Crypto Exchanges and Brokerages Are Shifting to Web 3.0 Wallets; Is Non-Custodial Storage the Future?

The Web 3.0 wave is fast catching up with centralized crypto exchanges and brokerages. In the past two years, there has been a gradual shift to the Decentralized Finance (DeFi) market, with more crypto natives opting for permissionless ecosystems. Today, this industry enjoys a total value locked of $106 billion, a significant growth from $1 billion at the beginning of 2020. 

Following the popularity of the DeFi trend, centralized crypto service providers have started offering products tailored to the Web 3.0 economy. Most notably, there has been an influx of non-custodial wallet services to challenge Metamask’s dominance (currently at 10 million monthly active users). 

On this front, we have the likes of Robinhood, which has announced plans to roll out a Web 3.0 wallet to cater for its growing DeFi community. According to the report by Coindesk, Robinhood’s Web 3.0 wallet will offer a similar utility to that of Metamask, enabling users to stake, lend, buy NFTs and participate in yield farms. 

“We see this new product as a kind of brother for Web 3. We want to give [users] the last piece missing to access the Web 3 space,” said Robinhood’s Chief Technology Officer Johann Kerbrat during a phone interview with Coindesk. 

Meanwhile, Coinbase recently introduced a multiparty computation wallet (MPC). This semi-custodial wallet solution has received mixed sentiments from the market; some DeFi natives believe it’s a great start for the U.S domiciled crypto exchange while others prefer smart wallet infrastructures. 

Which Way to Go for Crypto Custody? 

As far as crypto custody is concerned, the market now features several options, some of which are highlighted in the introduction. However, it is noteworthy that all these existing solutions have both pros and cons. So, which is the best wallet for one store crypto funds? Well, the answer to this question may vary depending on a person’s needs in the crypto market and other factors such as regulatory uncertainties. 

For example, Robinhood’s Web 3.0 wallet serves as a good point of access to the DeFi market but falls short in the non-custodial aspect. This wallet is somewhat exposed to centralization risks, meaning that regulatory pressures on Robinhood could affect the state of users’ DeFi funds. On the other hand, Coinbase’s MPC wallet is not fully non-custodial; users still have to rely on the exchange to recover their funds in the event of a loss. 

Non-custodial Wallets 

By now, most of the crypto enthusiasts have at some point used a non-custodial wallet. In fact, the whales ‘crypto OGs’ are fond of storing their assets in non-custodial wallets – away from the prying eyes of the regulators and taxmen. It comes as no surprise that Metamask enjoys over 10 million MAUs, with the number still growing steadily following the ongoing scrutiny of centralized exchanges by regulators. 

That said, it may not be as simple as it sounds for anyone to startup on Metamask. This wallet is built as a browser extension, making it hard for newbies to setup let alone navigate the DeFi ecosystem. To this end, we have several upcoming alternatives, one of them is the Ambire wallet. The first non-custodial crypto wallet to launch as a web application, featuring email/password registration. 

Unlike Metamask, the Ambire wallet caters for both DeFi newbies and veterans. Crypto users who store funds using this wallet have the autonomy of control and do not have to worry about seed phrase management. More importantly, Ambire supports multiple smart contract networks, including Ethereum, Polygon, Arbitrum, Avalanche and Fantom. This means that DeFi users can initiate cross-swaps while maintaining their funds within the Ambire wallet. 

As we can see, there are quite a number of options for the DeFi heads out there. However, not all of them may be a good fit; it is only prudent for all prospective crypto investors to do a thorough due diligence before deploying funds into any non-custodial wallet. This will help avoid common pitfalls such as being limited to a particular DeFi ecosystem or having to incur high transaction fees. 

Conclusion 

The crypto market may be a relatively new area of investment but one cannot ignore that it is slowly becoming a major asset class. That being the case, crypto custody solutions ought to be given much attention in the next innovation phase. If done right, crypto innovators will have a field day in gaining the confidence of mainstream players and the regulators. Whether custodial or non-custodial, it is only fair for crypto investors to have multiple storage options.  

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