Sony just went cryptocurrency with its very own hardware wallet

Posted: 26 October 2018 7:01 pm
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Sony has thrown its hat into the cryptocurrency ring with a fair amount of determination.

Sony's engineers have so far been walking around the edge of blockchain technology and cryptocurrency, occasionally throwing their hat into the ring in the form of things like blockchain DRM patents, and then turning back to talk among themselves.

Well, now we can see what they've been talking about.

Sony hardware wallet

If there are any doubts that Sony is taking cryptocurrency and blockchain seriously, they can probably be set to rest. This yet-to-be-pictured bad boy is scheduled to go live.

"Sony CSL (computer science laboratories) will continue advancing initiatives towards the commercialisation of its cryptocurrency hardware wallet technology that allows for safe and secure transactions of digital assets including cryptocurrencies with the aim of furthering the widespread adoption of blockchain technology," it said in the press release announcing the wallet.

It's an extremely practical place to start, and the thinking behind the release shows that Sony gets the point of blockchain in a way that's eluding many other companies.

"When a user owns a cryptocurrency, what they actually own is not the cryptocurrency itself, but a private key that allows you to freely trade that cryptocurrency," it said.

"In online wallets such as cryptocurrency exchange websites or services, the private key is managed by the online wallet operator, not the user, meaning that users are able to access to the wallet itself, but do not manage their personal private keys. Therefore, when an online server managing a user’s private key receives unauthorised access and the private key leaks, there is a risk that the cryptocurrency held by the user will be used by others."

This might be a solid insight into the reasoning that led to the creation of a hardware wallet specifically.

To abbreviate the likely thought process:

  • Blockchain technology and cryptocurrency has a ludicrous amount of potential in the gaming space. It can bring digital assets to life like nothing else, present better DRM models, creates ways of cost-effectively motivating the creation of high quality user-created content, and more.
  • To use it effectively, we need a solution for managing private keys.
  • We were hacked to pieces about a year ago. It cost us about a billion dollars, lost a lot of user trust and generally isn't something we want to do again. But like literally every single company, we are not 100% certain we can prevent it from happening again.

Basically, the easiest way to unlock all that juicy blockchain and cryptocurrency potential would be for Sony to become the aforementioned "online wallet operator" who controls those "private keys" on behalf of its users. This is similar to the way the system works today, where Sony controls your details and accounts on your behalf.

But adding the cryptocurrency elements means the stakes get much higher. Imagine a situation where instead of just stealing user data, the hacker could actually steal rare in-game items, a user's rights to access certain games and everything else, and then sell these rights and items on the open market. Now, imagine them simultaneously doing this to every single Sony PlayStation account in the world.

That would be bad.

And you have to remember, "cryptocurrency" isn't just bitcoin. The "tokens" which prove that a user can access games are also cryptocurrency of a sort. That rare video game sword is a cryptocurrency coin. Or that sexy nurse God of War outfit (or whatever) is also a cryptocurrency token. The accounts themselves can qualify as a digital token, and if it's worth anything it's a cryptocurrency. These are what users are protecting with their private keys.

And if you're wondering why someone would bother hacking Sony for a bunch of video game items, just remember that the video game skin market alone – just the useless cosmetic stuff – is worth $50 billion per year. The Ethereal Pink Flames Wardog skin in DOTA2 sold for $38,000. A pimped up Echoing Fury Mace in Diablo 3 sold for $14,000. And the Team Fortress 2 hat market is, ironically, quite uncapped.

Video game items are quite often worth more than bitcoins. The money is more than real enough to motivate serious attacks.

The solution

The solution is the same one that the cryptocurrency world is coming around to. As a company, you don't want to be responsible for a user's private keys. Put it squarely in the user's control, and let them handle it for themselves.

There are some downsides too. Sony will be giving up a certain amount of control over its users. Depending on what kind of blockchain arrangement it looks at, it might, for example, not even be able to control its own game items once a user gets their hands on it. This relinquishing of control is tough for a lot of businesses to get their heads around.

But the increasing sophistication of hackers, the introduction of GDPR regulations in Europe and the extreme costs involved with taking control of user data means the cost of control is getting much higher.

If you want to get the full benefits of blockchain, giving your customers control of their own private keys is the most sensible way of doing it. This hardware wallet is how Sony plans to do that.

"The IC card type hardware wallet is small, portable and useful, unlike typical existing hardware wallets," the press release says, throwing some shade in the process. "It is possible to securely generate and store a private key with a highly reliable tamper-proof module within the IC (NFC) card."

"This IC card-type cryptocurrency hardware wallet technology not only manages the private keys used for cryptocurrency transactions, but also manages private keys used for other purposes, such as those for permitting the use of personal information using blockchain technology. It is an infrastructure technology with multiple possible applications."

It might be mostly a way of bringing users into its planned blockchain ecosystem, as well as a new product to be commercialised in itself. Sony might be a much more trusted name than many of the relatively unknown and specialised brands making cryptocurrency hardware wallets today.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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