Unstoppable Finance Wallet Survey
A closer look into how non-custodial wallets are used today (user profiles, activities, key management, feature wishes)
Fueled by the astonishing rise of DeFi, NFTs, and play-to-earn games like Axie Infinity, non-custodial wallets have left their niche existence and entered the mainstream mobile app arena. Ethereum’s flagship wallet MetaMask surpassed 21 million monthly active users last year, Solana’s Phantom wallet hit 2 million users in a matter of six months and a $100m+ fundraise at a $1.2B valuation merely one year post launch.
Wallets are increasingly touted as the next global financial super apps, i.e. mobile applications that provide a wide array of different financial services via a single mobile interface. The term “super app” was coined by Mike Lazaridis, founder of Research in Motion, who defined them as “a closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized and efficient experience.”
At Unstoppable Finance, we set out on the ambitious mission to make these claims a reality and build a wallet that is capable of onboarding the retail investor into DeFi. We are aiming to become more than a wallet though and are building a DeFi Co-Pilot to help users navigate the sea of DeFi products and protocols out there.
We needed to get a better understanding of current wallet usage, user profiles, bottlenecks, and feature wishes and launched a dedicated wallet survey and led many 1:1 interviews a couple of weeks ago.
In this blog post, we want to share with you our key findings and takeaways from this endeavor and shed some light on what it will take to build a wallet super app to lift DeFi into the mainstream. We start with a quick breakdown of the survey methodology before diving directly into the findings and our main takeaways.
Our approach was quite straightforward. We set up an anonymous Google Form with wallet-specific questions (usage, use cases, etc.) and distributed it in two ways.
First, we sent it to a selection of our Unstoppable waitlist members, receiving 216 responses (as of February 22nd, 2022).
Second, we sent the survey to our crypto-passionate personal network and followers, reaching an additional 95 responses (as of February 1st, 2022).
Last but not least, we conducted 30 minutes-long one-on-one interviews with approximately 20 selected crypto experts to dive deeper into some wallet-related questions.
Key methodology caveats
Selection bias: Apart from being a small sample size, our survey sample is obviously not representative of the general population. We actively reached out to people highly familiar with decentralized finance and/or crypto and expect primarily the most skilled and passionate about wallets to have answered. The results are therefore undoubtedly skewed towards frequent users and thus need to be looked at in that context.
Response bias: With regards to the Google forms, we provided a pre-built list of answer options (e.g. feature wishes) in order to quantify and compare market needs. Hence, certain results are certainly influenced by our own ideas and vision (acquiescence bias) about what the market lacks. We tried to at least partially mitigate that through open answer options and the additional qualitative one-on-one interviews.
In spite of these methodological caveats, we are convinced that the results will help us and others to get a better understanding of how non-custodial wallets are used today and what challenges need to be overcome on the road to becoming true web3 super apps.
If you are a researcher/research institution that would like to test these results in a scientifically more rigorous manner or is generally interested in wallet-related research, please reach out. We are happy to support and collaborate.
But now let’s dive into our findings.
Key findings of the Unstoppable Finance wallet survey
- On wallet usage frequency
- Over half of our respondents use wallets daily.
- Wallets are already an indispensable product for a significant amount of people.
- Filtered for our network-specific outreach, the percentage of daily users falls substantially to roughly 35%.
2. On the importance of key ownership
- Ownership of private keys is central to many users.
- As expected, the importance is correlated with the frequency of wallet usage.
- More casual users attribute less importance to it.
3. On private key management & storage
- Most users currently prefer storing their seed phrase on paper (65%).
- Many have a hardware wallet backup (35%), and many also choose iCloud as a backup option (20%) for convenience.
- Social recovery (12%) is much less popular than what people might think. One hypothesis is that money (and especially crypto) is a personal thing, and people don’t want to engage others in that context. The other is high gas fees on social recovery based wallets.
- While only 20% of total respondents would like a custodian to store a backup of their private keys for recovery purposes, that percentage rises to almost 50% for casual wallet users. This goes to show that the more retail the investor gets, the more important a managed and trusted key recovery process gets.
4. On main wallet use cases
- The current top three use cases for wallet users are trading / swapping (76%), DeFi Lending (55%) and NFTs (54%).
- There are no significant differences among user categories, apart from a stronger importance of “hodling” for more casual users.
- Interestingly, following other wallets is one of the least requested features in our survey
5. Main feature requests for wallets
- Multi-chain support is a must with over 70% of users requesting it.
- Further top feature requests are integrated credit cards with cash back (53%), high-yield savings products (52%), a privacy mode for hidden transactions (52%), and a discovery section (46%).
- More casual users, in particular, strive for better fiat on and off ramps in the form of a DeFi IBAN. Getting money on-chain is still a major hassle for most.
6. On yield requirements
- 35% of our respondents are looking for significantly higher yields than what the average DeFi stablecoin lending protocol is offering today (10–20% vs. 3–5%).
- 38% of respondents expect yield in the 5–10% range.
- As expected, daily wallet power users require a higher yield than more casual users.
7. On crypto investment decisions
- 50%+ of respondents base their crypto investment decision on their personal network, 44% on crypto media content (Coindesk etc.), 40% on podcasts & blogs, 37% on crypto twitter, 34% on professional investors, and 20% on other social media.
- Casual users (almost 80% of monthly users) rely significantly more on personal recommendations than wallet power users (40% of daily users).
