Will there be new competitors in the plugin wallet market dominated by the little fox? The multi-chain wallet XDEFI plans to challenge

This article is sourced from Chain News, authored by Archon, a member of the Qi Capital Committee, and compiled by Perry Wang.

The outside world has ignited great interest in cryptocurrencies, non-fungible tokens (NFTs), and decentralized applications (DApps) based on blockchain, driving up the valuation of crypto assets and skyrocketing the number of users. Software tools that help users interact with the crypto metaverse and DeFi protocols, particularly trading platforms, wallets, and portfolio tracking tools, have also greatly benefited from this trend.

Web 3.0 wallets have also profited immensely from this growing demand.

Users store their crypto assets in a non-custodial manner, execute transactions on the internet, and interact with various DApps. Consequently, the usage of well-known solutions has surged, such as MetaMask, which reached 5 million monthly active users in April 2021. Meanwhile, some new tools starting from scratch have also raised significant funding.

In this article, we will frequently mention MetaMask, as it is XDEFI wallet's obvious main competitor and is widely used by cryptocurrency enthusiasts.

The Current "Wallet Space" is Not Perfect

Despite the strong growth in adoption, we should still note that most crypto wallets face two major challenges:

• Usability;
• Lack of multi-chain functionality.

The result is a user experience that is quite poor.

For crypto newcomers without prior experience, managing and trading crypto assets can be complex. It involves key management, securely storing recovery phrases, verifying transactions, and so on, but interacting with Web 3.0 and DeFi protocols adds a whole new layer of complexity. Suddenly, users must deal with mysterious issues such as token approvals, ERC20 contract IDs, gas limits, or nonce. Minimizing this complexity without sacrificing security is a very tricky balancing act, and not many wallets do it well.

MetaMask, which is the most widely used wallet on Ethereum (now also including Binance Smart Chain), has been a love-hate relationship for me as a seasoned user who has conducted over 1,000 transactions. I have spent countless hours dealing with various issues that every heavy DeFi user can relate to.

Welcome to the Multi-chain and Cross-chain World

Usability is not the only major challenge we face in multi-chain and cross-chain scenarios.

Although Ethereum dominates the DApp and DeFi space, we have entered a multi-chain world where multiple blockchains exist. Platforms like BSC, Terra, and Solana have gained significant user bases and exhibit some differentiated features. Ethereum's sidechains (like Polygon) and Layer 2 (L2) solutions (like Arbitrum or Optimism) have much to offer but also add more complexity.

So, are we living in a multi-chain world? Yes, but I even believe it can be called a cross-chain world.

Interoperability is one of the most important themes in the blockchain space in 2021, and the reasoning is very sound, as we want our digital assets and collectibles (for example, in the form of NFTs) to be effective and liquid across different blockchains—ideally without intermediaries. This is why projects like THORChain have succeeded, as they allow value to be transferred across multiple different blockchains. Other solutions (blockchains or protocols) attempt to connect at least a few different blockchains together, such as Kava and Sushiswap.

What is XDEFI Wallet

XDEFI Wallet attempts to address the above two issues by focusing on intuitive user experience and managing multiple crypto assets across different blockchains. Furthermore, the XDEFI team firmly believes that the future is a multi-chain world, as emphasized in their statement:

"XDEFI believes that the entire crypto ecosystem will not exist on just one network. Instead, we believe in a multi-chain future. To embrace the emergence of a multi-chain future, we need to build more effective cross-chain infrastructure."

XDEFI Wallet has been in testing, and I am one of the lucky beta testers and holders of a "Golden Ticket" (approximately 500 in total). The ongoing beta testing implements wallet usage at production scale and is driven by an online community where each tester can provide feedback.

XDEFI Wallet will first appear as a browser extension for Chrome and Brave, with other implementations (supporting more browsers, desktop wallets, mobile wallets) likely to follow as adoption increases.

What Makes XDEFI Different?

The XDEFI team focuses on several core use cases around Web 3.0 and cross-chain themes, enabling users to:

• Receive, send, and store digital assets, regardless of their native chain.
• Access any blockchain application.
• Seamlessly switch between protocols.
• Manage multiple parallel accounts and various crypto assets.
• Access native DeFi functionalities.
• Manage and visualize collectibles (NFTs).

XDEFI recently announced their support for visualizing collectibles/NFTs in their wallet.

One of the recent milestones is support for hardware wallets, particularly support for Ledger. I have also noticed that community feedback from the beta testing is continuously reflected in the product in real-time, leading to numerous (mostly UI-related) improvements.

To better understand how XDEFI Wallet works and what it looks like, I will guide you through the basic workflow with selected screenshots. For more detailed information, please refer to the basic guide Part 1 and Part 2.

