Crypto Wallet — How to Survive the Winter?
by Chao Wang, COO, Bitpie Wallet
“Hey Guys, how do you make money?” In the past seven years, users often ask us. In fact, what everyone means is, “If you don’t make money and go broke, will my coins be lost? ” So, we repeat again and again:
“the assets in the non-custodial wallet are kept by the users, as long as the mnemonic phrases are copied and kept in a safe place, the coin will always be yours.”
Similar to most technical tools, generating revenue for crypto wallets is difficult and tortuous. “Do you make money?” A simple ask torture the soul of all wallet teams.
For a crypto wallet, generate revenue or not is not only about health of business, but also about safety. A team without a healthy financial situation cannot make continuous and sufficient investment in safety, which will eventually kill them in an industry that changing rapidly every day.
The basic functions of the crypto wallet
The basic functions of the crypto wallet are the management of private keys and the sending and receiving of crypto assets. And no software wallet ever charges their personal users for these basic functions. Free use of wallet is everyone’s basic expectation. Under this expectation, does the blockchain wallet lack value capture capabilities?
Absolutely not.
With the rapid development of the blockchain world, the basic functions have been no longer meet the needs of a certain group of users, thus various advanced functions have emerged. Bitcoin accelerator built into the wallet is a typical scenario, and those people who often send and receive Bitcoins are certainly no strangers to it. There are many such scenarios, such as batch sender, miner fees rescuer as well as some selling points of smart wallets that have just begun to rise. Wallet users are willing to pay for advanced feature that digs deep enough into their pain points, which has been verified in many scenes.
However, there are only a few groups of users who need such advanced functions every day. Crypto is still a small world, the income brought by such functions is not enough, even for a wallet with good market share.
To survive, a crypto wallet has to do more.
Payment needs can be regarded as one of the origins of crypto assets, and this scenario has naturally been followed by many teams. In the past, many teams have made attempts in this field, but the major business model formed by such attempts is to provide payment platforms for merchants and to draw a certain percentage of commission for each purchase received by merchants. In such a scenario, if the crypto wallet is only used as a tool to complete an on-chain transaction, there is no way to charge users. Some wallets have chosen to work with Visa or Master to issue bank cards that can be used easier in the off-chain world and share some revenue as one of the payment channel participants and OTC desk. This could work.
The Lightning Network is another payment solution native to the crypto community. In the Lightning Network ecosystem, wallets can receive some fees by providing node services.
However, none of those attempts has changed the reality that encrypted assets are only accepted as a payment medium in a very small range. It is a bit difficult to make good money on this. However, with the rapid development of stable coins, a large number of users are rapidly pouring into crypto payment scenarios. These users are directly or indirectly bringing income to the wallet, and the growth rate is amazing.
The production of crypto assets (Mining) is one of the few fields in crypto world that generate income steadily in the past decade. A lot of players are crowded in this field, they have their own strengths, work together, and share the pie. Unfortunately, crypto wallet is not among them. However, with the launch of more and more PoS networks, crypto wallets were introduced into the production process finally, and stood directly at the forefront of the industry chain. There is a new name now: Staking.
More and more PoS network are squeezing into the top 30 of CoinMarketCap. The total output volume from staking can reach tens of billions of dollars per year, a considerable amount of revenue would be generated within crypto wallet by providing services around Staking.
The largest piece of income comes from third party applications. With the improvement of experience and the formation of user habits, both centralized and decentralized third-party services are increasingly accepted by wallet users. As a tool for users to manage assets, such services and wallets have a strong coupling effect.
DeFi applications, in particular, are developing rapidly and are bursting with tremendous energy and innovation. As the DeFi application network continues to mature, the asymmetry between centralized and decentralized services will be gradually erased, and the security and other advantages of open finance will be fully reflected. The cross-chain technology is also evolving rapidly, and each major blockchain will soon be connected to form a huge parallel universe. The stable coins and offchain assets projection will act as a wormhole to connect on-chain and off-chain universes. A lot of assets and users are entering the chain through these wormholes, forming a huge cross-border financial network.
The crypto wallet is the entrance of this financial network, and it is also the navigator of people in this complex network.
And DeFi is just a small part of the DApp world. The prosperity of DApp will directly bring huge revenue to the wallet. We have seen it once on the EOS network on winter 2018. Although the prosperity lasted only a few months, leading EOS wallets all received a lot of income, even enough to support them for years. This short period of prosperity is also a precious sample, many imaginary scenes become reality and many problems were exposed. Everyone learned something.
A year and a half have passed since then, we can see major blockchains such as Ethereal and EOS are evolving rapidly, and a lot of team are proposing new ideas and working hard to implement, the ability of DApp teams are rapidly improving as well. I am confident that a greater prosperity of DApp will return in the near future.
The beauty of the new world is becoming clearer and closer.
We will all be the first-generation citizens of it. In this world, the crypto wallet connects people and chain, carbon-based world and silicon-based world. It will not only help everyone’s to manage their cryptocurrency, but also manage their identity, Social insurance, voting rights, financial products, contracts, memberships, lottery tickets, and more things that have not yet been born. Wallet will be widely involved with our daily activities. Even if we use all our imagination, we probably still cannot really imagine where the crypto wallet will evolve into in the future and how important it will be in everyone’s life.
Next ：
Crypto Wallet — Radical Change is Coming
Stay tuned.
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