With frequent thunderstorms at CEX, what kind of opportunities will the Web3 wallet track usher in?
Original title: "8 Billion Deficit Takes FTX away, Wallet Security Solution Can Protect Web3 Bottom Line"
Original Source: R3PO
The cryptocurrency trading platform FTX set off a Lehman storm in the currency circle. Bitcoin, Ethereum, etc. plummeted in response, and the cryptocurrency circle was hit hard, causing market panic. The bear market is bound to be postponed. It is still difficult to judge when it will bottom out . Whether it is extreme or not, R3PO always believes that the bull market is ahead. In the long cold winter, where and what kind of strength is accumulated is the key to the vitality of spring. Far-sighted capital is increasing its investment in infrastructure construction. track input. R3PO believes that it is time to rethink how to manage our assets in a safer way. Web3 wallets should also find their own opportunities from the crisis. The weak are fearful, and the strong are already acting. Cobo is already planning to use MPC more securely. To manage assets, more encryption technology will keep our assets safe, which is also a rite of passage for returning to the process of decentralization.
R3PO conducted an in-depth survey of the current Web3 wallet track, not only from the perspective of industry researchers Looking up and down in the wallet market, we also return to the user's perspective to pay attention to the experience of using the wallet itself. The following keywords and insights are some of the rules that R3PO has glimpsed in the research, for readers’ reference. For more detailed data and analysis, please refer to the text of the report.
1. Trend: towards smart contract multi-chain multi-signature wallet, wallet becomes The main distribution center for traffic and applications
2. Smart: Smart contract solutions will be divided into AA (account abstraction) and EOA+ contracts Two technical routes
3. Security: The secure multi-party solution (MPC) will become the core of multi-signature, co-management and social restoration Technical solution
4. Easy to use: Web2's insensitivity, no private key, recoverable combined with Web3's data ownership and privacy Protection
5. Integrated: wallet + cross-chain + Dapp, can build a DeFi ecosystem on the decentralized chain that completely gets rid of CEX
/p>Report Text
You control the private key, which is your asset.
This sentence is extremely precious after the FTX thunderstorm, in the process of decentralization , security has never been raised to such a height, Binance has captured 70% of the spot market after popping the bubble, but is this the future of cryptocurrency we want?
R3PO believes that it is time to rethink how we manage our assets, and Web3 wallets should also start from Find your own opportunity in a crisis, the weak are afraid, the strong are already taking action, Cobo has planned to use MPC to manage assets more securely, more encryption technology will keep our assets safe, this is also the process of returning to decentralization coming-of-age ceremony.
The development history of the wallet itself has been described in detail by various organizations and perspectives many times, and in this Binance vs. FTX, we found that The wallet and the data on the chain are the only way for us to spy on who is Pinocchio. Don't look at what he is talking about, but look at how many coins are in his wallet.
Deconstructing the development history and technical route of the wallet from the wallet itself can deeply understand the various functions of the wallet. An essential point, but this is only part of the product, and the user's perspective is the other half of the circle. R3PO believes that users pay less attention to the complexity of wallet classification and the variety of technical routes, and they pay more attention to the intuitive experience of wallets, which we summarize as security, ease of use and rich functions.
1. Security lies in whether it can match the bank-level asset security;
2. Ease of use lies in whether it can match the seamless experience of Alipay and credit cards;
3. The function is to meet the actual needs of users in Web3, such as asset accumulation, DeFi, NFT display, etc. ;
In this report, obsolete The information, such as what the paper wallet is, will also remove "redundant" information, such as non-leading projects. Make every effort to reduce noise, and focus on the current pattern and future development trend of the wallet. No matter the technology or the product, it must serve the users after all.
This report is divided into wallet origin and classification, existing wallet functions and extensions, wallet The development direction and the overall market size of existing wallets are divided into four parts.
Origin and classification of wallets
The 1.0 status of the wallet is available Classified as "address is wallet" and "hard disk is wallet", at the beginning of Bitcoin, there is basically no product type that specializes in asset management. For example, Satoshi Nakamoto believes that in order to maintain anonymity, it should be used in every transaction. Different wallet addresses.
Before the emergence of ASIC mining machines, personal computers can participate in "mining", and the hard disk itself Bitcoin can be stored, so the hard disk can also be regarded as the earliest prototype of hardware wallet.
Wallet 2.0 appeared following the industrialization of Bitcoin mining, and miners need to store Bitcoins are sold for profit sharing with mining pools and for a price. The time difference between mining and selling creates the actual demand for wallets.
