Read the status quo and development trend of cryptocurrency wallet products in one article
Editor's Note: This article comes fromChain news (ID: chainnewscom)Editor's Note: This article comes from
Chain news (ID: chainnewscom)
Chain news (ID: chainnewscom)
Wallets are the key infrastructure for cryptocurrencies. Every action in the crypto space, whether it's buying or selling coins, holding coins for a long time, sending coins, staking coins, etc., relies on wallets in some way.
Wallets are also the gateway to the Web3, just as web browsers are the gateway to the Web2 Internet. Because crypto wallets are so important, nearly $400 million has flowed into crypto wallet businesses to date, led by Ledger ($88 million), Blockchain ($70 million), BRD ($54 million) and Abra ($35.5 million) Most funds.
A lot of research and work has gone into designing a better wallet user experience. In this post, I'll give an overview of the cryptocurrency wallet ecosystem and highlight some of the recent improvements to the wallet's user interface/user experience (UI/UX), including wallet SDKs, smart contract wallets, and meta transactions (meta transactions).
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The rise of cryptocurrency wallets
In the early days of Bitcoin, the first users were cypherpunks who were familiar with the concept of public and private keys. So the original approach to key management for cryptocurrencies was to write down a private key or a mnemonic phrase (aka seed phrase) on a piece of paper and keep it safe. For example:
Obviously, the average person wouldn't memorize a random string of alphanumeric characters in order to send someone money, and carrying around a private key is very dangerous. The Brainwallet project attempts to let users generate their own defined seed phrase, which is then converted into a private key via a hash algorithm such as SHA-256. The name Brainwallet comes from the fact that the seed phrase is only stored in the user's own brain, not somewhere. If the user forgets the seed phrase or dies, the bitcoins are lost forever.
Users rely on their ability to choose a good seed phrase to afford the risk of losing a fortune. But humans have been terrible at generating disordered seed phrases, and the seed phrases they come up with tend to form easily predictable patterns. As demonstrated in a DEFCON presentation, hackers have stolen hundreds of bitcoins, now worth millions of dollars, from poorly generated Brainwallets.
Thus, the wallet was born. Wallets abstract away private keys, allowing users to send and receive cryptocurrencies through a simple UI. Apart from backing up the wallet, users do not need to directly interact with their private keys. The first versions of the respective wallets were client-based, requiring users to download desktop software. These desktop wallets either run a lightweight client locally or connect to a node, which takes a few minutes to sync to the latest block every time the wallet is opened.
Long loading times are not a great user experience. As a result, the next version of wallets are mostly web-based or mobile wallets.
The only exception is Chinese wallets, which try to copy WeChat’s gameplay and cram as many functions as possible into it so that users don’t have to flee. For example, imToken allows users to obtain a native MakerDAO collateralized debt position from the wallet. Other popular wallets in China are Bitpie, RenrenBit, and Cobo Wallet.
Web3 Wallet
In addition to these software wallets, there are also hardware wallets. Hardware wallets provide cold storage, that is, physically isolated from the internet, and they are usually kept in a bank safe. Hardware wallets are great if you want to store large amounts of money because the only way for a hacker to steal the funds would be to physically break into the bank to gain access to these hardware wallets.
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Web3 Wallet
The wallets listed above are great options if you just want to store your crypto securely, send and receive transactions, and buy and sell crypto. However, they are less useful if you want to interact with Web3 applications.
From a user perspective, the main difference between Web2 and Web3 applications is that Web3 applications require a wallet in the browser. When entering the Web3 application, the website will check whether there is a wallet extension that supports the Web3 .js library. If not, it will inform the user that they should download a MetaMask before using the DApp. Non-Web3 wallets like BRD Wallet and Edge Wallet do not support the Web3 .js library, so it is not possible to spend ETH on DApps like Compound or Uniswap from a non-Web3 wallet.
Hedgehog is an alternative to MetaMask, a desktop Web3 wallet developed by the Audius team. The wallet encrypts the private key with a user-generated password and does not force the user to confirm the transaction pop-up multiple times, which reduces the complexity of the wallet. But the downside of this solution is that there is no way to restore the account and it is mainly built for small amount financial use cases.
Coinbase Wallet and Trust Wallet are two active mobile Web3 wallets, while MetaMask Mobile and Astro Wallet are both currently in beta. A mobile version of the Web3 wallet is actually just a browser with an ordinary mobile wallet added, so that users can use their mobile wallet funds on various websites. The mobile version of the Web3 wallet can also be accessed on a computer by scanning a QR code, using WalletConnect or WalletLink to connect the two devices. Some mobile wallets, such as DexWallet and Rainbow, are custom built and primarily serve Decentralized Finance (DeFi) use cases.
A better user experience is best for DApps like MakerDao and Auger, each of which provides a dedicated mobile application that users can download from the App Store or Play Store, just like most users access Facebook through mobile applications, while It's not the same as visiting facebook.com on a mobile browser. In order to improve the UI/UX of DApps on mobile devices, Tasit is building an SDK for developing mobile applications, serving various popular Ethereum DApps.
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Wallet SDK
A Web3 wallet SDK, like a Web2 user name and password to log in. Users don't need to download a separate extension specifically to use the app, nor do they have to click a popup every time they send a transaction. Moreover, the wallet is natively integrated into the website and is supported on all devices and browsers. The downside is that this wallet is only suitable for DApps that integrate a few lines of code for the wallet.
