Source: blockchain.news
I don’t know about you, but downloading a Web3 wallet and funding it for the first time was a stressful experience. Sending money without trusting some central authority with a familiar logo left me untethered; I refreshed my wallet several times, waiting.
After using it for a few months, I realized that this decentralized wallet was a very different beast from the typical payment apps provided by banks or companies like PayPal. These wallets not only carried my crypto assets, but also my login credentials and transaction history, forming a proto-identity for use throughout the Web3 world.
It seems Web3 wallets are more akin to vehicles, allowing people to navigate the new blockchain-based internet, and one day the brown leather wallet in my back pocket will be as archaic as rotary phones. And pretty cool too: there are so many decentralized finance (DeFi) apps out there that it would be impossible for one person to create a separate account every time, not to mention privacy issues.
Web3 wallets will also work in novel ways. They will satisfy the human need to create an identity around certain ideas and cultures by hosting a personal NFT gallery. Archaeologists have shown that humans have always collected items to augment their social identity, from gemstones to funny hats and tattoos.
So it’s only natural that we’re already seeing wallets being used as the digital equivalent of an NFT scrapbook containing the same kind of meaningful ephemera that humans have always used to create cultural identities. Platforms already exist that allow people to capture media from the internet and convert it into NFTs for their wallets. As this trend unfolds, one can imagine NFTs becoming the metaverse equivalent of piercings, designer outfits, or personalized license plates.
And these new wallet-based identities will allow us to vary our personas online in ways that today’s social media apps can only dream of. Because the wallet ID is just a string of alphanumeric characters, it is possible to change your external identity while the core functionality remains the same, such as changing clothes on the same body.
This is all great for cryptocurrency nerds, but what about the average person who sees no reason to trade in their faded Red Hot Chilli Peppers tour t-shirt for some NFT collectible? And isn’t the process of learning DeFi too esoteric for widespread adoption?
Well, centralized exchanges (CEX) have a solution: the centralized DeFi wallet. These wallets allow users to explore the new world of DeFi in the open and equal way these apps were designed to be, but with features that mimic the old ways of transacting through a trusted third party.
Old habits are hard to die, as they say. Do you remember the strange experience of sending money without using a trusted authority? By using CEX wallets, people who are uncomfortable with the idea of self-custody or don’t want to risk hacking smart contracts can still access the world of Web3 but with their keys stored in their favorite CEX.
Furthermore, the sheer number of DeFi applications is quite overwhelming for the neophyte and even crypto enthusiasts can fall victim to a ruckus from time to time. CEX wallets help mitigate these risks, but audit applications that their wallets may interact with or provide clear warnings and educational material before allowing access to new or riskier protocols.
The launch of CEX wallets is good for the blockchain space as they provide an easy stepping stone in the onboarding process. Most people are not ready to download an app with the image of a fox and YOLO a part of their portfolio in a whole new space.
People around the world are already using digital wallets connected to their bank accounts. By the way. A Juniper Research study has “found that the total number of digital wallet users will exceed 5.2 billion worldwide in 2026, up from 3.4 billion in 2022.” The research predicts that the use of digital wallets will continue to flourish in developing countries, which are considered “cash-heavy.”
This makes the gap between current digital wallets and Web3 offerings already very small. Every day it is easier for people to take the leap and fulfill the promises of Web3 for themselves.
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