Wallets Abound - The Daily Gwei #488

The wallet ecosystem is just getting started.

May 25

Hey readers - sorry for sending this out a bit later than usual - I must’ve forgot to hit send before heading to bed last night! Anyway, enjoy :)

Wallets are a really big deal in web3 land - after all, everyone has a wallet - and I think that’s why we’re seeing more and more companies releasing their own with GameStop being the latest entrant. Owning the “front door” to crypto is already quite lucrative for companies like centralized exchanges but that is focused on the fiat on-ramp for the most part. Owning the on-chain front door is the next frontier and is a multi-billion dollar opportunity - obviously everyone wants a piece of this pie.

GameStop @GameStop

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To give some context about just how lucrative the wallet game is, we can look to MetaMask. For the longest time, MetaMask was making $0 in revenue and basically surviving off of ConsenSys money - that all changed when MetaMask added a swap feature that takes a ~0.8% fee from every trade routed through it. As you can imagine, given MetaMask’s user-base size, this added up very quickly and has netted the team hundreds of millions of dollars in revenue since inception - and this is just 1 monetization angle that wallets can take!

I’ve often spoken about the fact that most people will interact with on-chain things via a third party front end that sits on top of the smart contracts. This could either come in the form of custodial wallets (like a centralized exchange), semi-custodial (like Coinbase Wallet’s new MPC design), or non-custodial where users own their private keys (like MetaMask). I believe the popularity of each of these solutions will come down to ease of use, marketing, supported integrations and perhaps most importantly - security!

Lastly, sometimes people ask the question of how many wallets do we actually need - 10’s, 100’s, 1000’s? Do we need different wallets for different regions in the world? What about different jurisdictions? Well, to be honest, I think there will only be a handful of mega-successful wallets with a long-tail of less-successful ones and I don’t believe we’ll see different wallets for different regions or jurisdictions over the long-term (it doesn’t really make much logical sense). The mega-winners will be the ones that get user experience, integrations and security to a point where users don’t even need to think about any of this - they simply enjoy using the wallet to do what they need to do.

Will MetaMask remain the top dog or will someone dethrone them? I think that this will be the biggest question that gets answered over the next few years as competition in the wallet space begins to head up rapidly. We’re probably going to see thousands of different wallets all competing to onboard the next billion users into web3 and regardless of which wallets win, this will be a positive outcome for everyone!

Have a great day everyone,
Anthony Sassano

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