CRYPTO WALLETS - CURRENT STATE, CHALLENGES AND DEVELOPMENT PROSPECTS IN 2023
- Current Crypto Wallet Market
- Business model of crypto wallets
- Challenges of Crypto Wallet
- Development Prospects of Crypto Wallet
- Identity to access Web3
- Payment gateways
- Multi-chain wallets
- About 3S Wallet
In 2022, although the crypto market is somewhat bleak, the number of crypto wallet users still shows signs of growth. Crypto wallets are gradually becoming an indispensable part, a gateway for users to join the crypto market. In this article, BHO Network will provide you with information on the current status, challenges and development prospects of crypto wallets in 2023.
Cryptocurrency experts say that non-custodial crypto wallets will continue to attract Web2 users to Web3. Most wallet developers today have simplified the complex process to create an easy-to-use application to serve the blockchain industry.
Current Crypto Wallet Market
According to data from statistica.com, as of November 2022, the total number of wallet users worldwide is around 85 million - an increase of about 6.3% from 80 million at the end of 2021, although the growth rate is somewhat slower than in previous years.
In terms of revenue size, according to a study by Future Market Insight, the total revenue of the global crypto wallet market in 2022 is around $1.398 billion, and is expected to exceed $3.371 billion in the next decade with a compound annual growth rate of 9.2%, representing a high growth trend.
In terms of regional distribution, North America is home to most users, and still dominates with a market share of more than 30.0% of revenue last year. There are several key users in the North American region, including Coinbase Global, Inc., BitGo, and BitPay, among others. In June 2022, PayPal Holdings, Inc. announced that all eligible PayPal account holders in the US can send and receive crypto on PayPal, which has also fueled the growth of wallet users to some extent.
The second fastest growing regional market is Asia Pacific, especially Mainland China and Hong Kong. The Asia Pacific region will play an important role in blockchain innovation. The region has a large population with high financial awareness and many technical enthusiasts, driving innovation in crypto wallets in the region.
Business model of crypto wallets
The current business models of crypto wallets are growing along with the industry. In the early days, most wallets (hot wallets) mainly acted as management tools, storing private keys, and interacting with the blockchain to deposit and withdraw coins/tokens. Since various on-chain applications launch in 2020, the primary business model has been transaction fees, but this revenue stream is no longer attractive.
As the demand for Defi and cross-chain skyrocketed, crypto wallet developers have continued to improve their products, and launched various on-chain services such as cross-chain integration, swap, staking, fast payment, etc.
Challenges of Crypto Wallet
In the current market cycle (from 2020 until now), the overall development of the wallet segment has been on track with many innovations, such as DeFi Summer in 2020, and the blooming of blockchain Layer 1 in 2021. However, user-friendliness, security, etc. are always challenges on the way to developing a crypto wallet.
Decentralized crypto wallets are more complex than those on centralized exchanges. Centralized exchanges provide convenience services, where users do not need to understand the entire usage logic of crypto wallets, while decentralized wallets require users to complete all interactive steps by themselves, which requires some basic understanding of blockchain. In addition, when a user of a crypto wallet encounters any problems with authentication or interaction, there will be no customer service team from the wallet team for support. This also prevents new users without a certain technical background from being able to access Web3.
In addition, the wallet app's interactive experience, and functionality/login/user interface is different from those of Web2 apps. Many new and existing users end up choosing crypto wallets over those on traditional centralized exchanges due to the disadvantages mentioned above.
While crypto wallets on exchanges can be easily manipulated by humans, they are easy to use and have a user-friendly interface. Therefore, in order for decentralized wallets to have more users, wallet developers have to solve the problem of user-friendliness.
Decentralized crypto wallets generally have a high level of security, and wallet users have full control over their assets in the wallet without the need for third-party intervention. Compared to centralized wallets, users of decentralized wallets do not have to worry about banks or exchanges appropriating or abusing asset authentication. Furthermore, decentralized wallets are less dependent on centralized institutions, less likely to be hacked or fail at a single point.
