An important battlefield for obtaining wallet share and thought share

A digital wallet is a software structure that imitates a physical wallet and provides the function of storing, using, and categorizing payment tools. The journey of a digital wallet started with payment and evolved into other forms of stubs, such as digital passes, air tickets, and boarding passes. However, encrypted wallets are trying to redefine the digital wallet landscape as more than just the secure storage of payment and encryption tools.

With the development of more than 100 encrypted wallets, this area of ​​the encryption field has become more and more crowded, and has further increased the complexity of the already dispersed blockchain and digital asset space.When I researched this field and tried to understand the complexity of the new blockchain, the first layer protocol decentralized finance (DeFi) and Irreplaceable tokens (NFT) projects are emerging with exponential growth, and I think that as the battle for the first layer agreement finally cools down, encrypted wallets will become the next battlefield. The scale, security, and speed of transaction processing and the core issues of the second-layer protocol have consolidated and transformed into the first-layer advantage, aimed at processing efficiency and security. Encrypted wallets will not only provide a way to get share of the wallet, but also represent the battle for share of ideas.

related: This time is different: when DeFi meets NFT

Today, the software structure provided by most crypto wallets provides the following very basic services in most cases:

  • Store public and private keys;
  • Interact with various first-layer blockchains;
  • Send and receive encrypted assets and cryptocurrencies;
  • Monitor the balance.

Crypto wallets should be more than just better key management

In my opinion, we need to broaden the definition of crypto wallets and treat them as a way to participate in the crypto economy. It can provide wallet holders with a framework of choice for participating in regulated networks that emphasize digital identities and require third-party verification, for example, know your customers.

related: Authorities are seeking to close the gap in uncustodial wallets

At the same time, it can also be part of an emerging network, which maintains anonymity and emphasizes the confidentiality and privacy protection of participants. This selection framework will enable regulatory and compliance dialogue, turning to networks and activities rather than individuals, just like the selection framework provided by our current wallet at the simulation level.

The wallet will be modeled as an extension of our identity structure within the current identity framework, from authoritative agents (such as government-issued IDs) to an evolving digital identity that represents our (credit) history, reputation and incentive-driven history. It will not only promote transparency and good behavior, but also protect privacy. The concept of identity is important because digital identity (now associated with every wallet and every network) is the basic technology that ensures the transaction, trust, and ownership of digital assets.

related: Concerns about data privacy are rising, and blockchain is the solution

The ability of the wallet to control participation and the selection framework that allows users to select wallet attributes will allow flexible design and encourage participation. These wallets have traditionally been containers for all types of asset classes, such as NFTs, DeFi assets, cryptocurrencies, and crypto assets. In addition, they also contain existing payment instruments, stored value accounts and other forms of digital stubs, allowing participation and inclusion through the registration process of existing financial service platforms and current and future blockchain and encrypted economy-driven networks. Registration may involve sharing cryptographic primitives, such as public keys, or providing wallets that are recognized by traditional centralized platforms.

In the age of Web 3.0

The question we should ask is how to design an encrypted wallet, which can be used as a channel The new decentralized internet (Web 3.0) and the entire encryption field, and replace and reform our relationship with current services and institutions.

The new design of these wallets should be able to participate in (encrypted) economic activities-whether it is Web 3.0 or other-for example, file storage, NFT custody, and simply store data or tools, allowing the wallet to be the account container and encryption field for all our income And participation of existing institutions.

related: How NFT, DeFi and Web 3.0 are intertwined

The World Wide Web Consortium (W3C) website payment standards and online payment aim to define technical standards. Although MetaMask is limited to Ethereum (the first layer of protocol), it provides an impressive view of providing a clean way of browser and wallet integration, called a browser. MetaMask has been doing this since the beginning of 2016 and now Define institutional access With MetaMask Institute (MMI). At present, the technical design of the wallet is mainly focused on the one-layer or platform-specific wallet and key management, which is necessary for the durability and long-term growth of Web 3.0. However, using models like MetaMask, wallet supply can become a new business model.

Institutional background and considerations-institutional wallet?

