Despite the launch of smart contract platforms such as Ethereum, many wallets have continued to adhere to a similar pattern of development and design as early iterations. This ignores the changes in how users are now interacting with blockchains.
This expansion means that the wallet must become less a means to simply store, and more a window through which the user can utilize DApps and manipulate the burgeoning types of different cryptoassets.
Then and now
The roots of wallets are part of the reason as to why this shift has been slow. Frequently misunderstood, BTC are never really stored in a wallet in the same way that you store cash in a physical wallet. Rather, your wallet acts as the key to use the BTC which the ledger deems to be assigned to that account. As such, the wallet can therefore be seen as more of an interface which allow for interaction with the network. These wallets take on many forms, including paper, phone, desktop and hardware solutions, each bringing their own strengths and weaknesses.
Bitcoin wallets are comparatively simple; a collection of addresses which the private key provides access to. Early wallets were predominantly paper and software based. This changed with the rollout of hardware wallets but was more a change to form than function; although there were improvements in security and ease, they achieved similar results and many of the issues remained.
I do not wish to diminish the sterling work done by many teams to improve both the security and ease of wallets. I personally find using my Ledger Nano S on decentralized exchanges (DEXs) a dream, a far superior experience to using centralized exchanges like Coinbase or Binance. Similarly, MetaMask has enabled many to access Ethereum based DApps and MyEtherWallet is used by millions.
That said, we should not ignore the challenges and issues wallets currently present to (particularly less technical) users, as they are often:
Complicated to use – they feature many unknown terms (gwei, gas, ENS etc) and have unintuitive processes (e.g. if a transaction is going to take too long it is possible to ‘overwrite’ it by resending it. Although MetaMask have changed to make this clearer, it is still not obvious how to do it through other services).
Scary – the irreversible nature of transactions makes getting it right of the utmost importance. When you do not quite understand what is going on, everything appears intimidating.
Full of friction points. For example, to use a wallet you first have to send ETH to it. Many wallets do not make this an easy process. Furthermore, the likes of MetaMask require an extension (on Chrome at least), necessitating an additional download and install. These wallets are also hard to transfer across devices, especially to mobile devices because…
Many are PC first – in a mobile first world.
The wallet of the future
As people use decentralized services more, there will also need to be a better way of recording transactions which will no longer be solely confined to payments. Transactions could include taking out loans, adding a ball of string to your CryptoKittie, making a move in a game or sending a message on PeepEth. The wallet that succeeds will likely be one that is able to amalgamate all of these into an attractive and icon/image driven Notifications esque screen.
It will also likely have to include displays/collection highlights for NFTs, the ability to buy/sell cryptoassets directly and forms of address books (save your friends/family for regular payments). It will need to be easily transferable and viewable across multiple devices – just because I may not wish to use my private key on my phone does not mean that I shouldn’t be able to view my activity on it. Ideally I might create transactions on my phone and then authorize these through a Bluetooth hardware wallet (which already exists).
However, the wallet will inevitably expand well beyond this. If the decentralized dream is realized then there will be hundreds and thousands of services being used daily. Many of us will currently log-in to services today using either our Google, Facebook or Twitter details. Decentralized networks will need this interoperability – and the wallet is the perfect tool to accomplish this.
Not only can the wallet store cryptoassets, but it could also feasibly store data and information. Ultimately this data could expand to include a full range of identification, with projects already emerging to tackle this use case. This could include, for example, names, photos and financial information. You could then select which of this information can be accessed by each service. Not only would this reduce friction, it would also mean a reduction in the amount of information you have to share with third parties.
This is just the start. With each new protocol and product created, new opportunities become possible. Most of this remains in the very early stages, and wallets are no exception. With every new solution created, wallets will find themselves having to add new features. However, there are a number of solutions now coming to fruition which see themselves less as wallets and more as the gateway to the wider crypto ecosystem. Part 2 looks at some of these competing solutions.