I don’t know about you, but downloading a Web3 wallet and funding it for the first time was a nerve-wracking experience. Sending money without trusting some central authority with a familiar logo left me feeling unmoored; I refreshed my wallet a few times, waiting.
After using it for a few months, I realized that this decentralized wallet was a very different beast from typical payment apps provided by banks or companies like Paypal. These wallets not only carried my crypto assets but also my login credentials and transaction history forming a proto-identity to use across the world of Web3.
It appears that Web3 wallets are more akin to vehicles, which allow people to traverse the new blockchain-based internet and, one day, the brown leather wallet in my back pocket will be as archaic as rotary dial phones. And quite right too: there are so many decentralized finance (DeFi) apps that it would be impossible for a person to create a separate account each time, not to mention the privacy issues.
Web3 wallets will function in novel ways too. They will fulfil the human need to create an identity around certain ideas and cultures by hosting a personal gallery of NFTs. Archaeologists have shown that humans have always collected items to augment their social identities, from precious stones to funny hats and tattoos.
It’s very natural, then, that we are already seeing wallets being used as the digital equivalent of an NFT scrapbook containing the same kind of meaningful ephemera that humans have always used to create cultural identities. There are already platforms that let people clip media from around the internet and turn them into NFTs for their wallets. As this trend develops, it will be possible to imagine that NFTs will become the metaverse equivalents of piercings, designer outfits, or personalized number plates.
And these new wallet-based identities will allow us to vary our online personas in a way current social media apps can only dream of. Because the wallet ID is just one string of alphanumeric characters, it’s possible to change its outer identity while the core functionality remains the same — like changing clothes on the same body.
This is all great for crypto nerds but what about your average person who sees no reason to swap their faded Red Hot Chilli Peppers tour t-shirt for some NFT collectible? And isn’t the process of learning to use DeFi too esoteric for widespread adoption?
Well, centralized exchanges (CEXs) have a solution: the centralized DeFi wallet. These wallets allow users to explore the fresh world of DeFi in the open and egalitarian way these apps were designed for but with features that mimic the old ways of doing transactions via a trusted third party.
Old habits die hard, as they say. Remember the strange experience of sending money without using a trusted authority? When using CEX wallets, people who are uncomfortable with the idea of self custody, or don’t want to take on the risk of smart contract hacks, can still access the world of Web3 but with their keys locked up in their favorite CEX.
Furthermore, the sheer number of DeFi apps is pretty overwhelming to the neophyte and even crypto enthusiasts can fall prey to a rugpull every now and then. The CEX wallets help mitigate these risks but auditing the apps their wallets can interact with, or providing clear warnings and educational material before allowing access to new or riskier protocols.
The launch of CEX wallets is good for the blockchain space as they provide an easy stepping stone in the onboarding process. Most people are not ready to download an app with a picture of a fox on it and YOLO a portion of their portfolio into an entirely new space.
People worldwide are already using digital wallets connected to their bank accounts. Indeed. A study from Juniper Research has “found that the total number of digital wallet users will exceed 5.2 billion globally in 2026, up from 3.4 billion in 2022.” The research predicts that digital wallet use will continue to thrive in developing countries, which are considered “cash heavy.”
This makes the gap between the current digital wallets and Web3 offerings is already very small. Every day it’s becoming easier for people to make the jump and realize the promises of Web3 for themselves.
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