TokenInsight: An Overview of the 2020 Cryptocurrency Wallet Ecosystem
The wallet is gradually integrating DeFi protocols while supporting a rich variety of public chains.This article is from TokenInsight, with the original title "2020 Annual Digital Wallet Industry Research Report | TokenInsight."
Key Summary
As the primary channel for storing digital assets, the activity level of wallets is closely related to the performance of the digital asset market. Since the arrival of the bull market in the fourth quarter of 2020, both the activity level of the digital asset market and the price of Bitcoin have reached new highs, leading to a recovery in the wallet market due to the growing demand for asset storage and transactions.
Among the top 10 digital asset wallets ranked by TokenInsight, the total visits in 2020 reached 140 million. In the second half of 2020 alone, visits increased by as much as 32%, rising from 22 million in July to nearly 30 million in December.
As an important entry point for user traffic, wallets are continuously enriching the number of supported public chains to meet the increasingly diverse needs of users, and the ecological connectivity is gradually becoming evident. In 2019, the average wallet supported fewer than 10 public chains, while by the end of 2020, the average wallet supported 25 public chains.
With the booming DeFi at the end of this year, various wallets are following the market trend, connecting to the DeFi ecosystem, and gradually supporting more new DeFi projects. For example, Kcash fully supports the underlying protocol of Uniswap, and Bitpay integrates DeFi applications to provide DAI payment support.
The maturity and richness of wallet financial products are also a market trend for the future, such as AToken launching AAVE aggregated financial products and Bitpie launching aggregated yield products.
An increasing number of wallets have integrated the WalletConnect feature to connect DApps and mobile wallets, providing channels for users to trade and transfer in DeFi applications.
As more PoS projects initiate staking, staking services have also received responses from the wallet market, but due to yield issues, some wallets are gradually abandoning the staking market.
Industry Tracking
Q1
- Multi-chain smart wallet MYKEY supports MakerDAO debt auctions and launches auction tools;
- Madfish launches the Tezos browser extension wallet Thanos;
- AlphaWallet collaborates with Bartercard to create the blockchain Qoin wallet and promote tokenization services;
- Kraken claims that Trezor hardware wallets can be physically hacked using voltage faults, to which Trezor acknowledges the vulnerability;
- Smart wallet Authereum receives $1.1 million investment from Coinbase and other institutions and has officially launched on the Ethereum mainnet.
Q2
- Smart wallet Argent no longer pays gas fees for users on applications like Compound, TokenSets, Uniswap V2, and Kyber;
- Trust Wallet has removed the DApp web browser in the latest iOS version to comply with Apple App Store guidelines;
- Bitpie wallet reaches a strategic cooperation with Three Arrows Capital and will launch its first yield product in mid-June;
- Hardware wallet Ledger joins the "Universal Protocol Alliance";
- Ethereum smart wallet Argent launches version 1.0, deeply integrating 7 DeFi protocols.
Q3
- Blockstream launches a new mobile wallet AQUA;
- MYKEY smart contracts pass the audit by Trail of Bits and release the first version of protocol specifications;
- Cryptocurrency wallet Ledger undergoes a version upgrade to add privacy protection and transfer settings;
- imToken adopts GasNow as the source of on-chain Gas Price data for Ethereum;
- Maiar wallet app now fully supports Nervos CKB;
- Ethereum light wallet MetaMask transitions from fully open-source to requiring authorization for some commercial uses.
Q4
- A database containing personal information of 270,000 Ledger customers leaks on RaidForums;
- The U.S. FinCEN may implement stricter KYC rules for non-custodial crypto wallets;
- Binance Labs leads a $12 million Series B funding round for Maiar wallet;
- Italian private bank Banca Generali acquires a $14 million stake in Bitcoin wallet Conio;
- Trezor suffers a phishing attack, suspected to originate from the stolen Ledger database;
- LVMH's Chief Digital Officer Ian Rogers has joined the Ledger hardware wallet team.
Digital Wallet Industry Ecological Landscape
Industry Heat
Market Heat
In terms of overall market heat, the number of global wallet users steadily increased in 2020, with a gradual growth rate. There was a slight uptick in October and November; in terms of user visits, December saw an increase of over 30%.
According to TokenInsight's statistics on global wallet users, as of January 11, 2021, the number of global wallet users in Q1 2021 has surpassed 60 million, reaching 64 million, compared to less than 50 million in Q1 2020, an increase of 14 million, approximately 30%. Compared to the bear market in Q1 and Q2 of 2019, this represents an increase of nearly 60%.
The best-performing months for user growth throughout the year were November and December, with increases of 4.67 million and 3.09 million users, respectively, both exceeding 5%.
