Non-custodial Wallets: To Have or Not to Have?
Blockchain technology has revolutionized the gaming industry, creating new ways for players to buy, sell, and trade in-game items, as well as providing a transparent and secure platform for game developers to create and manage their games.
However, when developing a blockchain game, one crucial decision is whether to use a custodial or non-custodial wallet. In this article, we will explore the benefits and drawbacks of both wallets and some of the challenges of onboarding new players to blockchain games.
To discuss the benefits and drawbacks of custodial and non-custodial wallets, we are joined by BGA members and experts in the blockchain gaming industry:
Amit Peled, Chief Strategy Officer for Kryptomon, a web3 game that allows players to play, collect and breed digital NFT creatures.
Ed Mason, Co-founder of The Notorious Frogs, also known as Frogland, an NFT project building a collaborative social space.
Jerome de Tychey, the CEO of Cometh, a gaming company that creates blockchain-based games, such as their first title, Cometh Battle, a F2P battle trading card game, provides infrastructure for third-party games.
In this panel discussion, we will tackle several factors to consider when deciding between a custodial or non-custodial wallet when developing a game. What are the prioritizations regarding Security, Convenience, and Control when game define their strategy in terms of custody? What are the current choices in the market, and how are BGA members overcoming this challenge?
A custodial wallet is where a third-party service provider, such as an exchange, holds and manages users’ private keys. Thus, users entrust their private keys to the service provider who maintains control over deposited funds while keeping their cryptocurrency safe and secure.
On the other hand, a non-custodial wallet gives users complete control over their private keys, a unique alphanumeric code to access and manage their cryptocurrencies and NFTs. With a non-custodial wallet, users have complete control over their funds. They are the sole owner responsible for the safety and security of their private keys, which can be more complex to use and require more responsibility.
While custodial wallets can offer more convenience, they also come with greater risk, as users rely on a third-party service provider that holds access to all funds on its platform. Non-custodial wallets offer more security, giving the user full control and autonomy over their crypto wallets, thus requiring a higher level of responsibility. Additionally, users could lose access to their assets if the custodian goes out of business, as seen in recent market conditions. Since the custodian has control over the assets, they could freeze or seize them in case of legal issues or other unforeseen circumstances. Hence the adage: Not your keys, not your crypto!
Furthermore, the debate around what type of wallet to use raises several questions for game developers. Not only do they need to consider the type of wallet, but they also need to design a seamless user experience. Cryptocurrency and other tokens, such as NFTs, add friction to onboarding traditional or casual gamers who need to set up these new processes before accessing the game.
As the blockchain gaming industry grows, onboarding new players to blockchain games has become a crucial issue. One way to onboard new players is by providing a user-friendly interface and clear instructions on how to get started with the game. This can include creating tutorials and guides that explain the basics of blockchain technology and how to use it within the game. Many web3 games offer a free-to-play option, enabling users to engage and enjoy the gaming elements before introducing them to NFTs, wallets, and other blockchain elements. Providing a seamless user experience and minimizing the amount of technical jargon can make the onboarding process smoother and enable more users to join and enter the space.
Players and Self-Custody
Entering and using web3 features cause friction at the onboarding stage, but there are solutions to reduce this. Game designers will need to decide who their players are, their blockchain experience and how to remove friction and facilitate user acquisition.
“To remove friction, educating users is time consuming, expensive or requires a lot of technical implementations that can lead to a host of complications. The larger gaming world has not yet adopted the tech, so the way Frogland operates is very much non-custodial, so we have created a freemium option with an option to set up your wallet along the way.
Warm wallets enable access to the token-gated world, so there are ways to bring people in and encourage them to want to become web3. Web2.5 is a good place to start, and web3.0 is where we want to finish.” explains Ed Mason from FrogLand.
When asked if it is necessary to ask new players to set up a wallet, protect their keys before playing the game? Jerome from Cometh commented: “If you don’t want to lose 90% of players at the onboarding stage, there are different ways of approaching this problem. Cometh approaches this by supporting wallets such as Coinbase and Metamask at a click, and others too. For example Web3os used by Sequence is an SDK that lets you associate a classic SSO, like Twitter or Facebook, with a semi-custodial key, an easy way to get people to access a wallet without full self-custody.
If you are targeting a wider market outside of crypto, you need to consider that many people won’t have a wallet, there are also workarounds with payment service providers to participate in the game economy. The protocol is moving forward with lots of solutions, there is an upgrade coming later in the year that enables account abstraction to delay entrance into crypto and therefore wallet sign up to access the blockchain element of the game.”
When looking at each step that leads game developers to make decisions concerning the type of wallet to integrate into the games interface, Amit Peled from Kryptomon outlines the steps taken before deciding the direction of this part of the game design: “Every decision we make is data-driven, we saw how long it took to onboard users only with Metamask, so we tested some options, opportunities that arise with custodial wallets, we saw we can reduce the onboarding time, so we designed an onboarding flow that directs users through the process of registering and onboarding into crypto; fiat to crypto on ramp that allows players to buy Kryptomon digital assets with a credit or debit card that takes them through a tutorial in our training hub — This mitigates a lot of the onboarding issues and enable a fluid onboarding flow.”
As the industry continues to evolve, it will be important for game developers to stay up to date with the latest trends and technology to create wallet solutions that enable simple accessibility to a wide range of users. The developers must decide whether to integrate a custodial or non-custodial wallet into their web3 game. Ultimately, it will depend on their target audience and how tech-heavy they choose the design.
Since this panel discussion, there have been a number of developments in wallet solutions and technology, look out for part two!
Watch the full panel discussion here:
About the Blockchain Game Alliance:
The Blockchain Game Alliance is committed to promoting blockchain within the game industry.
We aim to spread awareness about blockchain technologies and encourage adoption by highlighting their potential to foster new ways to create, publish, play, and build strong communities around games.
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