Installing XDEFI Wallet

Users can now access the XDEFI Wallet website or install XDEFI Wallet from the Chrome Web Store in Google Chrome and Brave browsers.

Wallet Configuration

If you've used other browser wallets, you know you can create a new wallet or import an existing one. During this process, the system will prompt you to set a security password, a secure backup recovery password, and save the key store file.

XDEFI Wallet Configuration

Creating One or More Accounts

XDEFI Wallet allows you to create and manage multiple individually named accounts. Each account has a predefined set of crypto assets (defaulting to BTC, ETH, BNB, LTC, RUNE, BCH), but you can freely decide which specific assets to include and set different asset sets for each account.

Managing multiple cross-chain accounts in parallel

The list of tokens users can add to the wallet is virtually endless, as all ERC20, BEP2 (Binance Chain), and BEP20 (Binance Smart Chain) are supported, many of which can already be searched, while others can be manually added by providing the token contract address.

Interaction Between XDEFI Wallet and Thorswap

What does it look like in practice when interacting with DeFi protocols? Let's take Thorswap as an example; you can simply choose XDEFI Wallet as one of the multiple wallets to connect (since Thorswap is a cross-chain decentralized exchange DEX, you can connect multiple wallets in parallel).

Thorswap natively supports XDEFI Wallet

Now, you only need to connect one multi-chain wallet to use Thorswap to swap native L1 assets (as well as ERC20, BEP2, and BEP20 assets).

Thorswap enables swapping native crypto assets across different blockchains

The Team Behind the Scenes

XDEFI has successfully established a cross-functional and international team across all technological frontiers, operating the project under the leadership of co-founders Emile Dubié and David Phan.

Investors and Investment Institutions

XDEFI Wallet was initially incubated by Thorchain in August 2020 as an important part of its cross-chain ecosystem. Since then, XDEFI has also completed a seed round of financing, with heavyweight institutions and well-known investors such as Delphi Ventures, Mechanism Capital, Alameda Research, Erik Voorhees (Shapeshift), Sebastian Audet and Suhail Gangji (Zapper), and Mark Zeller from Aave participating in the seed round.

Key Success Factors

Several criteria will affect the success of XDEFI Wallet, some of which can be directly influenced by the team, while others depend on external factors. Let's take a look:

• Cross-chain activity will increase: If Bitcoin and Ethereum continue to achieve relatively ideal adoption, cross-chain interoperability and handling multiple crypto assets across different blockchains will become a daily activity for many. Only a few wallets can simultaneously offer this and support Web 3.0.
• Thorchain gains widespread adoption: Thorchain is not only the incubator behind XDEFI Wallet but also one of its main use cases, as almost all activities on Thorchain (such as swapping and providing liquidity) involve transactions across multiple blockchains.
• Competition: MetaMask has incredible influence and strong supporters. If it or other widely used tools, such as Trust Wallet, can significantly improve user experience and provide cross-chain support, XDEFI will feel immense pressure.
• Integration: The usability of any Web 3.0 wallet is closely tied to the underlying protocols and DApps it supports. While you can already use XDEFI as an alternative to MetaMask, its adoption will accelerate if XDEFI Wallet is supported by as many platforms as possible, especially cross-chain. On the other hand, XDEFI can unlock additional growth potential by supporting other blockchains that provide DeFi applications (such as Terra or ICON blockchain).
• User base growth: Clearly, the overall adoption rate of cryptocurrencies and blockchain applications will be a decisive factor in the growth of XDEFI Wallet. If we assume that a peak of new users has already been reached in this cycle, the only way to increase user numbers is by replacing existing solutions.
• Development: XDEFI's greatest advantage (besides marketing and community engagement) is the speed and quality of new features and improvements. Time will tell whether XDEFI should focus on as many on-chain wallet/Web 3.0 features as possible (including desktop and mobile support), or whether the team decides to horizontally expand into adjacent use cases, such as portfolio management (represented by Zapper, ApeBoard) or built-in swaps/trading (represented by TrustWallet, Coinbase Wallet).
• Community building and potential tokens: Currently, XDEFI is very focused on building a loyal community. However, after having a larger user base and higher complexity, can they maintain this spirit?
• Many crypto software platforms and wallets also decide to issue their own tokens, partly to enhance user loyalty. This trend was further propelled in 2020 and 2021, so we speculate that the team may conduct an IDO afterward.

Conclusion

In summary, it is time for a strong competitor to challenge MetaMask in the Web 3.0 wallet market, especially as we enter the cross-chain crypto world. From a user perspective, the impact of this trend cannot be underestimated, as more competition will force market participants to strengthen themselves and focus more on user experience, thereby attracting a broader target market.