3 Opportunities for Crypto Wallets to Increase web3 Adoption
How Design, Functionality, and Niche-Fits Can Define the Next Generation of Crypto Wallets
Wallets are an integral part of the crypto ecosystem. Yet, existing wallet providers are just scratching the surface in terms of what is possible. Most wallets only offer the ability to view your tokens and connect to platforms for smart contract transactions. Some also offer a native web browser, particularly mobile wallets, as well as native token swap features. So, there is a great deal of potential for improving the user experience.
Here are three opportunities for crypto wallets that can greatly increase web3 adoption.
1. SuperWallets — Wallets with Native Functionality
In their basic and most common form, crypto wallets primarily serve as a gateway to interact with the broader crypto ecosystem. For instance, to use a dApp, a user generally has to connect a crypto wallet to an external website and interact with the smart contract. This is a sub-optimal experience as it requires the user to first verify the legitimacy of the website they’re visiting (often through sources like a project’s Twitter and Discord) and create a wallet if they don’t already have one that is compatible with the dApp.
A better solution is a “SuperWallet” that combines the function of a wallet and dApp services in one, offering a one-stop solution for users to take any action from the wallet application. For example, Rainbow Wallet, Trust Wallet, and Metamask allow you to swap tokens in-app without having to navigate to a different website and manually connect your wallet. This can be extended to other dApps like lending/staking protocols and NFT minting contracts. It would require the user to trust that the contracts integrated within the wallet are the original contracts and that the wallet provides a convenient way of interacting with dApps that do not custody/control the funds.
In the Web2 world, SuperApps like WeChat already exist to provide a single application linking to multiple services like chat, payments, food delivery, booking taxis, gaming, and social networking. WeChat is ingrained into the daily lives of more than a billion people.
Web3 SuperWallets could offer a similar user experience by collapsing several actions that a user would normally take across multiple platforms into a seamless, single user interface. For example, instead of first navigating to Uniswap.org to swap ETH to USDC, then going to Aave.com to deposit the USDC and borrow BTC against it, the SuperWallet UI could allow the user to do it all natively. This could be particularly helpful for web3 newcomers that are looking for a safe way to explore the ecosystem.
2. Modular Wallets — Customizable Wallets
Existing wallets are a “one-size-fits-all” solution and don’t consider specific user needs. While some offer customizable options for advanced users, they generally provide a similar user experience across the board. There is an opportunity for a ‘Modular Wallet’ that provides various blocks for users to customize their wallet based on needs. A good example of modular design can be seen in Google’s discontinued “Project Ara” — a customizable, compartmentalized smartphone that consisted of a base frame with modular components that could be switched out, allowing Ara users to upgrade their phones by replacing old components with new ones.
A Modular Wallet would have a basic “frame” and downloadable add-ons that users can access and install through a native app store.
For instance, a user who is new to crypto could install a ‘Web3 101’ add-on that explains each transaction in a simplified manner. A DeFi Pro could install a transaction simulator plugin that allows the user to simulate a transaction before carrying it out on-chain. Wallets can open up a new revenue stream by incentivizing third-party developers to build and list various plugins on the wallet app store.
The Backpack app offers something like this by implementing the Solana xNFT / “executable NFT” standard, turning an executable piece of code into an NFT, thereby providing ownership rights of the execution of the code. The xNFT standard is the first step in the shift of wallets from being a closed environment and transforming into an open ecosystem, allowing any developer to build native experiences.
3. Category Specific Wallets — Wallets That Provide the Best Services for Specific Niches
The Web3 ecosystem has grown to a point where users may have hundreds of different NFTs and fungible tokens that have been accumulated through purchases, airdrops, Mirror crowdfunds, and more. This proliferation of assets opens up the opportunity for category-specific wallets to emerge. This is similar to how the NFT space is moving beyond a generalized exchange model (OpenSea) and into vertical-specific NFT platforms (Fractal).
If you own a lot of music NFTs, it would make for a better user experience if there was a music-specific wallet app with dedicated features to that audience. The wallet could have a built-in music player, better sorting and curation for all music NFT and fungible assets, and a music NFT marketplace to discover other music NFTs based on existing holdings. Another example would be a wallet geared towards DAO workers. This wallet could seamlessly integrate DAO tools like Snapshot, Coordinape, and Superfluid in order to vote, request compensation, and withdraw all within a single interface. By building for specific segments of users, developers can build features that are more useful for that audience and serve them more effectively.
Differentiation and Innovation are Crucial for the Crypto Wallet Market
Since there is no cost for a user to switch between wallet apps by importing their private key, wallet providers have to innovate to develop a strong moat for retention. In-app wallets (STEPN, GARI), wallets with native tokens (Status.im), and native hardware wallets (Solana Saga, Trezor, etc) are steps in that direction as they increase the switching costs for the user. Still, crypto wallets in their current form generally fit a specific mold. They allow users to carry out transactions, view their tokens, and execute a few features like fiat on-ramps and token swaps. In order to bring the next millions of users into Web3, wallets must evolve to provide a simple, safe, and integrated user experience capable of further utility, while meeting the needs of the user through their Web3 journey.