👛 Web3 Wallet Landscape
Valha mapped 100 wallets using an 11-axis methodology.
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This article is a guest post by Octave, the co-founder of Valha. Valha is a DeFi abstraction layer. It helps developers seamlessly integrate DeFi protocols (Aave, Lido, Yearn & more) in their products while maintaining decentralization and control.
Wallets have lost a battle against exchanges to attract users in crypto between 2013 and 2021 due to poor onboarding, on-ramping, and lack of usability and safety.
The recent emergence of new wallets fixed some of these issues. Several flaws have been solved (swap, on-ramping, security features), but others are not yet widespread (bridge, native integrations, social log-in).
To get a better sense of the current market, we mapped 100 web3 wallets using an 11-axis methodology.
We unveiled some key lessons from the data: wallets should monitor simple usage metrics (weekly wallet usage time or the number of clicks to buy crypto), focus on building a best-in-class UX, and develop defensibility to prosper.
A tragedy in 3 acts
Wallets could be the main gateway to the crypto ecosystem. But, centralized platforms have been favored by users for 10 years due to 3 core reasons:
Let's say you’re curious about crypto, but not too curious to spend 10 hours a week exploring it. How would you onboard to web3 back in 2018?
Sign up for an exchange platform. Register with an email as you’d do anywhere else on the web and enter KYC details. BOOM. Your account is created and you can start investing.
Download a self-custody wallet - ideally a web extension (WTF for 90% of people: look at your mom’s computer and look at the number of extensions she uses). Then, secure a 24-word seed phrase that is the key to the money you are going to deposit in it: you take a pencil, write by hand those words and conceal it somewhere that would not be found by anyone but you.
Now keyless and social login solutions exist (Magic Link, account abstraction, MPC), but onboarding users to wallets used to be a big problem before 2022.
How can I invest in crypto with dollars?
Back in 2018, only centralized platforms could offer a way to buy tokens. The process was hazardous, expensive, and time-consuming, but exchanges supported it, not wallets.
Now, plenty of on-ramping solutions exist - Ramp, Transak, Moonpay, and many others.
Usability & safety
I bought some crypto, now what I can do with it?
Exchange platforms have minimal but essential functionalities: stake, swap, or bridge.
In comparison, your wallet doesn’t seem useful. It displays your holdings and that’s all. Obviously, you could go to any web3 website & use your wallet, but you need to be adventurous given the number of wallet exploits, scam websites, and scam transactions.
After recent scandals, public opinion about self-custody on exchange platforms shifted. It now seems like a great way to get your money robbed or invested in shady financial operations.
Possibilities to explore DeFi natively in your wallet interface (Bridge with LI.FI, DeFi with Valha) securely (Stelo, Blowfish) are de facto booming.
At Valha, we decided to take a look at 100 web3 wallets and classified them according to 11 criteria to get a better sense of the current wallet landscape.
Who is effectively tackling the problems mentioned above?
Software, Hardware wallets and specific sub-categories (exchange, institutional platform)
Access - how can the wallet be accessed?
Desktop App, Web App, iOS, Android, elsewhere.
Custody - how is custody ensured?
Conventional private key, Multi Computational Party (MPC), Smart contract wallet.
The ability to use the wallets with other solutions such as Ledger, Trezor, or Wallet Connect.
The ability to buy or sell crypto with FIAT (on-ramp/off-ramp) through third parties solutions.
Transaction simulation before execution, multi-signature process, approval checks and wallet social recovery.
Built-in integration to swap assets on the same or a different chain.
Collection, browser, or native integration.
Collection, browser, or native integration.
Gasless experience, Account Abstraction, Ability to spend (card or purchases), Multi-wallet, Open Source, Social login, Transaction builder.
Number of wallets downloads
On Play Store and Chrome Store
The majority of wallets have a mobile-first strategy and no longer a web-alone or web-first strategy.
MPC vs. Conventional vs. Smart contract wallet
Keyless and gasless experience, transaction batching, and social recovery will become the norm with a 100x improvement in User Experience.
Historically, self-custody meant private-key-held wallets. MPC and Smart contract wallets started to pop up, but are still under-represented. The emergence of Account Abstraction is starting to change the shape of the wallet landscape.
On-ramp vs. Off-ramp
A majority of wallets accept on-ramp now thanks to external providers such as Ramp, Transak, Moonpay, and many others.
It’s less the case for off-ramping. A greater difficulty for on-ramping providers to provide a stable and efficient off-ramping service (Ramp just announced its off-ramping service while the company has been around since 2018) could be a reason. The other one is that it’s less of a problem for wallets. They need to onboard users, but don’t necessarily want them to offboard.
Swap vs. Bridge
Built-in swap integrations are highly common in wallets today, but the possibility to briding between different networks remains scarce.
Providers such as Socket, LI.FI or Rango exchange are making it possible to quickly integrate these features.
DeFi native integration vs. DeFi browser
Only 32% of wallets integrate native DeFi functionalities creating a seamless user experience and generating brokerage fees or retro commissions on transactions.
Wallets are making efforts to integrate DeFi into their interface. Staking is usually the only DeFi feature so far but other integrations are emerging to offer an end-to-end built-in experience.
Most of the wallets still integrate DeFi through the browser. The experience is not the most intuitive for the user (I invest in a DeFi Pool on my protocol interface, but I don’t see the result in my wallet interface) nor is it the most pleasant (protocol interfaces are not adapted to mobile).
Downloads on Play Store
19% of wallets have more than 1 million downloads.
With only four wallets cumulating over 5 million downloads (Metamask, OKX, Trust wallet, and Coinbase wallet), it proves that the goal is not to fight with each other but to increase the size of the market.
Please DM Octave on Twitter to get additional details on other metrics of this study.
The future challenges for wallets
Wallets are undeniably one of the keys to web3 mass adoption. The best-in-class wallets will be focusing on:
Simple usage metrics: How many clicks to set up an account? How long does the onboarding last (from download to having crypto in your account)? How much time is spent in the wallet vs. outside of the wallet on a weekly basis (wallet absolute use and wallet time domination)?
Focus on UX: External solutions can be helpful to build an end-to-end experience for users (Onramper for on-ramp, Valha for DeFi, Li.fi for bridging, and Stelo for safety), but some features could also be rebuilt internally.
Build brand recognition
Get some proof of reliability with security audits, transparent communication, & hack history
Orchestrate financial liquidity markets (Fireblocks)
Implement features linked to the real-world (credit/debit cards or vouchers)
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We probably forgot some wallets in the process. If you’re a wallet builder and want to add it to the landscape, please fill in this form. Thanks :)
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Let’s fucking build,
Octave & Vlad
On and offramps via widgets seems like a stop-gap solution. Honestly terrible UX. What's more interesting is on and offramp APIs without worrying about compliance, license and any monthly fee for wallets.
Small correction: Argent has integrated NFT and Bridge between L1 and zkSync