In today's digital landscape, safeguarding one's identity is a growing concern. Enter Federated Wallets—a groundbreaking concept inspired by the community bitcoin wallet project by Fedi and of course, Vitalik Buterin's Social Recovery Wallets. This novel approach aims to bridge the gap between self-custody and cloud-based solutions.
The Challenge
Jane, an everyday user, finds the concept of decentralized identity appealing but daunting. She represents a user who could greatly benefit from a less complex, yet secure, way to manage her digital identity. Her only other viable option for managing her digital credentials is to run enterprise wallet software herself. This solution is not only cumbersome but also presents challenges in maintenance and technical know-how, leaving her in search of a more user-friendly yet secure alternative.
Introducing Federated Wallets
Federated Wallets emerge as a multi-signature community wallet solution, hosted by experts known as guardians. This novel approach creates a middle ground for users like Jane, who seek an alternative to the complexities of running enterprise software for digital identity management. Here's how the different participants—Jane and Emily, our guardian—experience the Federated Wallet system:
Guardian (Host) Setup: Emily's Perspective
Emily is a cybersecurity expert and a trusted community who wants to contribute to a safer digital landscape. She will act as the communities first Guardian.
She installs the federated wallet backend software on her node
Emily configures her network and invites several other trusted experts to act as network Guardians and host the backend software. The guardians have no access to users' wallets—everything is secure.
Hooray! The federation is set up, providing benefits like resilience against single-point failures and scalability. Private keys use a secret sharing scheme such as Shamirs secret sharing https://en.wikipedia.org/wiki/Shamir's_secret_sharing
User Setup: Jane's Journey
Jane downloads the Federated Wallet app, scans the Federation-specific QR code, and joins Emily’s federation.
She records a video of herself, not as a passphrase, but as a means for future identity verification. The video is distributed to all nodes and stored for the future in case Jane loses access her to her keys.
Jane starts storing her credentials, reassured by the backup and security advantages provided by the federated architecture.
She gains added peace of mind knowing that her credentials are always backed up and distributed across multiple nodes, ensuring both redundancy and security.
This additional layer of backup and security highlights one of the key benefits of Federated Wallets, offering Jane a sense of comfort and trust in the system.
Recovery Process: When Jane Loses Her Phone
Jane re-installs the Federated Wallet app and opts for wallet restoration.
She visits multiple guardians, as determined by the original multi-signature setup, to have her identity verified through her pre-recorded video.
Once enough guardians have verified and approved her identity, her credentials are restored, ensuring a secure recovery process that abides by the initial multi-signature requirements.
This recovery mechanism underscores the Federated Wallets' advantage of redundancy and multi-layered security, requiring verification from multiple guardians before granting access.
Benefits
Guardians do not need to know each other.
Credentials are redundantly backed up
Low risk of guardians collaborating to steal credentials.
Supports did:web DIDs. Hosts of the federation can set up DNS records and assign resolvable did:web usernames to all their community members if they wish
Provides resilience against single-point failures.
Additional functionalities like DWN storage, credential verification, and trusted issuer lists can be integrated.
Scalability: Network can accommodate guardians of various sizes and domains, from friends and family to governments.
Conclusion
Federated Wallets introduce a user-friendly yet secure alternative to traditional decentralized identity management solutions. Whether you're a newcomer like Jane or an expert like Emily, the system is designed to offer robust features and benefits that meet diverse needs.
