeals to investors and artists alike.

What is Tokenization?

While NFTs are unique digital assets, tokenization is a method that protects sensitive data by converting it into non-sensitive data, or "tokens." These tokens are generated by random numbers and have no connection to the original data, making them impossible to decode. This means that tokenizing digital wallets can prevent threats to sensitive consumer data like identity theft. 

Irrespective of what business you run, you always have some data that is sensitive and is required to be protected at any cost. When your data is turned into tokens, it can be kept securely in a third-party database separate from internal systems through a tokenization platform. Thus, businesses can use these tokenized data for their operational needs, which will facilitate them in preventing security risks in their internal environment. No matter what happens, tokens cannot be decoded.

Digital Wallets and Tokenization

A digital wallet is a system that stores payment cards in digitized form. Examples of

digital wallets include Apple Pay and Google Wallet. The digitization of digital wallets enables users to have a convenient and secure platform to store and use their cards without having to carry physical cards.

Credit Card Tokenization

Card tokenization is a way to protect sensitive data by replacing it with tokens that are surrogate data entered in a secure form. For example, when users insert a payment card into their digital wallet, they use sensitive data such as the PAN, expiration date, and CVV2. If tokens replace this data, they will serve as a reference to the card, and the digital wallet will only use the token, preventing it from exposing the original information on the card. Users can find various platforms to implement card tokenization. The platform that generates the tokens and stores the card data on behalf of the digital wallets is known as network tokenization. This means they generate tokens from the card network, such as Mastercard or Visa.

Benefits of Digital Wallets and Credit Card Tokenization

The advantages of digital wallets and card tokenization are:

  • Tokenized cards are widely accepted and are valid on any commercial platforms that accept digital wallets.

     
  • Sensitive data remains secured since fewer systems have access to sensitive data. 

     
  • Each token network is exclusive to a digital wallet and a device.

NFTs also play a role in eliminating the need for credit cards by providing a new way to make digital payments. Instead of using a credit card to make a purchase, a buyer can simply transfer ownership of an NFT to the seller. This can be done using smart contracts on the Ethereum blockchain, which can automatically transfer the NFT and any associated funds between the buyer and seller.

In this way, NFTs can function as a digital currency, allowing individuals and businesses to make transactions without the need for credit cards or other traditional forms of payment. This can also be beneficial for businesses, as it eliminates the need to store and secure credit card information, reducing the risk of data breaches and fraud.nclusion
 

The use of NFTs and tokenization has the potential to revolutionize the way we store and use digital assets, including digital wallets. NFTs provide a new way to own and trade digital assets, while tokenization increases security for sensitive data. Together, these technologies can greatly reduce the need for credit cards, making digital transactions safer and more secure. As the technology and adoption continue to grow, it's an exciting time to see how this technology will continue to evolve and shape the future of digital payments.

 

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