Global wallet growth rate statistics, source: TokenInsight
2020 global wallet statistics, source: Statista, TokenInsight
User Visits
According to user visit data from Similarweb, the total visits among the top 10 digital asset wallets ranked by TokenInsight reached 140 million. Moreover, in the second half of 2020 alone, visits increased by 32%, rising from 22 million in July to 29 million in December.
There were some negative growth in September and October, but as market heat steadily rebounded, wallet application visits also achieved a 32% increase in December.
2020 Q3 & Q4 wallet user monthly visit data, source: Similarweb, TokenInsight
2020 Q3 & Q4 wallet user monthly visit changes, source: TokenInsight
Digital wallet 2020 Q3 & Q4 monthly visit total proportion, source: SimilarWeb, TokenInsight
Software wallet annual Top 11 visit rankings [1], source: SimilarWeb, TokenInsight
[1] Page views may be affected by other services provided by the platform. During the statistics, TokenInsight has adjusted based on actual wallet page visit situations, but interference cannot be completely ruled out.
[2] Some rankings on Google Play are limited by certain countries and are not "absolute rankings," but this information still holds reference value.
Among the top 11 wallet websites in terms of visits over the past 7 months as counted by TokenInsight, BlockChain Wallet ranked first with 57 million visits. Meanwhile, Coinbase Wallet saw a significant drop, with only about 2.5 million visits in this half-year count, ranking 10th.
From the data on page browsing duration and number of pages viewed, five wallets had an average browsing duration of over 6 minutes, and two wallets had more than 7 pages viewed.
Software wallet visit Top 11 browsing duration and page numbers, source: SimilarWeb, TokenInsight
Function Dynamics
Function Classification
TokenInsight categorizes wallet functions into four types: storage and transaction services, market information services, financial product services, and DApp browser services.
Digital wallet function service classification, source: TokenInsight
Number of public chains supported by each wallet, source: TokenInsight
As the ecosystems of various public chains gradually improve, the number of public chains supported by wallet platforms has also multiplied compared to 2019. In the data surveyed by TokenInsight, the average number of public chains supported by wallets in 2019 was 4, while by the end of 2020, this number had grown to 23.
During the data statistics, the number of public chains disclosed on various wallet official websites was somewhat vague. TokenInsight adopted an enumeration and verification method to confirm the exact number of supported public chains in their apps. Among them, Math Wallet, which supports the most public chains, was also the wallet with the most comprehensive public chain support in 2019.
Distribution statistics of public chains supported by each wallet in 2019, source: TokenInsight
Distribution statistics of public chains supported by each wallet in 2021, source: TokenInsight
Transaction Services
Due to the high transfer fees of centralized exchanges, users also face risks such as server downtime, loss of transaction records, and centralized trust risks like fund outflow and theft. Decentralized exchanges have become a window for many traders to avoid such risks. With the maturity of the DeFi industry, wallets, as important entry points for user traffic, not only provide various transaction service products but also facilitate users' experience in enjoying the advantages of decentralized trading.
The transaction services in the wallet industry can be mainly divided into three categories: The first category is DEX services developed by connecting to centralized exchanges, such as Trust Wallet connecting to Binance DEX. Unlike logging in via QR code on the web, Trust App directly integrates DEX trading services. imToken provides a decentralized trading platform called Tokenlon. The second category is wallets connecting to centralized exchanges, such as Bitpie. The third category is connecting to DEX trading of DeFi projects, such as TokenPocket connecting to the Bancor protocol and AToken connecting to Uniswap and 1inch, etc.; currently, most wallets also support swap functions, allowing for exchanges between different currencies at a certain exchange rate using decentralized exchange platforms.
Digital wallet transaction service information, source: TokenInsight
Financial Services
Currently, the financial services provided by various wallets can mainly be divided into two categories: the first type is where the wallet platform acts as a "bank" intermediary, launching fixed-term and demand financial products, completing fundraising activities and custodial services for clients; the second type is where wallets embed browsers in mobile applications to connect to DApps or third-party financial products. TokenInsight compared four wallets with relatively rich financial products and organized the results.
Introduction to financial product functions of each wallet, source: TokenInsight, statistics as of January 10, 2021
Digital wallet yield information for BTC, ETH, USDT financial products, source: TokenInsight
Wallet Integration with DApps
As of early 2021, there are nearly 6,000 DApps that can be queried, with approximately 643 active DApps and around 140,000 active users [3]. Currently, DApps on the market can be divided into the following seven categories: financial services, exchange markets, prediction games, social software, other games, high-risk investments, and others, with financial services accounting for the largest share. In addition to mainstream public chains like EOS, ETH, and TRON, there are over 30 public chains with DApps, including BSC, HIVE, IOST, and STEEM. The DApp market is becoming increasingly rich, requiring active participation from users.
