How to Win the Wallet Landscape: Strategies and Trends
Table of Contents
In Crypto, web3 wallets stand as the gateway to on-chain services, facilitating interactions with decentralized applications (dapps) and securing digital assets. As the number of wallets surpasses 350, according to WalletConnect, the sector has become notably saturated. This article dive into strategic frameworks, categorizations, and emerging trends that can guide both builders and investors in the competitive wallet space.
I. Frameworks for Strategic Positioning
In dissecting the diverse world of web3 wallets, we explore three strategic frameworks that offer insights into their business and positioning:
Competitive Zones
1. All-encompassing approach: Positioned in the top left quadrant are wallets aspiring to be a "one-size-fits-all" solution, providing a broad spectrum of features and accommodating various blockchain ecosystems. Trust (Binance), Coinbase Wallet, OKX, and Bitget Wallet are notable players in this space.
2. Specialized use cases: Wallets in the top right quadrant maintain broad blockchain ecosystem coverage but focus on specific use cases catering to active user groups. Examples include Zerion, Zapper, and Rainbow, each excelling in consolidated DeFi portfolio tracking or NFT-centric experiences.
3. Ecosystem inclination: Found in the bottom left quadrant are wallets with a discernible bias towards specific blockchain ecosystems, aiming to secure early footholds in rising chains. Phantom (Solana) and Core Wallet (Avalanche) exemplify this strategy.
4. Niche masters: Positioned in the bottom right quadrant, these wallets concentrate on specific features and user activities like staking and swaps, supporting selective chains for a targeted approach.
Source: Ceteris Paribus
II. The Wallet Stack
In understanding the intricate layers that compose a web3 wallet, we turn our attention to the four crucial components of the wallet stack, each playing a pivotal role in shaping the user experience and determining the strategic focus of the wallet.
1. Security & Key Management:
Security lies at the foundation of any robust web3 wallet. This dimension revolves around self-custody, focusing on how wallets manage private keys to ensure the utmost security for users. Features in this layer range from multi-party computation (MPC), support for hardware wallets, and multi-sign functionalities to innovations like social logins powered by Account Abstraction. These elements significantly impact the onboarding journey, dictating how new users are converted and how secure their assets remain within the wallet.
2. Chain Support:
The diversity of blockchain ecosystems is vast, and wallets can distinguish themselves by the breadth of chains they support. Some wallets concentrate on the Ethereum ecosystem, including layer 2 solutions and Ethereum Virtual Machines (EVMs), while others cater to Bitcoin-related protocols (BRC-20 & Ordinals), Cosmos chains, or standalone chains such as Solana and TON. The choice of supported chains defines the potential market reach of a wallet, aligning it with the preferences and needs of users within specific blockchain communities.
3. Utility:
The utility dimension emphasizes the core functionalities that set wallets apart. From facilitating basic asset transfers to supporting decentralized applications (dApps), native staking, and the management of non-fungible tokens (NFTs), the spectrum of utility features establishes the revenue streams for wallets. Many wallets now offer table-stake offerings like swap functionalities and fiat on-ramps. Differentiation in this layer is essential for a wallet to stand out in a crowded market, and improvements made here contribute to the overall user experience.
4. UI/UX:
Serving as the initial interface for users, the User Interface (UI) and User Experience (UX) layer orchestrates how users interact with the wallet. Elements such as gasless swaps, transaction alerts, the display logic of multi-chain balances, and the integration of web3 domains with decentralized identities (DID) are crucial in shaping primary user activities within the app. A seamless and intuitive UI/UX enhances user retention and ensures that users can easily navigate the functionalities provided by the wallet.
Evaluating Features
To assess a wallet product effectively, considering the monetizability and substitutability of its features is crucial:
1. Monetizability: The revenue-generating potential of wallet features, such as fiat on-ramps, token swaps, and staking, determines their financial viability.
2. Substitutability: Examining how distinctly a product sets itself apart from competitors and its replaceability, emphasizing the competitive differentiation of features.
Questions for Builders and Investors
This section prompts critical questions for those involved in the wallet space:
- Where does the wallet fit in terms of ecosystem coverage and feature specificity?
- Which layer of the wallet stack is the project emphasizing, and how does it contribute to user conversion, market reach, revenue generation, and user retention?
source: letsfuckingbuild
III. Trends Shaping the Future
source: kyros.ventures
A. Embedded Wallets
The Rise of Embedded Wallets
A transformative trend in the world of web3 wallets is the ascent of embedded wallets. Traditional practices involved users connecting to decentralized applications (dapps) via intermediaries like Metamask or WalletConnect. However, emerging solutions, like Friend.Tech and its forks, are challenging this convention by integrating wallet functionalities directly into their infrastructure. This shift transforms the paradigm from "one wallet for all dapps" to "one wallet for each dapp."