However, most current wallet users are responsible for self-managing their private keys and assets, and it is more vulnerable to threats such as social engineering attacks and viruses.
In addition, the biggest security challenges for users are still the rights to monitor private keys, and attacks from hackers. The lack of security knowledge and awareness, as well as careless habits can create great opportunities for hackers.
For crypto wallet developers, the basic security of the wallet is also a challenge. In addition to the wallet's code being open source, developers must conduct thorough testing for the security of the codes and for each major update, as well as the storage and management of private keys.
Development Prospects of Crypto Wallet
Identity to access Web3
Web3 is a decentralized version of the current Internet Web2 powered by blockchain and crypto technology. Web3 not only ensures the fairness of users when accessing the Internet, but users can also control their own data, as well as host their own websites and applications. Transactions can be arbitrarily initiated by crypto applications that are not governed by a centralized company, bypassing the centralized power of Web2. The decentralized nature of Web3 offers many advantages and endless possibilities.
According to a report by GrandView, the global Web 3.0 blockchain market size is expected to reach $33.53 billion by 2030, with a compound growth rate of 44.9% from 2022 to 2030.
Web3 does not require much different credentials than Web2. Decentralized wallets are mostly designed to be easily compatible with all Web3 application ecosystems. In addition, the decentralized crypto wallets are expected to have off-chain KYC, on-chain user profiling, and on-chain credit rating with a huge user base.
Future crypto wallets will serve as an identity gateway to access any digital or virtual assets in the Metaverse (land, real estate, game items and many other NFTs), and activities in DeFi.
Currently, retail crypto payments are still in the early stages due to the incomplete global regulatory environment, low awareness of cryptocurrencies from merchants, etc. However, as cryptocurrencies gradually gain popularity, and the regulatory environment is being upgraded, project developers and users paying with cryptocurrencies will skyrocket.
Crypto wallet, as a gateway for Web3, can integrate all crypto payment projects, forming a new generation of Web3 payment ecosystem. All relevant offline and online activities can be done through the wallet, including shopping, ordering food, taking a taxi, traveling, and other P2P payments.
The current competitive landscape of Layer 1 blockchains has been taking shape. Almost every Layer 1 blockchain creates its own wallet for the sake of ecological development. However, these wallets are not yet capable enough to meet the current needs of multi-chain and cross-chain.
Furthermore, managing private keys across multiple chains also faces the problem of chaos, and is prone to loss or confusion. As a result, users only need a multi-chain wallet to determine their identity and do not need other tools that manage private keys and can manage assets on different chains. At the same time, with a multi-chain wallet, users can easily trade and swap assets across multiple chains.
Currently, multi-chain wallets have been developed on most mobile devices and desktops, as well as hardware wallets. The competition for multi-chain wallets is expected to become more fierce in the future as the demand for interoperability between more chains and more smart contracts comes into play.
About 3S Wallet
3S Wallet is a product in the ecosystem of BHO Network, and has all the necessary features of an NFT wallet to help you store NFTs safely and quickly.
3S Wallet - A multi-chain-enabled non-custodial cryptocurrency wallet that provides secure and convenient storage and management of crypto assets in accordance with Web3 standards. You can store more than 3000 different coins/tokens.
Allows trading, storing, and managing coins/tokens, NFT assets on many blockchain networks such as Ethereum, Binance Smart Chain, Polygon, Fantom, Avalanche, Optimistic, Arbitrum, Cronos, Solana, BHO Chain, etc.
3S Wallet is oriented to be a simple, secure and safe Defi wallet product. With a one-touch interface, 3S Wallet's simple gestures make it easy to use for new users.
In addition to maintaining a stable user base during a downtrend in the crypto market, decentralized crypto wallets are also of more interest when recently there has been a lot of bad news surrounding centralized exchanges, which affects user psychology. The number of decentralized wallet users promises to increase even more in 2023. And BHO Network's 3S Wallet will be a good and safe choice for you to store and trade coins/tokens, as well as NFT.
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Published on December 24, 2022
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