[3] Data source: DAppReview
As an important entry point for user traffic, wallets integrate various types of DApps in the market, not only lowering the entry and usage thresholds but also providing platforms and traffic support for the scaled development of DApps. Additionally, transactions within DApps can also increase the transaction volume of wallets, enhancing their vitality.
Three DApp integration methods displayed, source: imToken, KCash, Trust Wallet, TokenInsight
Currently, there are mainly three ways for mobile wallets to connect with DApps:
First, through DApp browsers. DApp browsers are generally open Web3 browsers where users can enter URLs to access any DApp. Wallets with DApp browser functionality include imToken, Trust Wallet, Coinbase Wallet, Math Wallet, Bitpie, etc. Among them, imToken's browser interface design allows users to not only input URLs to access DApps but also provides quick access to different DApps listed on public chains; the Math Wallet browser features a Math DApp Store interface that supports access to various decentralized applications and categorizes the integrated applications into DeFi, CeFi, trading, tools, data, etc.
The second method is wallet aggregation of DApps, where user IDs are uniformly managed by the wallet, integrating different types of DApps from various public chains within their wallet app.
In addition to the first two methods, the third method is using WalletConnect to access DApps. WalletConnect serves as a bridge for mobile wallets to connect with Web3 DApps. Since most DApps are based on the Web3.js API, users can interact with the backend blockchain through the frontend web page, but the selection of mobile DApps is relatively limited. WalletConnect enables interaction between mobile wallet users and web-based DApps through QR code scanning.
DApp integration method statistics, source: TokenInsight
TokenInsight compared the DApp browsers of Math Wallet, imToken, AToken, and Kcash, aggregating DApp integration data, as shown in the following figure.
DApp aggregation wallet public chain application proportion statistics, source: TokenInsight
Both Math and imToken browsers have categorized DApp applications across different public chains, including seven types of applications from ETH2.0 staking services to games, communities, etc. Among the 65 public chains integrated by Math Wallet, there are over 400 ETH applications, 175 on EOS, and 98 on TRON, making it the wallet with the richest DApp integration.
DApp aggregation function wallet DApp function classification statistics, source: TokenInsight
AToken also categorizes different public chain applications in its DApp browser. AToken has integrated ETH, EOS, TRON, and TOMO, with Ethereum ETH applications accounting for about 80%, totaling 57 applications, while the rest are fewer than 20. Compared to Math and imToken, AToken has a larger number of public chain integrations, but the overall number of applications is lower than that of Math and imToken.
DApp aggregation function wallet DApp quantity statistics, source: TokenInsight
Similarly, Math Wallet, which also features a DApp browser, does not categorize applications by different public chains but instead adopts a functional classification approach, categorizing integrated applications into DeFi, CeFi, trading, tools, data, etc. After the rapid development in 2020, the DApp ecosystem has shown an unexpectedly high level of activity. The DeFi sector, led by MakerDAO, Compound, and Uniswap, has gradually matured in stablecoins, lending, and exchange segments. Therefore, wallets are also actively laying out in the DeFi hotspots. TokenInsight has compiled the integration status of the top ten hottest DeFi projects by Math, imToken, AToken, and KCash wallets.
Staking Services
Various wallets have been offering diverse staking financial services since 2019. With the launch of Ethereum 2.0 Beacon Chain, the transition from Proof of Work (PoW) to Proof of Stake (PoS) has been realized. In Phase 0, earning rewards through staking has become a focal point in the market.
TokenInsight selected four representative digital wallets for data statistics on staking services. Among the surveyed digital wallets, the annualized staking yield for various cryptocurrencies ranges from less than 1% to over 10%, with an average staking yield of around 6.6%.
Information on digital wallets supporting staking services, source: TokenInsight, statistics as of January 31, 2021
It is worth noting that among the wallets surveyed by TokenInsight, the types and numbers of staking services disclosed on many wallet official websites differ slightly from those actually provided in their apps. Most of the actual offerings have not reached the numbers officially disclosed. In addition to potential risks such as low security of staking services and mining pools, low profit margins for wallets are also one of the reasons hindering the development of staking services.
A certain wallet project revealed to TokenInsight that its existing PoS staking services for over 10 cryptocurrencies have been reduced to 4 due to unappealing profits, and these cryptocurrencies will also be gradually phased out, with staking services potentially being removed from their product line.