Shifting Paradigm
This paradigm shift has profound implications, potentially leading to a more fragmented wallet ecosystem. Users may find themselves managing multiple addresses and balances for various dapps, challenging the traditional notion of a unified and comprehensive wallet solution. Friend.Tech, for instance, positions itself in the bottom right quadrant, emphasizing its specific use case in managing Friend.Tech keys and focusing solely on its native chain, Base.
Impact on Traditional Wallets
As embedded wallets gain traction, traditional standalone wallets face a paradigmatic challenge. The rise of Wallet-as-a-Service (WaaS) offerings from platforms like Privy, Coinbase WaaS, Web3Auth, Magic Link, Ramper, Unipass, Dynamic, Sequence, Particle, ZeroDev, among others, signals a potential encroachment on the market share historically dominated by standalone wallets. Dapps, leveraging embedded wallets, are incorporating wallet functionalities as ancillary features, challenging the conventional dominance of standalone wallet applications.
B. Wallet's Role in MEV Supply Chain
Understanding MEV (Maximal Extractable Value)
While this article has primarily explored web3 wallets as an independent sector, it's crucial to consider their integral role within the broader context of the Maximal Extractable Value (MEV) supply chain. Wallets, often overlooked beyond their user interface and asset management capabilities, emerge as powerful gatekeepers in the MEV ecosystem.
Wallets as Gatekeepers
Wallets compile user intents into on-chain actions, determining the routing of transactions through either public mempools or private RPCs, such as MEV-Blocker (employed by Uniswap Wallet), Flashbots Protect (utilized by OKX Wallet), and Blink. These functionalities regulate searchers' strategies, mitigating issues like frontrunning and sandwiching in the MEV landscape.
Strategic Significance
The strategic significance of wallets transcends their conventional roles, influencing the MEV supply chain. The control over the wallet implies control over the RPC endpoint, subsequently dictating the order flow of transactions. This cascade of control underscores the substantial leverage wallets possess in monetizing via Payments for Order Flow (PFOF).
Examples: Metamask, Infura, ConsenSys
Metamask, a widely used wallet, not only accumulates significant swap fees but also controls the default RPC endpoint, which happens to be Infura. Both Metamask and Infura belong to the same parent company, ConsenSys. This interconnected ecosystem illustrates the interconnected nature of wallet control, RPC endpoints, and MEV extraction.
C. Multi Signature wallets
Multi Signature wallets like Orosign can provide an additional layer of security against hackers. Multisig wallets require two or more private keys to authorize a transaction, making it much harder for hackers to gain access to your funds. In addition, Orosign is completely open to support Liquid Staking that meet the criteria that ensure the safety of customers, compliance with the law and convenience for users.
Orosign is a Self-Managing Mobile App For Digital Assets that serves as an interface of Orochi Ecosystem, which can integrate multiple games and native decentralized applications. Orosign allows users to interact with all applications on Orochi Computation Layer and empowers customers to organize and manage their digital assets.
Orosign is designed for ease of use, even for non-crypto users. You can send, receive or store various cryptocurrencies and digital assets safely and securely with Orosign mobile app.
Currently, Orosign allows customers to create their own multisignature wallet with minimal cost as well as customize smart contracts to meet their own expectations. Off-chain signing and verification are used to secure the signing process. All proofs are verified independently with secp256k1, which is the most widely used elliptic curve in the blockchain space, thanks to its 256 bits security level. Thus, the fund is safe as long as the majority of private keys are safe
Read more about why should we own a Multisignature Wallet?
The future of liquid staking appears promising, with the potential for continued growth, innovation, and integration with emerging DeFi protocols. Increased competition, diversification of LSDs, regulatory considerations, network expansions, and strategic collaborations are anticipated to shape the landscape of liquid staking in the coming months and years. As the trend evolves, participants should stay informed and adapt their strategies to maximize the opportunities presented by this dynamic and transformative trend.
Conclusion
In navigating the wallet landscape, understanding strategic frameworks and emerging trends is paramount. As the industry evolves, adapting to embedded wallets and recognizing the strategic significance of wallets in the MEV supply chain will be key for staying ahead in the wallet war.
About Orochi Network
Orochi Network is a cutting-edge zkOS (An operating system based on zero-knowledge proof) designed to tackle the challenges of computation limitation, data correctness, and data availability in the Web3 industry. With the well-rounded solutions for Web3 Applications, Orochi Network omits the current performance-related barriers and makes ways for more comprehensive dApps hence, becoming the backbone of Web3's infrastructure landscape.
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