Asia’s most popular crypto wallet, imToken, provides an outlook on technological developments for crypto wallets in 2023. The main areas of concern identified are self-custody and multi-party computation. Smart wallets include wallets with Account Abstraction (AA), as well as wallets based upon Multi-party computations (MPC).
The report found that self-custodial options are still painful for users. Metamask and imToken wallets offer security and access to DeFi. However, users still prefer custodial solutions. ImToken’s survey found that almost two-thirds of users (63%) prefer trading on exchanges over trading on wallets. An unexpected number.
While we are seeing solutions, there are also opportunities. PayPal introduced a custodial feature for their wallet, while Reddit (6th most popular site in the world) added wallet functionality. Reddit called their wallet feature “vault”, obscuring the complexity that many crypto users find frustrating.
What’s more, 38% of users found wallets to be less secure than exchanges. End users don’t seem to be convinced of security as a major advantage of wallets. Users fear being hacked (39%), and losing crypto through their own error (18%). They are currently using wallets that do not work properly, which would solve over 40% of their problems.
However, many users are not optimistic. The majority of users, more than 25%, believe that most people will not switch to self-custodial – the core paradigm of crypto – until 5 years after they do. The same percentage (25%) of those interviewed believe that the majority of crypto users will remain with custodial options even after 10 years.
Smart wallets offer a solution to these user problems. Even though the new tools are niche, they are gaining users. In all of its history, 2022 was a year with the best contract wallets. In 2022, for instance, 65% were created by Safe (formerly Gnosis Safe) wallets. It was more than twice as many as the previous year. However, market share remains low. Research by imToken found that smart wallets only account for 0.1% of the wallet market. It could be because deploying a smart wallet is expensive, with $100 upfront.
These wallets promise promising solutions for 2023. Research by imToken has shown that smart wallets can provide convenience and increased security compared to custodial options. Smart wallets provide security by setting daily limits. It also allows for the stopping of wallets that have lost or stolen keys and regaining access to them. Most survey respondents (51%) said that they would prefer improved security through multi-factor authentication to choose a wallet.
Smart wallets are less convenient than ever. A remarkable 76% of those interviewed thought custodial solutions were more convenient than wallets. Only a few people look for convenience and ease in wallets.
All future wallets will be different. Chang-Wu Chen, imToken, identifies the downside to Multi-party computation (MPC), wallets like Zengo and Coinbase. The Head of research asks, “[a MPCWallet] sounds perfect, right?” However, the MPC solution requires an online computing unit to collaborate with. This is not a problem for smart wallets built on Account Abstraction. This smart contract wallet remains online all the time. Ethereum, the most popular blockchain, has not yet implemented this feature.
According to imToken, the report did not just include wallets, but also projects that use blockchain technology in order to offer those convenience and security features. Illia Polosukhin (co-founder of NEAR) said that unlike Ethereum, the decision to implement smart account capabilities at the base level paid off. There are an estimated 500k-1m accounts who have used these features.
Layer 2 blockchains, such as StarkWare or Matter Labs, face a different challenge. Both projects build on Ethereum so must use an account abstraction instead of building a brand new account model. Both projects agree the benefits are well worth it. StarkWare’s Product Lead Tom Brand is enthusiastic about the Web2 user experience, as illustrated by Visa’s prototype built on StarkWare. Omar Azhar (Head of Enterprise Business Development at Matter Labs) agreed that users can use email logins and Paymaster to make batch transactions. This is a very valuable asset for crypto products.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
