Decode the Life and Death of Crypto Wallets with CipherBC
Crypto wallets, as a crucial entry point to the blockchain and Web3 ecosystem, have evolved beyond just tools for storing assets. They now serve more complex and diverse functions. As blockchain technology progresses, the design and usage of wallets continue to evolve, with an increasing focus on higher security, more diverse functionality, and better user experiences. In 2024, we witnessed the rapid diversification of the wallet ecosystem, and the trends emerging now are set to drive wallet technology into even broader use cases in the future.
Crypto Wallet Landscape in 2024
Diversities of Wallet Types
Wallets are primarily categorized into custodial and non-custodial types. Custodial wallets store private keys with a third party, which offers a better user experience but limits control over funds and introduces risks associated with third-party oversight. In contrast, non-custodial wallets give users complete control over their private keys, offering better security but carrying the risk of losing access if the private keys are lost. Additionally, with technological advances, new types of wallets, such as MPC (Multi-Party Computation) wallets and smart contract wallets, are emerging. These enhance wallet security and flexibility, particularly in decentralized finance (DeFi).
Core Technological Advancements
Today, mainstream wallet technologies include MPC wallets and smart contract wallets. MPC wallets improve security and recoverability by splitting and encrypting the private key across multiple devices. Smart contract wallets, through distributed account technology, support more complex transaction functionalities such as multi-signatures, account freezing, and Gas sponsorship. These features greatly enhance the wallet’s capabilities, particularly in the context of DeFi applications.
Integration of Wallets with Blockchain Applications
Wallets are no longer just tools for asset management; they are deeply integrated into blockchain transaction execution and interactions. The order flow market is increasingly concentrated among a few large builders in the Ethereum ecosystem. Wallet products are actively entering the market, with decentralized platforms such as Uniswap and Curve launching their wallets to better control order flows and capture more value.
Major Trends in Crypto Wallets for 2024
Consolidation of Blockchain Markets
The block-building market is becoming more concentrated in the Ethereum ecosystem, leading to fierce competition. To address this, wallet providers are adopting new strategies such as order flow payments, auctions, and private order flows. These innovations optimize transaction execution and better protect users’ MEV (miner extractable value), enhancing user experience.
Rise of Account Abstraction
With the introduction of ERC-4337, account abstraction has become a reality. This breaks the reliance on traditional EOAs (Externally Owned Accounts) and enables more flexible transaction functionality through smart contract wallets. This development further accelerates the adoption of decentralized finance (DeFi) and Web3 applications.
The Rise of Stablecoin Payments
Stablecoins are increasingly critical in DeFi and cross-border payments. Many wallets now integrate stablecoin payment features, such as USDC and PYUSD. As stablecoins become more widely used in payments and cross-border transactions, wallets are becoming more aligned with traditional financial systems, driving the everyday use of cryptocurrencies.
Anticipation of Crypto Wallets in 2025
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The Comprehensive Evolution of Smart Wallets
In the future, smart wallets based on account abstraction technology will continue to evolve. With the launch of proposals such as EIP-7702 and EIP-7212, wallets will gain new features like batch processing and permission control. These innovations will turn wallets into more intelligent, personalized platforms for user experience. Smart wallets will enhance user convenience and security by integrating richer functionality and more secure verification methods.
The Application of Pre-confirmation Technology
Pre-confirmation technology will become an essential tool for optimizing wallet transactions. By providing early confirmation on Layer 1 blockchains, pre-confirmation technology can reduce network congestion and increase transaction execution speed. This technology will significantly reduce transaction delays and enhance efficiency for users and exchanges, improving the overall wallet experience.
Integration of Trusted Execution Environment (TEE) Technology
As the focus on wallet security intensifies, Trusted Execution Environment (TEE) technology will become a key component in improving wallet security by 2025. TEE can protect private keys at the hardware level, preventing vulnerabilities in software that could lead to security risks. As privacy protection and regulatory compliance needs grow, TEE technology will be crucial in solving security challenges for wallet providers.
Progress in Compliance and Global Regulation
The wallet functionality of decentralized exchanges (DEXs) has drawn the attention of regulatory authorities. Regulatory actions against wallets like MetaMask and Coinbase by the U.S. SEC indicate that wallets will likely face more regulatory scrutiny regarding securities laws. In 2025, as global regulation of cryptocurrencies and blockchain technology tightens, wallet providers must ensure compliance with increasingly stringent regulations. This includes adhering to regulations surrounding asset storage, transactions, and privacy protection.
Layer 2 (L2) and Other Scalability Solutions
Layer 2 (L2) solutions are protocols that increase the throughput of Layer 1 blockchains by executing transactions off-chain. Built on top of Layer 1 blockchains (e.g., Optimism and Arbitrum on Ethereum), these solutions aim to offer higher throughput and efficiency. While the frequency and number of attacks on crypto projects continue to be alarming, it also presents a massive market for new security solutions. New companies providing smart contract audits, transaction screening services, and secure fund storage solutions are emerging to address these security concerns.
The Popularization of Cross-chain and Multi-currency Support
Wallets will increasingly support more blockchain networks and a wider range of crypto assets. The growing use of cross-chain functionality will enable users to move assets freely between different blockchains. Additionally, wallets will continue to support multi-currency and cross-border payments, promoting the global adoption of cryptocurrencies. One of the key outcomes of the next bull market and large-scale adoption will likely be the ability to pay for everyday expenses, from hotels to supermarket groceries, using cryptocurrencies in many countries.
Integration of Cold Wallet and Cutting-edge Technology
Due to the high cost of Multi-sig and the bugs in writing smart contracts, Cold Wallet will be combined with technologies such as Multi-Party Computation and Threshold Signature to create an even more extremely secure solution for token fund management. Due to the rapid development of AI, facial recognition security will gradually be outdated, and modern crypto wallets will gradually introduce iris recognition technology to provide users with a more secure and convenient authentication. Market research shows that more users prefer to use iris recognition to unlock their wallets instead of pin codes, fingerprints or facial recognition technology.
Security Is Always the Key
In 2024, crypto wallets’ technology and market environment are rapidly changing. Wallets are no longer just tools for storing crypto assets; they have become essential entry points and interaction platforms in the blockchain world. As we approach 2025, wallets’ security, functionality, and user experience will continue to improve, through innovations in smart contract wallets and MPC technologies, providing users with more flexible and diverse experiences. Meanwhile, stricter global regulations will push wallet providers to pay closer attention to compliance, ensuring their products adapt to the evolving regulatory landscape. As technology and markets develop, future digital wallets will provide users with more comprehensive, secure, and convenient financial experiences, fundamentally transforming how we manage and use assets.