Smart Contract Wallet
Wallet SDK providers store encrypted user passwords that map to corresponding private keys, stored on HSMs in the case of Fortmatic and Bitski, and sharded in the case of Torus. Because the wallet SDK provider stores the mapping between the password and the private key, updating the mapping can reset the password. This is important because users are so used to resets in Web2 applications that they'll think there's a backdoor for password recovery anyway. In traditional wallets, if users lose their private keys, the funds inside are lost forever.
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Smart Contract Wallet
Smart contracts on Ethereum can enable programmable money for use cases like DeFi. It would be really imaginative if we could leverage smart contracts to add additional functionality to programmable wallets.
First, let me give some background on the Ethereum account model. There are two different types of accounts in Ethereum: externally owned accounts and contract accounts. Traditional Ethereum wallets use externally owned accounts that are secured with private keys, usually converted into a 12-word "seed phrase" for the user. So the onus is on the end user to make sure that the phrase is not lost, and if they do, the funds in the account are lost forever.
In contrast, a contract account is code that lives only on the Ethereum blockchain, and there is no private key that can access the funds in the account. With contract accounts, smart contract wallets completely bypass the concept of managing private keys for users. Moreover, smart contract wallets can be programmed to have the same security guarantees as traditional banks, such as account recovery, fraud protection, and withdrawal restrictions.
In traditional wallets, if a user doesn't back up their seed phrase and loses their phone, all their funds are gone. However, with a smart contract wallet, users can designate reliable family and friends as “backups” (called guardians in Argent). Users are able to trigger a social recovery process to get their funds back if the majority of backers agree. It is important to note that backupers can never steal users' funds; their authority is such that only they can participate in the restoration process.
Withdrawal limits are an extremely common security feature in traditional banking systems. With a smart contract wallet, users can set a maximum transfer limit for any given transaction. If the triggered transaction exceeds this amount, the transaction will be suspended for a period of time until a specified point in time. During this period, the user can cancel the transaction.
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meta transaction
For more information, please visit NexusTracker.io
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meta transaction
Meta transactions (Meta transactions) is an emerging design pattern pioneered by Austin Griffth, which greatly lowers the threshold for DApps to be adopted on a large scale. A passionate community has formed around this idea, led primarily by MetaCartel.
Meta transactions are gas-free transactions that allow users to instantly spend DApps without installing browser extensions or purchasing cryptocurrencies. The concept of a meta-transaction is that the user signs a transaction with his own private key, and then sends it to a repeater (replayer) that receives the transaction data, and the repeater packages it into an actual Ethereum transaction. Gas fees are then paid to submit that transaction to the Ethereum blockchain.
The first version of metatransactions relied on a single relayer to broadcast transactions, making the system very centralized. In theory, relayers can censor users' transactions, but since wallet providers or DApps are usually relayers, in practice it makes no sense for them to censor their own users. Nevertheless, Zeppelin and the members of the TabooKey team have solved this problem very ingeniously, they relay all meta transactions in a decentralized way, and they are releasing the Gas Station network.
In the Gas Station network, users randomly select one from a network of independent relayers to submit their transactions to the blockchain on their behalf. The DApp pays the relayer, and the latter has to submit a deposit, which will be confiscated in case of malicious behavior. In this way, DApp bears the cost of repeaters and gas, which can be regarded as customer acquisition costs. And users enjoy a seamless experience. Based on the business model of DApps, they can charge users by charging subscription fees and so on.
Meta transactions can be implemented in smart contract wallets. Argent and Astro wallets use meta transactions so that users can send transactions without paying gas fees. But more importantly, meta transactions allow multiple transactions to be bundled into a single transaction. This is important because DApps like Uniswap require an additional transaction to unlock each token a user wants to exchange before the user can make a single exchange. Meta transactions remove all these unnecessary initial steps and users can transact directly with DApps.
At ETHDenver, the Burner Wallet was launched, allowing hackathon attendees to pay for food trucks. Since then, many different versions of the Burner Wallet have popped up at other events.
Another great example of using meta transactions in practice to get new crypto users to try it out is Burner Wallet. It is a web wallet for quick payments of small amounts of cryptocurrencies with a simple interface. When you visit xdai.io from a web or mobile browser, a Burner Wallet is automatically generated without downloading any apps or seed phrases, and the private key is stored in the browser's local storage. Sending transactions between Burner Wallets is just like WeChat Pay - scan the QR code to exchange cryptocurrencies between users.
Burner Wallet is similar to cash - you don't carry a lot of bills with you because they are easy to lose, and bills are easy to exchange. Burner Wallet offers users a great trial experience since their private keys are stored in their browser's local storage, but it's not a permanent way to store funds. To solve this problem, Burner Wallet has partnered with Gnosis Safe to automatically transfer funds to a safer wallet once users have accumulated enough funds in their Burner Wallet. Combining the security and scaling capabilities of Gnosis Safe with the ease of access of Burner Wallet, this is a major improvement over Ethereum wallet infrastructure.
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Where will the purse business go
Most people think that the user experience of cryptocurrencies and DApps is still several years away from the usability of the mainstream population, but in the past year, there have actually been many major breakthroughs in user experience, which only need to be implemented in existing wallets. Just do it. I believe that as long as better user experience like meta transactions can be rolled out to DApp developers and implemented more widely, we will see a burst of DApp usage.
I also noticed a divide between existing crypto native users and crypto novices in wallet usage behavior. Existing crypto-native users seem to be using MetaMask just fine (or at least have gotten used to its UX issues), with no strong incentive to switch to other wallets. Of course, they will still want to take advantage of features like not paying gas fees when the price of Ethereum gas is soaring.