From 2009-2013, the wallet at this time only has the most basic of single chain, storage and withdrawal Representative products include Bitcoin Core (Bitcoin-qt), a full-node, high-security wallet established by developers in 2011, using private keys to manage wallets.
But in essence, this is not the same product as the current wallet, it is closer to Bitcoin The node synchronization software, the overweight product form also prevents it from becoming the mainstream choice.
Wallet 3.0 comes with the emergence of the Ethereum ecosystem.
Since 2014, with the emergence of Ethereum, multi-chain and smart contract wallets have become Mainstream, the former represents domestic wallets such as Bixin and imToken, while the latter has Gnosis-Safe, which focuses on asset management, and has begun to explore smart contracts and B-side asset management types.
Since 2018, DeFi, NFT and richer Dapps have become mainstream trends, The main function of the wallet outside of asset management is to interact with Dapp, such as MetaMask, and the emergence of meta wallets such as WalletConnect.
The 4.0 keywords of the wallet are smart contracts, multi-chains, and multi-signatures. With the progress of account abstraction, it has become possible to remove the EOA account and retain the smart contract account type separately. Multi-chain is gradually realized through EVM compatibility and cross-chain bridge. The function brought about by the booming MPC mode is the practicality of account multi-signature, thus It has greatly improved social recovery and security, and the main representative products include Zengo, Bitizen, M-Safe and other main products.
We are currently in the evolution of Wallet 3.0 to Wallet 4.0, MetaMask for C-side, and G-Safe for the B-side has become the main target of "surpassing".
About the classification of wallets, from the perspective of users, only products and functions are different, such as MPC Speaking of providing security and multi-signature technology, G-Safe is a professional tool for DAOs and institutions, and the wallets that are in daily contact are more head products, such as imToken, etc., which can be understood as C-side, software-type, go-to Centralized, multi-chain wallet.
Image Description: Abstract Classification of Wallets
Image Source: R3PO
From the wallet itself, the division dimensions are more diverse, such as hot and cold, media, etc., but most wallets can be violently divided into two perspectives: equipment and hosting type.
Existing wallet functions and extensions
From a macro perspective, wallet functions can be abstracted into three types:
1. Traffic/fund entrance
In the encryption world, the trading platform is the largest After the boom of NFT, the NFT trading platform is expected to become the second CEX role.
From the data point of view, 2.5 million wallets are active every day on the head public chain , BNB Chain, Solana, Polygon and Ethereum accounted for more than 80%.
However, judging from the total number of CEX accounts, the current trading platform has accumulated 90 million active accounts The address is 36 times that of the address on the chain, and the caliber is further enlarged to the Web 2 world. Major account types such as Visa, MasterCard, and Apple Pay are all billions or even billions.
High EQ means that the wallet on the chain is in the early stage of development, and low EQ means decentralization transformation is still far away.
Image description: Web3 Monthly Live
Image source: Dune
2. Dapp Store/Connect/Swap
The main function of the current wallet is not "asset management". At least asset management is only meaningful for institutions and DAOs. The purpose of individual users using the wallet is to "interact" with Dapp.
From this point of view, it can be subdivided into two modes: connection and bidding ranking. Metamask is the most typical representative, and its product model can be summarized as three steps of activation, interaction, and signature. As for what type of Dapp and public chain are linked, they all support user-defined. From this perspective, Metamask is also a multi-chain Wallet, for example, it supports user-defined chains such as BNB Chain.
Bitkeep is the most typical Dapp Store display and ranking mode, which is directly carried out in the product Dapp display and promotion, as well as direct currency listing, NFT listing and other heavy operation models, are intended to "realize user behavior". This is a flexible move after the data cannot be realized in the Web3 era. The traffic business never sleeps, but the path changes .
The Swap function is currently the most direct traffic realization mode for wallets, and it is more convenient than Dapp display Direct, closer to the user side. For example, Metamask's only direct source of profit is the built-in Metamask Swap function, but this is based on its 30 million active users, and it is difficult to be imitated by other wallets.
3. Extension of wallet function
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On the basis of the above functions, the wallet will gradually integrate with more functional models in 2021, such as DID, SBT, NFT display, etc. More functional expansion related to personal characteristics.
Essentially speaking, the wallet is the "container" of the account, and decentralization is difficult For complex measures such as front-end KYC and AML, the non-custodial C-side wallet cannot really control the user type technically, and the address behavior data becomes the tentacle to outline the user.
