Unpacking the crypto wallet stack
or, modularization's moving up the stack
Observing the wallet-related discourse of this past year has been equal parts inspiring and amusing. When I started my journey in the crypto space in 2017, wallets were relegated to the (often second class) category of “solvable UX problems”, with much more attention diverted downstream towards the “harder problems” at the protocol layer. Coming from someone who’s worked on real world adoption of crypto-enabled products, this reckoning can’t come soon enough.
Bear market-induced or not, it’s exciting to see the puck start to move towards users. Part and parcel of this shift is a wave of attention on the new, very broad “wallet space”. Everyone seems to be building wallets (or at least talking about them). To me, the missing piece to this discussion is introspection- what are wallets today, how did they get this way, and what do they need to be if we hope for crypto to ever reach real people?
We’re in the midst of a significant unbundling of the wallet space. What, you may ask, is being unbundled here— aren’t wallets their own thing?
How we got here
Let’s have a look at what most standalone wallets do today:
Wallets are an interesting case of dependent evolution alongside blockchains. In the early days of crypto, all you could do was transfer and hold BTC. Wallets were simply a UI with which one could interact with balances and transfers.
Next, we got ERC-20s. So naturally UIs were augmented to support multiple assets and transferring them. This is when we got the first products like Metamask that resemble today’s wallets.
But then..things took a turn for the weird. With the explosions of DeFi and NFTs, we now had several, specialized crypto-aware UIs. And with this explosion in crypto-aware UI surface area, wallets and dApps alike have started to grapple with their newfound identities.
Wallets Today
This has given rise to a few trends:
dapp and vertical-specific wallets; the “wallet-ification” of crypto-aware products
wallets integrating up into protocol-specific functionality that previously lived in apps, be it swaps, NFT purchases, or ENS registrations
Before the dust settled on these movements, a new debate entered the scene: the great MPC vs AA debate.
So now there’s movement in all directions in the application layer, wallets are specializing upward and downward, just in time for a debate on what wallet solution will scale best for mainstream usage.
As a result, every team is now trying to build wider, or repackage what exists into their own products. We’re moving from composability to a land-grab — and users stand to lose. Though wallets and applications are users’ first touch-points into crypto, we’ve positioned ease-of-use and interoperability as diametrically opposed.
What wallets need to be to reach real people
Independent of how one feels about any of the movements mentioned above, a few points may resonate:
None of what we’re building matters if we don’t grow the pie
Without unpacking the layers of the application stack and giving due to all the nuance of this product space, it’s difficult to articulate what missing links are most sorely holding us back.
We need mature, great products built at each of these infra layers to enable true innovation at the app layer. Until this happens, every product will have no choice but to roll their own bespoke, duplicative, and walled-off infra setups.
Instead of re-creating silos in this next phase, we need to build new infrastructure with simplicity AND interoperability at the forefront. This is a false dichotomy — the third element of the equation is focus. Specialization and intentionality have always been the secret to great software, and crypto is no exception. We need mature solutions at all layers of the application stack, and to solve these tradeoffs simply and at their root.
We’re at arguably the most exciting time to build in the crypto space. We can (finally!) move from jack-of-all-trades application building to the emergence of real infrastructure categories that will mature to serve development of real products. It’s about time.
A big thank you to Aditi Sriram, Medha Kothari, Gaby Goldberg, and many others for conversations and writing that this post builds on.
banger