The Evolution of the Web3 Wallet
Chrome extensions and mobile wallets have become ubiquitous as enablers of the current generation of web3 applications. Born as cryptocurrency wallets, they have been designed and built to reflect the web3 ethos of decentralization. They are standalone applications that serve a single purpose; keeping assets safe under strict self-custody. Setting up a wallet is more complex than opening up your average fiat payment wallet. Interactions with other applications are enabled by making connections that must be approved by the user, on every single occasion. The fact that this makes for a somewhat convoluted user experience, has been readily accepted by the crypto community.
Today web3 is rapidly expanding into a much broader range of applications. No longer are crypto and DeFi the only use cases. As a matter of fact, DeFi is no longer the largest category in terms of wallet activity. Gaming, arts and music are examples of verticals where exciting new models are being built based on web3 technology and principles. These verticals are bringing along a large new audiences to web3, made up of people who enter with a different set of expectations around user experience. As a consequence, the concept of a web3 wallet is changing, and new requirements are being defined.
Current Crypto Wallets
MetaMask was also limited in terms of chains used, initially focusing on Ethereum, which later expanded to a range of EVM compatible chains. Following the Chrome Extension wallet model, and responding to the chain limitations of MetaMask, new wallets were created that expanded support to non-EVM chains. The Liquality wallet was the first to add support for holding and swapping Ethereum as well as Bitcoin, Solana and others. The key value proposition here was to enable users to not just hold assets on multiple chains, but also to facilitate swaps between those chains. In addition, NFTs became an asset class that required specific functionality to view and manage in the wallet, which is what this class of wallets added to the experience.
Mobile crypto wallets to an extent followed the same model as Chrome extension wallets. They are standalone mobile applications that require specific authentication and approvals for interactions with other mobile apps. Arguably, the experience of having to switch between multiple apps, just to complete a transaction, is even more painful on a mobile device than it is in a desktop web-browser.
From Crypto to Web3
Web3 is no longer just about crypto and DeFi. Applications of blockchain have gone much wider, and increasingly, non-crypto audiences are being addressed. In domains like gaming, arts, music, (social) media and traditional brands, applications are being created that will help bring the next one billion users into web3.
When web3 was still only about crypto and DeFi, it was generally accepted that self-custody and security came with a certain level of friction in the user experience. However, with web3 applications starting to address mainstream audiences, that friction is no longer being accepted. This has led to a situation where web3 principles of self-custody, security and immutability are as important as ever, but the experience of standalone wallets and seed phrases is no longer sufficient to drive growth.
The Wallet for the Next Chapter of Web3
To drive the next generation of web3 applications, wallets have to respond to a new set of requirements. Web2 users expect an experience that is equally user friendly as what they know from web2. At the same time, core web3 values must be upheld. Here’s what is needed in a web3 wallet that the next one billion web3 users will be willing to embrace.
Standalone wallets will no longer do. A web3 wallet needs to be part of a singular app experience, without jump-offs or redirects. Simply put, the wallet should just be a part of a web3 app, similar to how a Stripe checkout module is part of a web2 ecommerce app.
For example, in the gaming vertical, a gamer should not be required to leave the game experience, in order to transact with a browser extension wallet. The wallet should be fully integrated into the game experience, like a page in the menu, or a seamless module within a page. User wallet creation, and further wallet interactions, like funding and minting collectibles, all should happen within one single, seamless experience.
Ease of Onboarding
The standard seed phrase enabled setup of a wallet is too complex for mainstream users. In terms of experience, setting up a web3 wallet should really be as easy as logging on with an email address, or a social account. Obviously, security should not be compromised by changing the onboarding and authentication process. But the complexity of making and keeping the wallet secure, will have to move to a back-end that is invisible to the user. The seed phrase will still exist, but will be securely distributed in the background, in a way that ensures custody is fully in the hands of the user. The experience needs to be about ease of use for the beginner, and paths of migration to higher levels of user control. The result of this is a user experience that is as good as in web2, while security and user self-custody are safeguarded at every point.
Self-Custody with Portability
Simplifying onboarding and general user experience should not go at the expense of the core values of web3. Wallets need to remain self-custodied, and full and final control of the wallet should be in the hands of the user at all times. Within this framework, a user would freely choose to use their wallet on one of multiple levels.
On the first level, if for example a gamer just wants to play a single web3 game, they would benefit from ease of onboarding, and an immersive experience of using a wallet within the confines of the game experience, without additional hurdles.
On the second level, at the moment they find another game that shares assets with the first game, they could re-use their wallet credentials, port their wallet over and continue playing with the same wallet in the second game.
On the third level, they could choose to completely separate the wallet from the game experiences, and use their wallet as a ‘traditional’ standalone wallet. This would be the ‘advanced user’ scenario, which should always be available, even though the majority might just be satisfied with using the first two levels.
Offering flexibility in this way fully optimizes between the two objectives that need to be fulfilled, ease of use, and bringing the essence of web3 values to a new segment of users.
Onboarding the next Billion Users
It is impossible to deny that web3 is growing in new directions. While crypto and DeFi maintain to be a central use case in web3, applications in new verticals are drawing the attention of new user segments.
Web3 gaming is already responsible for about half of active blockchain wallets. That’s massive relative to other web3 use cases, but at the same time web3 is still a niche in the gaming vertical. Integrated web3 wallets will be one of the key solutions that are going to unlock mass adoption of web2 users into web3 gaming.
Similarly, web2 brands like Coca Cola, McDonalds and Adidas have shown successful examples of using NFTs in customer engagement campaigns. It is undeniable that a simpler experience for non-crypto users to acquire NFTs would add to the potential reach of these campaigns on a massive scale.
In music there are a substantial number of innovative projects that have taken off, exploring new ways to engage with fans, drive events and even experiment with project ownership. Great examples of evolving web3 models in music are Sound.xyz, Royal.io and Soundmint.xyz.The level of excitement is high, even while user communities are still moderate in size. Opening up access to a much larger user group by lowering barriers in the user experience will allow projects in music and arts to penetrate a much larger potential user group.
Web3 has been a space of major innovation. Finance was the original use case, and DeFi has been the driving force in the early stages of web3 adoption. The experience of separate wallets was integral to the initial developmental stages of web3.
Now that web3 is expanding into new verticals and a new type of user has started to participate, a new wallet experience is needed. Creating immersive experiences with a wallet integral into the app, and simplifying onboarding to match a UX as easy as web2, are the two main ingredients that will lower the barrier for web2 users to join web3. While doing this, the core web3 value of self-custody must and will be safeguarded by granting the user full and final control over their wallet.
There are many exciting new use cases of web3 coming through, with great examples in gaming, music, arts and web2 brands. These verticals are going to bring the next one billion users to web3. User experience is going to be the key to onboarding these new users. The web3 wallets enabling this will need to be as user friendly as web2 experiences, while at the same time maintaining safeguarding self-custody, and security.
Liquality web3 SDK
Working and building together on new opportunities is what will further accelerate innovation. The Liquality web3 SDK is designed with these principles in mind. It helps both devs and users get into web3 with a solution that easily builds immersive app experiences, while maintaining security and user self-custody. Being open source, the Liquality web3 SDK allows anyone to use and expand the platform. Start a conversation about the Liquality SDK today by leaving your details here.