Of course, at the current stage, such functions are still relatively cutting-edge and difficult to implement, but the wallet It is indeed a good entry for identification on the chain, especially at a time when privacy protection is becoming more and more important.
Wallet Development Direction
We put the development direction of the wallet in the Before the market, it was due to the overall consideration that changes in user experience will change the current market structure. The current wallet market is at the threshold of another change, and it is also a good time for latecomers to enter the market.
First of all, start from breaking the superstition of technology. The publicity of technology has become a fixed routine, such as the technical advantages of the Move language, the importance of MPC to wallet security, the universalization of ZK technology, etc., but this is not the whole story, technology is only a component of function, and function will lead to market The landscape changes.
We mentioned the smart contract multi-chain multi-signature wallet earlier, which can be deconstructed into The following equation:
Smart contract multi-chain multi-signature wallet = easy to use + security (1)
Ease of use + security = AA+MPC+EVM multi-chain (2)
AA refers to account abstraction, which is mainly explored on Ethereum, but thanks to the existence of EVM compatible chains and cross-chain bridges, we can regard it as the future development trend.
From the perspective of more complex function realization, the future form of the wallet is a multivariate In the evolution process, how to realize the smart contract multi-chain multi-signature wallet in the experience accumulation of MPC and other technologies, ease of use and security, is a very difficult process.
Image Description: Wallet Technology and Product Relationship
Image Source: R3PO
It is not difficult to simply talk about MPC, but there is still a long product iteration process from technical principles to market competition. For example, we all know that Layer 2 of Ethereum must be in It was born in the ZK series, but which product won the final victory is not a process that can be asserted at the moment.
Secure Multi-Party Computation (Secure Multi-Party Computation) is mainly aimed at In the case of three parties, how to safely calculate a contract function problem. Secure Multi-Party Computation is often abbreviated as SMPC or MPC. Based on the multi-party signature technology of secure multi-party computing, there is no single-point private key from the beginning to the end. Through multiple private key shards, different participants calculate the final signature through the MPC protocol when signing, and this signature can pass the verification of the corresponding single public key.
The main products are Fireblocks for B-end users, ZenGo for C-end users, and future Middleware Security Heron that provides security services for Metamask.
Fireblocks
Fireblocks provides digital asset custody platform for 1300 large institutions, including MPC wallet , Token issuance/management, and access to DeFi. Its customers include banks, trading platforms, lending institutions, hedge funds, market makers and other institutions. A private key can be provided to complete the exit mechanism.
Revolut, one of Fireblocks' customers (valued at $5.5 billion, is the largest financial technology company One) is using Fireblocks' MPC to introduce encrypted services to 13 million retail customers worldwide. This infrastructure is used to provide a secure payment rail for digital asset transfers. With the MPC Wallet, Revolut can add cryptocurrency-involved product lines and retail-oriented features.
Fireblocks provides digital asset custody platforms for 1300 large institutions, including MPC wallets, Token issuance/ Governance, and access to DeFi. Its customers include banks, trading platforms, lending institutions, hedge funds, market makers and other institutions. A private key can be provided to complete the exit mechanism.
ZenGo
Zengo is a relatively mature, MPC-based technology, no private key, EOA account wallet product, the latest round of financing is 20 million US dollars, investors include Insight Partners and Samsung. Having received Samsung's leading investment, Zengo has the opportunity to obtain the huge channel advantage of Samsung mobile phones. When creating an account, ZenGo creates two key shares, one stored on your mobile device and the other on ZenGo servers. Regarding the wallet exit mechanism, the solution is to design a corresponding private key recovery program and entrust it to a trusted third party for safekeeping. Once Zengo products cannot continue to provide services, the third party will verify and disclose the private key recovery program. A private key can be created for export and backup.
Safeheron
Has reached a cooperation with Metamask and will provide it with an overall MPC solution, The current product suite includes:
1. MPC Wallet APP, customers can have more
2. MPC Wallet API, supports customers to write programs to automatically sign transactions without worrying about private
3. MPC Web3 browser plug-in, which supports customers to access the Web3 protocol through multi-person audit.
From this point of view, the general outline of the technology, the rapid iteration of the product, and the response The key to solving the problem is the speed of market demand, which is a continuous process in which operations outweigh technology.
But this does not mean that technology itself is not important, but emphasizes that technology is the first step , the market is the final judge of the applicability of the technology.
