Research Summary
The report discusses the strategic positioning of web3 wallets in the saturated crypto market. It presents three frameworks to understand the business aspects of these wallets, focusing on their feature specificity, blockchain ecosystem coverage, and potential for monetization. The report also highlights the role of wallets in the Maximal Extractable Value (MEV) supply chain and the emerging trend of embedded wallets in decentralized applications (dApps).
Key Takeaways
Web3 Wallets: A Strategic Framework
- One Wallet Fits All vs. Niche Master: The report categorizes wallets based on feature specificity and blockchain ecosystem coverage. It identifies four categories: wallets aiming for a “one-size-fits-all” strategy, wallets specializing in specific use cases, wallets with a discernible ecosystem inclination, and ‘niche masters’ focusing on specific features.
- The Wallet Stack: The report presents a layered framework for wallets, including security & key management, chain support, utility, and UI/UX. It emphasizes the strategic implications of each layer, such as onboarding, conversion, monetization, and retention.
- Monetizability and Substitutability: The report evaluates wallets based on the revenue-generating potential and competitive differentiation of their features. It highlights how certain features can generate revenue and create a competitive moat.
Emerging Trends in the Wallet Landscape
- Rise of Embedded Wallets: The report notes the trend of dApps integrating wallet functionalities, shifting from “one wallet for ALL dApps” to “one wallet for EACH dApp.” This could challenge the ‘fat wallet’ thesis and lead to a more fragmented wallet ecosystem.
- Wallets’ Role in MEV Supply Chain: The report underscores the role of wallets in the MEV supply chain, highlighting their influence over the user’s transaction journey. It suggests that wallets could monetize through Payments for Order Flow (PFOF).
Actionable Insights
- Consider the Strategic Positioning: Builders and investors in the wallet space should consider where a wallet sits on the spectrum of ecosystem coverage and feature specificity. They should also assess the wallet’s emphasis on different layers of the wallet stack and the monetizability and substitutability of its features.
- Monitor Emerging Trends: Stakeholders should keep an eye on emerging trends such as the rise of embedded wallets and the role of wallets in the MEV supply chain. These developments could significantly impact the wallet landscape.
