So you’ve read Part 1 but you still aren’t convinced about what makes the perfect crypto wallet? Good. You shouldn’t be. There’s a lot more that goes into the perfect crypto wallet than just private key management and security. Crypto wallets are not just “vaults,” they are also meant to be used. They’re there to transact with and they will be a foundational layer for interacting with Dapps. Wallets are similar to web browsers in that what matters is what features the browser supports, not how you access the browser (mobile, tablet, desktop). In the same way, a wallet can be accessed through many platforms, but what is important is what services and Dapps are supported. As the use cases for crypto assets increase, choosing a wallet that works for you will become all the more important.
Security is crucial for wallets, but depending on the use case, there are a host of other considerations that users must balance. Users who simply store their crypto will depend more on the diverse support of both assets and protocol forks. Users that prioritize transactions, whether trading or spending, will need friendly user interfaces and convenient features. Today, the components that define a successful crypto wallet are:
Before choosing a wallet it’s most important to evaluate which crypto tokens are supported. With hundreds of options, finding a wallet that supports them all is not an easy task. Supporting tokens that are built on the same standard (ERC20, NEP5, etc.) is simple. If the wallet supports Ethereum, it is likely to support all Ethereum-based tokens. The issue arises in supporting tokens with independent or unique chains. To support new chains, the wallet must be customized to specifically connect with that blockchain and even sometimes support a new elliptic curve (for example, ECDSA for Bitcoin and Ethereum, and Ring Signatures for Monero). This is the exact reason that not many wallets support Nano, IOTA, or Monero tokens. Given that these tokens are built using a DAG (Directed Acyclic Graph) and Ring Signatures, wallets must be specifically and uniquely constructed to support them.
Each protocol also offers special functionalities. Wallets need built-in “native support” for these features. For example, ZCash enables optional, anonymous “shielded” transactions. Wallets for proof of stake tokens (like NEO, Tezos, or Ark) must support staking, baking, and voting for delegates. This problem will continue to improve, especially as various tokens come to capture adoption. But for now, check to make sure that your favorite wallets support the tokens you hold.
One of decentralized technology’s greatest advantages is also one of the largest challenges for wallet designers. Since most blockchains open-source their code, forks frequently occur as others make slight modifications to the code and release new chains with new tokens. Bitcoin Cash and Ethereum Classic are two examples. At the same time, supporting new, untested protocols introduces potential security vulnerabilities. Successful wallets must be both responsive in adding support for new tokens and responsible in only adding those protocols which have proven security. This largely rests on the strength of the dev team designing the wallet -- so don’t overlook that.
Airdrops are another aspect of the crypto industry. Airdrops happen when new forks distribute their coin or token to holders (Bitcoin Cash to Bitcoin holders), when companies want to do promotions, or when platforms transfer their tokens from ICO token to protocol token (such as when EOS transferred their ERC20 token to their own EOSIO token standard). Not every wallet supports every airdrop and exchanges aren’t necessarily required to distribute airdrops to the original recipients. Using a self-custody wallet is the surest way of receiving your airdrops, but even then, make sure that the wallet provides the necessary support. If they don’t, you might be left empty-handed.
Nothing is worse than using a wallet with a bad user experience. It’s frustrating and with real money on the line, downright terrifying. As crypto assets gain more use cases, the importance of a good user interface will only increase. Users can’t be expected to trust crypto, to use it in their daily lives, if the applications for using it are...well, unusable. User experience is one of those aspects that very much depends on the users’ preferences. So find a wallet with an interface that speaks to you.
Wallets with good user experiences depend on many aspects. Like most successful apps or programs, wallets must be clear and easy to use for both beginners and advanced users. The wallet must work smoothly and quickly. We’re still in the beginning stages of crypto adoption where usability is usually sacrificed on behalf of functionality. Wallets and crypto will only begin to see mass adoption when they combine these two elements.
There will almost always be a tradeoff with wallets between usability and privacy. The most user-friendly wallets make use of a central database. A central organization manages and owns the data and users are able to login with just a password and username from any device, interact conveniently with friends, and seamlessly manage their assets. The reality is, the more easily that a user can customize the app and send money, the more personal information it will require. Some of the most convenient apps today -- Venmo, Uber, Airbnb -- are also the least private. Linking services with your Facebook account make for incredibly easy signup, but the tradeoff is obvious. Crypto wallets can add many ease-of-use features but each has a privacy cost. Some users will want to be able to search directly for their friends’ addresses, automatically split the bill with crypto at their local restaurant, and centralize their crypto account with their other social account. Other users will prioritize anonymity, using only totally anonymous tokens and wallets that require no personal information. But even those wallets that choose privacy will implement features to assist their users, like customizable addresses, address books, and convenient notifications.
Many crypto use cases will demand wallets that allow for multiple parties to share access or ownership of the wallet. Whether because the wallet stores shared funds or because the user wants additional levels of security, multi-party encryption and multisig support will continue to be critical. Multi-user crypto wallets are important for institutional adoption as well. Institutions will also be one of the biggest adopters of multi-user wallets. Those enterprises making use of digital wallets will need single-user wallets -- for basic operations by employees -- and multiple-user wallets -- for collaborative operations. These wallets will need to support various access levels which pose an entirely different challenge to wallet developers. Traditionally, multi-user wallets sacrifice heavily on user experience and setting up the wallet is generally very cumbersome. Wallets are still trying to develop multi-party support that is easy and convenient to use.
The reality is, crypto wallets will follow a similar trajectory as any foundational software such as web browsers. Different users gravitate towards different services. Some users prioritize privacy, using a browser like Brave or Firefox. Others want convenience, turning instead to browsers like Chrome or Safari which centralizes all their Google or Apple services into one, easy to access place. Some crypto wallets will evolve to service crypto collectibles like the video game industry. Other wallets will address corporate needs, providing support for enterprises and supply chains. Other wallets will focus on the user who, above all else, wants a casual, simple crypto experience.
No “perfect” wallet exists for everyone. It is up to each user to choose a solution that works for them. However, we must also continue to hold wallets to high standards, demanding responsible management and development. Because when services host people’s life savings, mistakes are costly.
Crypto wallet services are still incredibly new. Even with the consideration that no “perfect” wallet will exist, we still have a long way to go in developing a host of wallets that can support all the various user demands. Wallets today sacrifice on convenience and usability for security and privacy. Wallets today have critical errors -- just look at last year’s Parity Wallet hack, or vulnerabilities found in the Coinomi wallet -- and many more will surely be found. And since the success of crypto depends heavily on wallets, technological advancements must be made. We must demand that wallets are transparent about their tradeoffs. We must demand that wallets undergo third-party security audits. We must demand that wallets take responsibility for their mistakes. Only then will we get wallets that can make decentralized crypto assets a reality.
We will soon be releasing a simple and secure wallet. The ZenGo wallet is the first-of-its-kind wallet with the goal of providing everything that you expect in a wallet, without ever compromising on usability and security. Follow us at ZenGo.com.