Wallets in "CRYPTO THESES 2024"

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Looking back at the first decade of crypto, the wallets we use today may seem quite primitive in the future. The technological breakthroughs of 2023 might be seen as a quiet turning point in crypto adoption when viewed from the future.

Multi-party Computation (MPC) Upgrade

For years, Externally Owned Accounts (EOAs) have been the foundation behind Ethereum's wallets in practice. Since its initial launch, MetaMask has allowed users to execute Ethereum transactions using a single private key.

In early 2022, Coinbase announced that they were launching a new decentralized application wallet based on Multi-party Computation (MPC) technology, eliminating the need for users to bear the full burden of maintaining their own private keys. MPC is a secure protocol that allows multiple participants to compute a function together without revealing their individual inputs. In the context of cryptocurrency wallets, this means different parts of the private key can be distributed among different participants or devices, thereby increasing security and usability.

The introduction of this technology marks a shift from traditional private key management to more advanced and user-friendly security solutions. It reduces the risk of single points of failure and provides users with a more convenient and secure way to manage and use their crypto assets. As this technology develops and becomes more widespread, we can expect future cryptocurrency wallets to be more secure, user-friendly, and better integrated into our daily lives.

Smart Contract Accounts (SCAs)

Account Abstraction (AA) is an initiative on Ethereum’s core roadmap aimed at replacing externally owned accounts (EOAs) with smart contract wallets or "smart accounts."

The core AA implementation, ERC-4337, provides a standard around which wallet developers, infrastructure providers, and end-users can leverage the advantages of smart contract wallets without having to take significant leaps of trust in terms of security across multiple implementations.

The introduction of smart contract wallets has changed the account model on Ethereum. Unlike traditional EOAs, smart contract accounts can execute complex logic internally, including more advanced security measures, automated transactions, and user-defined operational rules. This account abstraction makes user interactions more flexible and powerful while also providing new possibilities for wallet security and functionality.

ERC-4337 serves as a standard, providing a common framework for the implementation of smart contract accounts, ensuring compatibility and security between different implementations. This helps accelerate the development and adoption of smart contract wallets while bringing more innovation and user-friendly interaction methods to the Ethereum network. With further development and realization of account abstraction, we can expect more customized, high-performance, and secure wallet solutions on the Ethereum network.

Embedded "Wallet-as-a-Service" (WaaS) and Super Apps

Privy may have inadvertently shown the way forward: startups might consider moving from generic Wallet-as-a-Service platforms (upper left) to super app-associated wallets (lower right), where they might find market-leading app partners eager to collaborate: projects like Uniswap are striving to ensure they maintain control over their user relationships as third-party wallet providers begin blurring competitive lines.

In this transformation, wallets no longer serve merely as tools for storing and managing crypto assets but become comprehensive platforms capable of integrating various services and applications. These so-called "super app" wallets will provide one-stop solutions ranging from trading and lending to social media and other functions, enabling users to perform various crypto-related activities within a single app.

The advantage of this model lies in providing users with a more seamless and integrated experience while offering app developers a larger user base and opportunities to increase user retention. However, this also presents some challenges, such as ensuring user privacy and security, as well as maintaining efficient and user-friendly interface design when providing multiple services.

As the crypto space continues to evolve, we can expect the boundaries between Wallet-as-a-Service and super app wallets to become increasingly blurred, with emerging companies and established platforms seeking innovative ways to attract and serve users. This competitive and innovative environment may give rise to a series of new crypto wallet solutions that better meet evolving market demands and user expectations.

Controversy over Ledger Recover Functionality

The Ledger Recover feature, which divides users' seed phrases into three parts and stores them separately in different entities, has raised serious concerns about security and privacy. This approach contradicts Ledger's previous claim of "private keys never leaving the device," leading to a crisis of trust in the Ledger brand. Notably, this controversy unfolded during a bear market. Looking ahead to the next year, we may see the launch of new hardware models and a series of new services designed to handle high-risk edge cases.

This incident highlights the complex trade-off between security and convenience in the field of cryptocurrency hardware wallets. On one hand, Ledger attempted to improve user experience and provide more recovery options through innovation, but on the other hand, this approach potentially weakened its core product — the ability to securely store private keys. Users' high attention to security reflects the cryptocurrency community's emphasis on privacy and security.

As the crypto market evolves and user needs grow, hardware wallet manufacturers must continuously innovate while maintaining security to meet various user demands. This could include developing new hardware designs, improving user interfaces, and providing more diversified services to address various extreme situations. The competition and rapid development in this field may lead to safer, more efficient, and more user-friendly solutions for storing and managing crypto assets.