Wallets

The wallet service is the means by which payments are made. Wallets provide a general payment abstraction without constraining implementation details. Wallets may be used to represent digital cash, credit accounts, bank accounts or any other kind of currency.

Jtrix specifies the basic negotiation interface between wallets. This interface is used to determine a payment interface supported by both parties. The payment interface determines the currencies in use, exchange rates, etc. It's anticipated that standard payment interfaces will arise.

There are two basic patterns supported by the Wallet Interface:

1. Seller Initiated

   The Seller passes a Wallet Warrant (The ``Sellers Wallet'') to the Buyer. This Wallet acts as a ``destination'' for payments. The Buyer uses its own Wallet to ``push'' money to the Seller.

2. Buyer Initiated

   The Buyer passes a Wallet Warrant (The ``Buyers Wallet'') to the Seller. This Wallet acts as a ``source'' for payments. The Seller uses its own Wallet to ``pull'' money from the Buyer.

In either case, both parties have their own Wallet. The party which receives the Wallet from the other initiates the transaction between the Wallets. The party with passes the Wallet gets to veto or inspect the transaction, either when the transaction takes place, or in advance.

The degree of trust between the wallets may affect the efficiency of the transfer, and therefore the cost per transaction and the minimum transaction size. To illustrate this, consider the following scenarios:

1. Buyer B purchases something from seller S. To pay, B uses a wallet service supplied by their bank account with Second Fictional Bank, Inc. The seller has a wallet from First Fictional Bank, Inc. The only interface they have in common is a credit card style debit transaction, and First Fictional Bank has never heard of Second Fictional Bank. So the transaction cost is quite high, because each debit needs to be authorised through the credit card agency.
2. Buyer B and seller S both use wallets from First Fictional, Inc. In this case, the wallets can use their commonality to negotiate an ``Intra-First Fictional'' payment interface. Payments can be transferred directly with little cost, direct from account to account.
3. Buyer B and seller S have different banks, but both banks use a wallet service from First Fictional Clearing Systems, Inc, which operates a digital cash mechanism. Each wallet leases digital coins from its corresponding bank account. Because the wallets trust each other, digital cash is transferred without verification. Coin copying is ruled out because the implementations and operation of the wallets are known and trusted not to do illegal things.

Other digital cash techniques could be used to aid in the transaction between untrusted parties, and minimising the need for third party verification, thus reducing the transaction cost. Thus the Jtrix wallet system can adapt to improving technology. A technology which is more effective at reducing risk correspondingly reduces the constraints by which wallets need to protect their data from untrusted systems, and make verification transactions.

Wallets really represent a direct communications path between the financial institutions involved. They enable those financial institutions to use smart proxies at the point of sale, if desired. In a cash model, the financial institution degenerates into a real wallet analogue.