The exponential growth of digital assets and related ecosystems, such as decentralized finance, native encrypted assets and NFTs, has not only triggered large-scale innovations in technology and financial products, but also attracted the attention of many innovators, technicians, and investors. Recently, institutional investors.

related: Despite record Bitcoin outflows, institutions seem to be bullish on cryptocurrencies

Although blockchain, as a distributed ledger infrastructure and transaction processing system, aims to improve the efficiency of dematerialized assets (assets in ledger entries), the emergence of cryptocurrencies and digital assets has changed the pattern and participants, and fundamentally Changes the market infrastructure. Therefore, it makes digital (and encrypted) assets unique and differentiated, not only due to the inherent characteristics of the assets, but also due to changes in the digital (encrypted) asset market infrastructure. Digital (encrypted) assets are usually bearer assets, and claims for these assets are usually managed by public-private key infrastructure. Digital assets are bearer assets, which have an impact on trading and protection, and put forward consideration for institutional asset managers who wish to allocate funds to digital asset funds.

There are also some nuances and considerations in the concept of wallets in the institutional context, including (but not limited to):

  • Know your customer/Know your transaction Require.
  • Asset allocation and token deployment.
  • Interactions with encrypted hosting services and service providers.
  • Collateral management and lending.
  • Liquidity management and financial considerations.

Different from traditional finance with unique institutional market infrastructure, professional asset classes, dematerialized assets, licensing gate control standards, etc.-the core structure of digital assets, such as DeFi tokens, tradable NFTs, and cryptocurrencies First layer protocol Wait—there is no significant difference between institutional investors. Traditional financial dematerialized assets, centralized securities depository (CSD), mortgage loans, and transaction models are different in DeFi and other emerging asset classes. The issuance and emergence of institutional-level custody solutions, digital asset trading desks, etc., apply systematic traditional financial tools and risk models to tame the fast-growing technology and the crypto-economy-led ecosystem.

From an institutional perspective, the problem is scale, risk, and consistency with traditional organizational control and governance.For example, the institutional situation surrounding digital asset custody is similar to traditional services if The custodian bank actually owns the financial assets on behalf of the customer. However, despite the similarity in concept, the practice of digital asset custody requires a lot of consideration in technical design. It is also necessary to pay attention to business and transaction considerations such as liquidity, capital and collateral management, and deepen the understanding of the evolving regulatory and compliance framework for digital assets, which may represent different asset classes.

Applying a traditional financial perspective will not only increase costs, but also put institutional investors at a disadvantage. This provides a reason to use wallets in an institutional environment to resolve the nuances discussed earlier.

Perhaps DeFi’s impact on traditional business models, liquidity (capital adequacy ratio) and funds, and related services provided to fund managers and managers may drive the design of institutional wallet requirements from “institutional custody” of core assets to “deployment points”. Payment points” and distribution. “This changes the perspective and focus of institutional custody, and expands institutional wallets to provide channels for distribution instructions to crypto capital deployment and participation instructions. Automated Market Maker (AMM) Interface with liquidity pools and “custodial” long assets.

related: The rise of DEX robots: AMM promotes the industrial revolution in the trading field

Again, this is the most important question we should ask: How to design an encrypted wallet to become a channel for Web 3.0 and the entire encryption field, and replace and reform our relationship with current services and institutions? The promise of encrypted assets will only be realized with their use, circulation and speed, but if we create a market structure that only imitates or replicates the existing system, what problem do we solve?

I think that as the battle for the first layer agreement finally cools down, encrypted wallets will become the next battleground. Due to core issues such as the scale, security and speed of transaction processing, as well as the integration and transformation of the second-layer protocol, the first-layer advantage aims to deal with efficiency and security. Encrypted wallets will not only provide a way to get share of the wallet, but also represent the battle for share of ideas.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Niding Gower He is the founder and director of the IBM Digital Asset Lab, where he designs industry standards and use cases, and is committed to making enterprise blockchain a reality. He previously served as the CTO of IBM World Wire and IBM Mobile Payments and Enterprise Mobile Solutions, and founded IBM Blockchain Labs, where he led the work of establishing blockchain practices for enterprises. Gaur is also an IBM Distinguished Engineer and IBM Master Inventor, with a rich patent portfolio. In addition, he also serves as the research and portfolio manager of Portal Asset Management, a multi-manager fund specializing in digital assets and DeFi investment strategies.