The Case for Crypto Projects to Build Their Own Wallets
Each crypto project has a unique type of experience they want to share with their users. While the design of a project’s interface and community can determine whether that experience is positive or negative, the wallet that a user chooses to interact with the project can heavily influence the overall user experience. Since most projects integrate with general-use wallets like Metamask or Phantom — and both wallets are built with a “one size fits all” approach — the wallet UX for these projects is neither customizable or optimized for user satisfaction. In order to provide a better experience for their users, projects would do well to explore building their own wallets.
Currently, we see a trend of customized wallets in the Centralized Exchange space. For example, exchanges like Coinbase and OKX have developed their own web3 wallets that allow for deeper integrations with their platforms, while also providing users convenient ways to interact with DeFi protocols. Below, we outline the three main reasons why crypto projects should build their own wallets.
For consumer crypto projects like p2e games that focus on bringing new users into crypto, it is important to make the onboarding process as simple as possible — people want to sign up and start participating immediately.
The most common web3 onboarding process for a blockchain game goes something like this:
- A new user visits a game’s website and clicks on “Sign Up”, whereby the user is prompted to connect their wallet.
- Let’s say this user doesn’t have a wallet, and they’re redirected to a wallet website like Metamask, Rainbow, or Phantom.
- The user is then left to fend for themselves in completing the setup and installation for that wallet, recording the 12-word seed phrase, and maybe even loading the wallet with some tokens (e.g. ETH/SOL/MATIC) to pay for gas.
- Sometimes, dApps will then ask the user to wrap the token before making a transaction.
- After all of that, the user then has to return to the game’s website, connect their wallet, and create a profile — before, at last, they can start engaging with the game’s ecosystem.
In other words, most web3 projects that utilize general-use wallets are hindering new people from joining their community. There are two ways that a project can improve user onboarding: By implementing a custodial or non-custodial wallet solution.
For both custodial and non-custodial wallet implementations, “Custodial Wallet as a Service” providers like Bitski have exposed APIs that allow developers to integrate with their wallet services. This provides a seamless user signup experience where a person doesn’t need to record their seed phrase, and even allows the use of social logins to access their wallet (in the case of Torus).
A good example of a native, custom-built custodial wallet is the Chingari Wallet. The Chingari Wallet for the Gari Network — a web3 social network — adheres to regulatory requirements by requiring users to connect their Chingari Wallet with their phone number and verify their identity with Aadhar, India’s Unique Identification Authority. People currently don’t have access to their private keys, but when the product becomes more decentralized, that information can be surfaced to them, allowing for importing keys into other wallet apps for use across the web3 ecosystem.
Increased Protocol/Project “Stickiness” (User Retention)
Projects that implement native wallets can achieve greater user retention by providing rich features.
An excellent example of this can be seen in 1inch’s DeFi Wallet product. 1inch is a Decentralized Exchange (DEX) Aggregator — When a user wants to swap one token for another using a DEX like Uniswap or SushiSwap, 1inch aggregates all of the price information, allowing the user to swap at the best rates. 1inch’s “DeFi Wallet” introduces a set of sophisticated features catering to the pro crypto trader. For example, the 1inch DeFi Wallet aggregates liquidity sources on multiple chains, allowing users to make the best swaps without navigating across interfaces. The wallet also supports flash transactions, which enable transactions to execute instantly and prevent front-running (using technology to retrieve prior knowledge of upcoming transactions).
By offering a DeFi Wallet, 1inch has simplified access to its protocol and maintained the top position for DEX Aggregators in terms of Aggregator Volume Share (50–70% of Aggregator Swap Volume daily flows through 1inch). Projects that operate in a market with multiple players (NFT Marketplaces, DEXs, Lending Protocols, Derivatives Protocols, etc.) could move in a similar direction and launch their own wallets to strengthen the “stickiness” of their protocols.
Ease of Use
Creating a native wallet can significantly improve the overall user experience by removing unnecessary details and processes. The STEPN wallet is a good example of a consumer crypto product with a native wallet that simplifies the interactions required to engage the dApp. The app allows a person to create a new non-custodial wallet within the product, allowing that person to record the seed phrase and add assets to their wallet to use within the game. If a user already has a crypto wallet, they can import the seed phrase in-app.
The STEPN App wallet interface displays fungible (SOL, GST, GMT and USDC) and non-fungible (Sneaker and Shoebox NFTs) assets that are relevant to the game. This is a better user experience than having to scroll through all the assets in a general-use wallet interface like Metamask or Phantom. For STEPN, a native wallet allows people to view and filter game assets effectively while preventing them from having to cycle between multiple interfaces for signing and confirming transactions.
TL;DR — Native Wallets Are The Next Step for the web3 Ecosystem
A ‘one-size-fits-all’ wallet doesn’t allow for a fully customizable user experience. Web3 projects can create their own native wallets to provide people with a better user experience, increasing satisfaction and retention. For protocols that drive a strong value, it is worth exploring building a native wallet solution to create a strong moat.
Of course, building a wallet is not easy. Development takes a lot of time and effort, and adds an additional attack vector that needs to be protected — wallets and wallet features are increasingly being targeted by hackers. Wallets are certainly a complex undertaking, but for a protocol where the value of having a native wallet outweighs the costs, it can be worthwhile. Web3 projects that build their own native wallets can gain complete control of their UX design, allowing them to improve and innovate their user experience in real-time, giving them a better chance at sustaining their communities for mass adoption.