From the perspective of the smart contract account to look at the development of the wallet, the most obvious trend is The merger of Ethereum accounts, from the merger of EOA (external account address) and smart contract account into a kind of "account abstraction", it should be noted that the account abstraction here can be understood as a smart contract account, but it also has EOA Function.
The main features of the smart contract wallet are as follows:
Seedless
There is no private key in the contract wallet account, there is no need to back up private key fragments, and specific user information is bound through the chain code (such as Device information, email account and other personal information), realize account ownership, prevent users from losing encrypted assets due to the loss of mnemonics, and truly realize no private key storage;
Multi-signature scheme
CA account supports further programming, which can realize multi-signature mechanism more conveniently. For example, M-safe, by creating multi-signature wallets based on different addresses, realizes joint management of organizational assets and meets asset management service requirements such as transfer control, transaction review, and transaction records;
Gasless
The CA account can specify gas to pay on behalf of the user to avoid the lack of service fees affecting the transfer process and optimize the user experience. However, in extreme market conditions, the network Congestion may lead to a sharp increase in handling fees, especially the logic of smart wallets is more complex than that of EOA wallets, so the creation of wallets and the gas for each operation will be more expensive. It is necessary to consider the long-term healthy development model of product functions. Argent wallets are in extreme market conditions. At that time, more than 50 ETH fees were paid. Considering this problem, Unipass adopts the following solution: use the project party to pay gas to solve the problem of new user transfers, and then plan to develop a deduction function for handling fees to attract users and improve user experience while ensuring the continuous operation of functions and saving operating costs.
After its finalization, the smart contract account facilitates the private keyless process of the wallet, and supports More complex DeFi product forms such as gas-free interaction.
However, in the current situation, the wallet that truly realizes AA-level accounts has not launched actual products The closest ones are G-Safe and M-Safe. The former is a smart contract wallet based on the EVM layer, and the latter is a native smart contract wallet in the Move language. From a technical point of view, it is closer to the bottom layer than G-Safe, but It is currently in the promotion stage, and its compatibility with EVM is also questionable.
In short, MPC can make private keyless more secure, and AA can realize truly complex Intelligent interaction.
The overall market size of existing wallets
According to US market research According to a new report by consulting firm Grand View Research, the global crypto wallet market size is expected to reach $48.27 billion by 2030, at a CAGR of 24.4% during the forecast period.
According to a report by Triple-A, by 2022, it is estimated that there will be more than 3.2 billion cryptocurrency users, while the number of global cryptocurrency wallet users reached 84.02 million as of August 2022, compared to 76.32 million users in August 2021.
At least within the currency circle, there is still the possibility of user conversion, the current wallet does not Fully recognized, most people still primarily use trading platforms to manage assets.
In this process, including the Bitcoin legalization process started by El Salvador, DeFi, NFT Popularity is the most important factor. After September 2021, 2.7 million Salvadorans have become Chivo wallet users, on which they can directly use the Lightning Network for transfers and other operations.
From the perspective of the outside world of the blockchain, the mainstreaming of DeFi and the out-of-circle of NFT , and concepts such as Web3 and metaverse have become new economic growth points in various countries and other multiple favorable factors, which jointly promote the increase of wallet users.
In terms of segmentation, it can be deconstructed into the following trends:
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1. The increase of supporting merchants: for example, the lightning network payment service provider Strike continues to gain customers in Latin America, and according to Bit Pay According to the study, 40.0% of consumers who pay with cryptocurrency are new to merchants, and their purchases are twice the amount of credit card purchases.
2. C-end users contribute user volume, B-end users contribute profit: Individual users will account for more than 62.0% of revenue in 2021 %, and North America dominated the wallet market with a revenue share of over 30.0%.
3. Ease of use wins: hot wallet segment accounts for more than 55.0% revenue share in 2021, Android system segment in 2021 Accounting for 45.0% of the revenue share, in the final analysis, low-income groups and ease of operation are more important, which is also an important data support for emphasizing user experience.
4. Swap remains an important source of revenue: Swap generates over 40.0% revenue share in 2021.
Image Description: Wallet Classification
Image Source: R3PO
Summary
, user funds can only truly ensure ownership when they are circulated on the chain, otherwise they can only continue to encounter misappropriation again and again, and no one will stick to principles in the face of interests.
Regulation cannot solve all problems, especially at the coming turning point of Web3, the industry should have the courage to provide a more perfect solution, and The wallet is the perfect solution for personal asset storage and institutional asset management. It is time to take on the heavy responsibility of history.
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