How smart is your wallet?
A web3 wallet should, at minimum, be self-custodial, mobile-friendly, chain agnostic and composable. If it isn’t all of these things, get a new one.
Wallets. If you’re keeping a pulse on trends to watch in DeFi and web3, this is one of them. Your crypto wallet is the gateway to your on-chain identity. It’s the basis for proof of ownership, the power of a bank branch in your pocket, the keys to the king–
Okay, fine, here’s a real definition:
A crypto wallet is a software program or physical device that stores your private keys, allowing you to retrieve your digital assets on a blockchain.
Wallets boil down to proof of ownership. The crypto you own isn’t really “stored” in your digital wallet. It’s stored on the blockchain. Your private key is what proves you are the owner of those assets, allowing you, as the sole custodian, to move them.
Us crypto folks like to pretend that wallets aren’t all that hard to navigate. Set up a MetaMask, save your seed phrase, deposit some cash, and off you go! Easy peasy lemon squeezy. But the reality-check is that wallets are a far cry from the lofty ideals I mentioned earlier. In fact, most of them are –
*cringes, leans closer and assumes quiet worried tone*
…pretty bad.
The good news is there’s been a wallet race for the past 12 months and just about everyone is building one. (And about time too because LHM we really cannot endure another year of MetaMask.)
So as we anxiously await the unveiling of the Wonderful Wallets of 2022, it might be helpful to set some expectations – a set of “minimal viable standards”, if you will.
For the sake of simplicity I’m going to distinguish between the wallets we know and love (and sometimes hate just a little bit, but mostly love – it’s complicated, okay?) and the new wallets moving into town. For now I’m calling them smart wallets.
But be warned: the new wallets of web3 are probably going to look gorgeous too and enamour us with all sorts of heart warming words – “next generation”, “community-owned”, etc. Distractions! Ignore them. These are the non-negotiables: a smart wallet is self-custodial, mobile friendly, chain agnostic and composable. That’s it.
Let’s explore all of these.
A smart wallet is self-custodial
A non-custodial or self-custodial wallet gives you full ownership of your private key – that string of letters and numbers (similar to a password) that lets you and only you manage your crypto assets.
With custodial wallets, your private key is held by a third party – see centralized exchanges like Coinbase, Binance, Kraken, and so forth.
But centralized, custodial platforms get hacked. They aren’t reliable when geopolitics hits the fan (for example, Coinbase recently blocked 25,000 wallets belonging to Russian users). And quite frankly, they’re just not cool.
“Your crypto, your keys” is the mantra – get with it.
A smart wallet is mobile friendly
There’s a growing push to make web3 mobile. So long as decentralized finance remains a desktop experience, we exclude millions, if not hundreds of millions of people from participating in this life-changing technology.
Mobile friendly really means mobile-first. While there are several mobile wallets out there, it’s no secret that many still find the experience confusing, unreliable and intimidating.
Wallet providers that have managed to craft a beautiful mobile experience (à la Argent et Rainbow) unfortunately have been unable to do so without sacrificing one or all of these: self-custodianship, chain agnosticism and composability.
A smart wallet is chain agnostic
Let’s be realistic here – if we get this decentralized finance thing right, two years from now you shouldn’t have to care whether you’re using an Ethereum or a Polygon or a Solana. Just as we’ve demanded an aggregated DeFi experience (why hop between Uniswap, 1inch and SushiSwap when Zerion* can route you through the cheapest of all three?), it’s time we expected the same of our wallet providers.
A smart wallet is composable
The beauty of web3 is it sometimes feels a bit like playing with a box of legos. There’s no limit to how you stack different primitives, apps and use cases.
That’s why you can view your NFTs on Zerion or OpenSea. It’s why you can participate in a Gitcoin grant paying in any token, on any chain. It’s why you can use Zapper one day and Zerion the next, knowing that regardless of the interface you choose, your assets remain untouched.
Contrast this to centralized finance, where switching banks typically takes “just seven working days” and is a bureaucratic nightmare.
We expect decentralized apps to allow us to plug and play without being tied to a single provider, so shouldn’t we expect the same of our wallets?
Why get locked into using one provider when the reality is that different wallets serve different purposes? You might have your Ledger hardware wallet for storing large token balances, MetaMask for day-to-day trading, and Rainbow because they’ve done a darn good job of making crypto fun, simple and secure.
A smart wallet ideally aggregates all your existing wallets and places no limit to the number of seed phrases you can manage from one place.
The wallet wave is coming
There are several web3 wallets (not all of them “smart”) that either recently launched or are set to launch soon, and this list is by no means exhaustive:
Tally (Twitter @TallyCash)
Balance (Twitter @Balance_io)
Zapper
Robinhood
Rabby by DeBank
When it’s time to pick (or switch) your wallet, do so knowing the non-negotiables: a smart wallet is self-custodial, mobile-friendly, chain agnostic and composable.
And whatever you do, please don’t settle.
*Disclaimer: I work at Zerion. Affiliations aside, I genuinely believe we’ve built one of the most useful DeFi products on the market. I wish more people knew about it. If you’ve never used it, go check it out.