Additional findings from the 20+ one-on-one interviews with crypto enthusiasts from our personal networks
In addition to the data from the survey, one key feedback from the interviews was the fact that many people currently use non-custodial wallets primarily for hodling and to experiment with different DeFi projects. A standard feedback to the question of what wallets the person used and for what reasons often came close to the following:
“Ledger for hodling, Metamask for DeFi. And depending on what other blockchains I want to try out I downloaded some other wallets (Phantom for Solana, Kepler for Cosmos, Station for Terra etc.). But to be honest, most of my activities with non-custodial wallets are mainly for experimental and educational purposes, which is also reflected in the limited amount of assets I store there.”
Adoption barriers for Non-Custodial Wallets
Regarding the major barriers for greater adoption and usage of non-custodial wallets, the feedback from the interviews can be summarized in four main points.
- Key management — Users need similar log-in and key recovery processes to those they are familiar with in Web2 services. Seed phrases on paper and even current hardware wallets are not mass-market ready. Social recovery doesn’t feel like the end state solution either. We need more innovations in that field to cross the chasm.
- Usability — Many aspects pay into the usability barrier. Users need a multi-chain one-stop shop with easy and secure bridging. They need better FIAT on- and off-ramps, better explanations, and user flows regarding crypto-native concepts like gas costs or transaction analytics, and better curation or pre-selection of DeFi dApps. Also, the complexity of tax documentation/declaration of wallets is still scaring many potential users away.
- Trust — Although a trustless or trust-minimized system is the primary objective of any blockchain technology, users need to trust the company and team behind a wallet before storing significant amounts of assets on it. They need to trust its security concept and that DeFi integrations are carefully screened and selected. Trust is earned in a long-term game that involves product, branding, communication and customer support.
- Cost/benefit — Non-custodial wallets need to be cheaper (transactions, fees, etc.) than their centralized competitors and offer higher yield opportunities and more feature options since people take on additional responsibilities. “Today’s Ethereum L1 wallets won’t be able to onboard the mass market.”
With the key findings of both the survey and the one-on-one interviews in mind, our key takeaways for our mission and more specifically our product roadmap can be summarized in three major aspects.
1. Wallet user groups are split
There is a significant gap in current wallet user groups, both in terms of their perspective on self-custody and their priorities for feature additions.
Power users (daily usage) value blockchain’s ideological foundations such as self-custody and privacy to a substantially higher degree. They care more about higher yield, privacy, and feature depth and choice (e.g. credit card cash back).
Casual users (monthly usage) are more open to more centralized recovery backup options and top-down support in general, for example when it comes to a pre-selection of suitable DeFi apps. They need more built-in education and assistance and are mainly influenced by their personal network when it comes to investing into crypto. Their yield preferences tend more towards security instead of amount of yield. Seamless fiat on- and off-ramps to get money on chain are a key missing part for greater adoption of casual users.
In order to be successful long-term, wallets need to appeal to both user groups with specific optionalities. However, a wallet that targets new market entrants has to be particularly focused on the needs of casual users.
2. The central adoption barriers need to be tackled
The road towards mass adoption of wallets will not bypass the major roadblockers. No single wallet will be able to reach the super app status without addressing these hard problems (kept short since already outlined).
Key Management: Better key management solutions. UX, convenience and brand trust trump the ideologically pure self-custody solution.
Usability: A fintech-like UX (one-stop-shop, curation, fast and cheap etc.) trumps technological depth and choice.
Fiat Onramp: Getting money on-chain is still too difficult. People need a super low friction way (e.g. DeFi IBAN) to get funds into their non-custodial wallet. Going via exchanges is too cumbersome by adding an extra step.
Cost/Benefit: Non-custodial wallet transactions must be the same cost or cheaper and more lucrative (higher yield) than centralized ones. The additional benefits and use cases (NFTs, GameFi, DeFi etc.) offered by non-custodial wallets must be instantly recognizable, curated and easy to access.
3. Next-generation wallets need to go way beyond just signing transactions and holding assets
Currently, wallets like MetaMask are mainly used as mere execution / transaction signing layers for NFT or DeFi transactions. Everything else happens outside of the wallet (research, social, tracking). But quite clearly, users demand a next level of features and wallet capabilities. They *want* to spend more time in the wallet.
In the future, wallets will plug into almost every website in the world. They will become your login layer. They will hold all kinds of crypto-assets, from financial assets to art, collectibles, certificates, identity proofs, entry tickets and much more. They will be built for identity and web3 navigation and exploration.
As such, wallets will need to function more and more as social instruments. They will grant access to games, events, social media channels and other online spaces. They need to have built-in discovery feeds (trending topics & tokens, content timeline) and social connection features (track wallets, p2p message wallets etc.).
They need to become tools so deeply integrated with web3 services that users open them in the same reflexive manner they unlock their smartphone screen before even knowing what they actually want to do with it.
Conclusion: People need a DeFi Co-Pilot
In summary, people really *want* to engage in DeFi. The excitement about this space is enormous. But they don’t just need another wallet with better UX, they need a full-fledged DeFi Co-Pilot to help them navigate this complex but fantastic space of new opportunities. They need a brand they can trust, an experience that mirrors FinTech innovators and a very low friction way to start to invest money into this space. Enter: Unstoppable Finance.
As mentioned above, all the data and insights here have to be interpreted in the context of our survey design and audience caveats. Nevertheless, the findings will help us better identify our target customers, prioritize feature requests and build a product that users are passionate about.
The key takeaways outlined above will guide us on our product roadmap to make sure that we don’t lose sight of the overarching goal — building a global financial super app for the next evolution of the internet.
PS: Feel free to share this article with the larger crypto community as it might help other teams as well. Let’s grow the pie together.