MiddleGame Ventures

The way in which Wallets operate varies significantly There are four levers that determine the key characteristics of a Wallet: custody, storage, chain and authentication Each of these levers can be flexed to suit the specific needs of the use case at hand

Key Trends We Are Monitoring

The key trends below should be understood within the broader context of early innovation cycles with large volumes of experimentation and investigation characterised by a vast number of early-stage projects

• Rise of institutional wallets In order for crypto to achieve mainstream adoption, enterprises and institutional players must take part Many initial Wallet offerings are focused on non-custodial solutions for retail customers and therefore do not meet institutional requirements from a security, storage, multi-party authentication and volume perspective We have seen a rise in institutional Wallets that are custodial by design, enabling enterprise players to gain access to crypto and broader Web 3
• 0 exposure There has been increased partnership between Wallets and crypto custodians (e
• g
• , BitGo, Qredo and HexTrust) in order to provide services to multi-billion dollar enterprises
• In order for crypto to achieve mainstream adoption, enterprises and institutional players must take part
• Many initial Wallet offerings are focused on non-custodial solutions for retail customers and therefore do not meet institutional requirements from a security, storage, multi-party authentication and volume perspective
• We have seen a rise in institutional Wallets that are custodial by design, enabling enterprise players to gain access to crypto and broader Web 3
• 0 exposure
• There has been increased partnership between Wallets and crypto custodians (e
• g
• , BitGo, Qredo and HexTrust) in order to provide services to multi-billion dollar enterprises
• Proliferation of wallet types Wallets have developed to reflect the continually evolving use cases and number of blockchain protocols within the ecosystem As a result, we have seen the proliferation of multiple types of Wallets, each designed to optimise for a specific chain, activity or service
• For example, Argent is designed for Ethereum assets, or Yoroi to support Cardano transactions We expect Wallets to evolve to cater to this increasingly decentralised ecosystem, resulting in the development of Wallets for transaction, Wallets for NFTs, Wallets for gaming, Wallets for DeFi etc
• Wallets have developed to reflect the continually evolving use cases and number of blockchain protocols within the ecosystem
• As a result, we have seen the proliferation of multiple types of Wallets, each designed to optimise for a specific chain, activity or service
• For example, Argent is designed for Ethereum assets, or Yoroi to support Cardano transactions
• We expect Wallets to evolve to cater to this increasingly decentralised ecosystem, resulting in the development of Wallets for transaction, Wallets for NFTs, Wallets for gaming, Wallets for DeFi etc
• Simple and frictionless user journeys It can take over 10 ‘clicks’ and require movement between multiple platforms to set up a Wallet or validate a transaction using a private key using current providers
• Cumbersome and long-winded customer journeys result in churn and hinder mainstream engagement There has been a rise in Wallets aiming to extract away these points of friction and provide simple and engaging customer journeys Mobile-first Wallets enable users to set up a Wallet in under five minutes, self-custody their assets without needing to remember a Seed Phrase and apply multi-sig security when needed to improve security and safeguarding of assets
• It can take over 10 ‘clicks’ and require movement between multiple platforms to set up a Wallet or validate a transaction using a private key using current providers
• Cumbersome and long-winded customer journeys result in churn and hinder mainstream engagement
• There has been a rise in Wallets aiming to extract away these points of friction and provide simple and engaging customer journeys
• Mobile-first Wallets enable users to set up a Wallet in under five minutes, self-custody their assets without needing to remember a Seed Phrase and apply multi-sig security when needed to improve security and safeguarding of assets
• Security and key recovery Non-custodial Wallets often require users to remember / store their Seed Phrase and Private Key
• If lost, these critical items are unrecoverable and therefore users lose access to all their digital assets
• The risk around losing access to digital assets acts as a barrier to entry for those new to the Web 3
• 0 space, as well as institutional actors who are responsible for large volumes of assets In a drive to improve usability and access, some Wallets are testing ways in which users can recover their Seed Phrase or Private Key
• For example, users can nominate ‘Guardians’ or trusted individuals who can help them recover or unlock their accounts, as well as provide a secondary signature to increase security (Multi-sig)
• Non-custodial Wallets often require users to remember / store their Seed Phrase and Private Key
• If lost, these critical items are unrecoverable and therefore users lose access to all their digital assets
• The risk around losing access to digital assets acts as a barrier to entry for those new to the Web 3
• 0 space, as well as institutional actors who are responsible for large volumes of assets
• In a drive to improve usability and access, some Wallets are testing ways in which users can recover their Seed Phrase or Private Key
• For example, users can nominate ‘Guardians’ or trusted individuals who can help them recover or unlock their accounts, as well as provide a secondary signature to increase security (Multi-sig)
• Multi-chain as the new standard The proliferation in blockchain protocols has resulted in the rapid growth of Wallets to support those specific protocols
• As a result, Wallets can provide siloed and limited user experiences within one protocol network
• Users are therefore unable to transfer or engage with digital assets or dApps which run on chains not supported by their Wallet of choice We are seeing existing Wallets begin to pivot towards supporting a multi-chain ecosystem with the end goal of ultimately supporting all chains and digital assets built on top of those chains in order to maximise engagement Many Wallets choose to support Ethereum initially, due to a large active user base and volume of assets on chain; however, Wallets are now beginning to integrate with additional protocols
• The proliferation in blockchain protocols has resulted in the rapid growth of Wallets to support those specific protocols
• As a result, Wallets can provide siloed and limited user experiences within one protocol network
• Users are therefore unable to transfer or engage with digital assets or dApps which run on chains not supported by their Wallet of choice
• We are seeing existing Wallets begin to pivot towards supporting a multi-chain ecosystem with the end goal of ultimately supporting all chains and digital assets built on top of those chains in order to maximise engagement
• Many Wallets choose to support Ethereum initially, due to a large active user base and volume of assets on chain; however, Wallets are now beginning to integrate with additional protocols
• The emergence of multi-sig Initially crypto Wallets required a single signature to authorise a transaction and transfer assets to another Wallet
• Single signature authentication of transactions provides limited security and therefore often deters institutional and some retail users who require more bespoke custodial solutions for the safeguarding of their assets Over time we will see the rise of native multi-chain Wallets in order to support the multi-chain ecosystem and optimise for interoperability The rise of multi-sig provides the required security, consensus and enterprise-grade infrastructure for large corporates who hold sizable funds for themselves or on behalf of clients
• Multi-sign also enables the execution of escrow-style transactions whereby a third party can act at the intermediary
• Initially crypto Wallets required a single signature to authorise a transaction and transfer assets to another Wallet
• Single signature authentication of transactions provides limited security and therefore often deters institutional and some retail users who require more bespoke custodial solutions for the safeguarding of their assets
• Over time we will see the rise of native multi-chain Wallets in order to support the multi-chain ecosystem and optimise for interoperability
• The rise of multi-sig provides the required security, consensus and enterprise-grade infrastructure for large corporates who hold sizable funds for themselves or on behalf of clients
• Multi-sign also enables the execution of escrow-style transactions whereby a third party can act at the intermediary In order for wallets to secure their place as the central nervous system of the decentralised finance ecosystem, we will witness a number of key transformations across the end-to-end tech stack

Key future trends include: