Sony integrates Bitcoin, can smart cards be used as hardware wallets?

Sony's Felica is the technology that powers the most popular contactless NFC (near field communication) smart cards. Essential for Japanese commuters, Felica can also be used at points of sale, train stations and airports, and can be embedded in university ID cards. Recently, Bitcoin has been successfully integrated into Felica technology. It is planned that each contactless smart card will contain a Bitcoin wallet and store the private key.

Felica's User Base

Sony, a large Japanese electronics and entertainment conglomerate, first developed Felica contactless RFID (radio frequency identification) smart card technology. In 2007, Felica Pocket Marketing was established to sell, promote and distribute Felica cards, and also provide card terminal rental services to member companies.

Embedded in smart cards, smartphones and other devices, Felica technology supports most of Asia's public transportation systems, with functions such as electronic money, electronic identity, electronic ticketing and membership cards. For example, major Japanese airlines have adopted this technology, and more than 365 universities in the United States use it on ID cards.

According to Nikkei Review, global shipments of Felica chips reached 1 billion in 2016.

Felica Technology Successfully Tested Bitcoin

Last week, Felica announced that it had developed and successfully tested a nearly instant, “contact payment” method that uses cryptocurrencies in its technology. Their testing focused on the practicality and security of the technology, while also preventing double spending.

The company concluded that the test was a success and that integrating Bitcoin could create a secure and practical payment system. They also said they would soon produce a product that could process Bitcoin payments, similar to current contactless payment options.

How does the Felica Bitcoin Hardware Wallet work?

The company plans to add bitcoin hardware wallet functionality to each Felica card by adding a second memory storage chip.

The existing memory chip is a "non-privatized storage area" that will continuously hold addresses and other information that is destined to be shared. At the same time, this new "privatized storage area", called Felica Pocket Region, is used to store Bitcoin wallet private keys. By separating private keys and signatures in a tamper-proof area, the signing of transactions will become more secure.

By tapping the card into a reader, the company says, it can retrieve the wallet's private key to sign bitcoin transactions. In fact, future Felica cards and devices could work just as well as hardware wallets like Ledger, Trezor and Keepkey.

Bitcoin Testing Results and Flaws

Felica said the biggest challenge in integrating Bitcoin is security. Because the private keys will be used in the payment application, the payment app and other providers will need to be verified, but the company did not explain how this will be done.

Felica also mentioned that the biggest problem for retail stores accepting Bitcoin payments is that Bitcoin payments need to wait for network confirmation. Consumers waiting for network confirmation in stores has always been a major problem for merchants accepting Bitcoin payments. Therefore, the company chose to use a centralized system to complete the confirmation before the transaction is broadcast. The end result is to build a centralized payment layer in a decentralized settlement system so that Felica users can enjoy instant Bitcoin payments.

Next step

Felica said the test proved that cryptocurrency payments can be perfectly integrated with their contactless payment function while preventing double spending. Security is a priority for the company, especially how to keep private keys safe.

The company announced plans to release several hardware wallets with several partners, though no specific timeline has been announced yet, and plans to provide support services for retailers that use Felica to accept bitcoin payments.