Security Dynamics
Key security is the most critical element that wallets need to guarantee for users. The main security risks faced by keys can be divided into three aspects: first, the randomness risk of keys; second, the storage risk of keys; third, the usage risk of keys.
From the perspective of whether there is a correlation between keys, wallets can be divided into nondeterministic wallets and deterministic wallets. In a nondeterministic wallet, each key is independently generated by random numbers, and there is no correlation between the keys, such as Bitcoin Core; in a deterministic wallet, the keys are derived from a master key, which is the key seed. Since the keys in this type of wallet are interrelated, all keys can be found through the key seed, with the most common method being the hierarchical deterministic structure.
Deterministic wallets mainly generate numerous keys from the seed through different standards, and during backup, only the corresponding mnemonic phrase needs to be entered.
Thus, from the first aspect, software wallets need to ensure that their algorithm design guarantees that private keys can generate random numbers in various environments, such as across different browsers, iOS, and Android systems. Secondly, they must ensure that the generated random numbers have a low repetition rate to effectively control the randomness risk of private keys; for hardware wallets, they mainly rely on their secure chips for random number generation. Below is a list of various wallet random number generation methods.
Hardware wallet private key randomness production situation, source: TokenInsight
[4] The Common Criteria (CC) is the result of the International Organization for Standardization unifying various existing criteria and is currently the most comprehensive evaluation criterion. CC divides the evaluation process into two parts: functionality and assurance, with evaluation levels ranging from EAL1 to EAL7, with higher levels indicating higher security. EAL4+ is the basic evaluation level for financial security chips.
The second point, regarding the storage risk of private keys, presents the biggest challenge for wallet technology development teams in creating secure storage solutions that adapt to different operating systems, which include cold-hot isolation, encryption protection (irreversible encryption methods, local data encryption, etc.), and biometric protection (fingerprint recognition, facial recognition, etc.). Additionally, hardware wallets must also consider risks of physical damage to devices caused by external forces, in addition to the risks associated with interacting with the network through QR code scanning, Bluetooth, USB, etc.
Finally, regarding the usage risk of private keys, most transactions require online operations, which exposes them to risks such as HTTPS hijacking or DNS hijacking, making users susceptible to phishing. In the second half of 2020, two phishing incidents involving wallets occurred; due to the leakage of user email data, on October 26, 2020, hardware wallet manufacturer Ledger suffered a phishing attack, resulting in some users losing funds after receiving phishing software emails. This data leak also affected competitor Trezor, which similarly suffered a phishing attack on December 11, 2020, where users received messages indicating that their TREZ0R wallets had been disabled. Due to new KYC regulations, users needed to verify their identities. Security experts have indicated that the Trezor phishing attack appears to originate from the same stolen database from Ledger, showing the same names and numbers, and is unrelated to Trezor.
This indicates that wallets still have numerous unresolved security risks, and as hackers' techniques become increasingly sophisticated, both software and hardware wallets need to enhance development and research on the security of user private keys. Ledger upgraded its software suite "Coin Control" in September 2020 to better protect user privacy and set transfer functions, claiming that this upgrade could help users prevent "dust attacks."
Timeline of Ledger phishing attacks, source: TokenInsight
Industry Voices
"The road ahead for decentralized wallets is still long and full of hope. Decentralized trading platforms like Uniswap have driven the decentralized trading scenarios for wallets. Decentralized finance is a necessity, and financial derivatives will continuously stimulate decentralized wallets to become more convenient."
------AToken CMO Jolish
"The rise of DeFi has changed the landscape of wallet applications. Some wallets have gained many users by introducing support for DeFi, but the most important factors for wallets remain security and ease of use. The impact of institutional entry on the entire industry has been underestimated; it greatly helps build confidence among traditional investors. In the coming years, this industry will carry a massive amount of capital, and there will be more innovations in the DeFi field, especially in DeFi applications on layer two networks."
------Bitfinex Wallet COO Deng Keai
"Adhere to the development of blockchain, innovate cutting-edge blockchain technology, and pay attention to industry risks after bubble growth. In short, projects should continuously improve their capabilities to provide better services for users; users need to be aware of financial risks to avoid losses."
------KCash Founder Zhu Xuejiao
"In 2020, the popularity of DeFi mining has allowed decentralized wallets to regain user scenarios and traffic. The maturity of AMM and DEX allows users to trade directly within decentralized wallets. DeFi will definitely form a trend of migrating to high-performance public chains (or Layer 2), and with this change, we believe that both the user base and application scenarios will undergo significant changes, bringing new opportunities for wallet products."
------Math Wallet CTO Eric Yu
