The Crypto Wallet Wars Are Heating Up

Anyone who can remember the days of Web 1.0 will likely be able to recall the legendary “Browser Wars” that became synonymous with the dawn of the internet. 

Back then, there was fierce competition among early innovators in the World Wide Web, all vying to become the number one portal to the internet. The Browser Wars went on for years before the dust finally settled. But with the rise of Web3 and the crypto wallet, we have another epic battle on our hands.

Remembering The Browser Wars

It was the open-source Netscape Navigator that launched the first consumer-focused web browser, paving the way for millions to navigate the internet. Despite initially dominating the market, it soon began to lose market share to Microsoft, which leveraged its monopoly of OS space to edge out its rival by packaging its browser with Windows. 

Netscape Navigator’s user base slowly dwindled away, and for a time Internet Explorer was by far the most popular browser, with more than 90% market share. However, the Browser Wars were far from over. 

On the brink of defeat, Netscape decided to join forces with a number of other software organizations and create the Mozilla Foundation, before launching its browser as Mozilla Firefox. Around this time, other browser makers entered the game, such as Opera. A brutal battle ensued, with Microsoft, Mozilla and others competing for the soul of the internet. Slowly but surely, Mozilla Firefox clawed its way up, with its open-source nature and innovative new features like tabs helping it to convince millions of users to switch from IE, breaking Microsoft’s stranglehold. 

But as Mozilla Firefox’s market share peaked at around 30%, the fast-growing search engine giant Google burst onto the scene, with the Chrome browser based on the open-source Chromium project, pushing aside both of its rivals to seize the crown for itself. 

A New Battleground For Web3

Now, as interest in Web3, a new kind of decentralized internet, grows, the Browser Wars is entering a new territory with a totally different set of players. The web browser is widely seen as the gateway to the internet, but with Web3, digital wallets are slowly taking over that role, providing the tools and functions people need to engage with the brave new world of DeFi applications, decentralized autonomous organizations, NFTs and the metaverse. 

Web3 wallets are the main portal for accessing Web3 applications, and already there is one company threatening to establish a monopoly. Just as IE became the default portal to Web1, the MetaMask wallet has emerged as the key to so many decentralized applications. Indeed, numerous DeFi protocols and Web3 dApps have already started to optimize their platforms for MetaMask, which has built up by far the largest share in the market for crypto wallets. 

There’s reason to be concerned by this development, for wallets are one of the most centralized elements of the crypto industry. ConsenSys, the company that owns the codebase for MetaMask, is relying on monopolistic business tactics, combining them with a walled-garden approach that undermines the very ethos of Web3. Having switched its codebase from a free license to a tiered, proprietary license, it grew its user base from just over 500,000 in 2020 to more than 30 million active users as of January 2024. As a result, ConsenSys has earned hundreds of millions of dollars in service fees. 

Innovation shapes the Wallet Wars

MetaMask is in a powerful position, but just like how Firefox emerged to wrest control away from Microsoft in the Browser Wars, it is facing a lot of innovative competitors in the new Wallet Wars. 

One of the biggest rivals to emerge so far is Trust Wallet, which is a smartphone-based crypto wallet that lets users manage their digital assets via their smartphone. It’s packed with easy-to-use features, including QR code scanning, it supports hundreds of different cryptocurrencies and integrates advanced features such as “stake-to-earn” rewards, as well as various third-party dApps to interact with the wider Web3 ecosystem. 

Meanwhile Coinbase Wallet offers an edge over the above wallets thanks to its direct integration with the Coinbase exchange platform. Although user’s accounts on Coinbase are custodial – meaning they’re controlled by Coinbase – Coinbase wallets are non-custodial, so the users have full control of their funds. Its biggest advantage is its built-in swap functionality, which enables users to buy and sell different crypto tokens at the same rates as the main Coinbase exchange. 

Other rivals include desktop wallets like Exodus, which can be installed on user’s PCs. Because the private keys are stored locally on the user’s machine, Exodus claims to offer better security than any mobile crypto wallet. It also supports advanced features such as multi-sig transactions, which require multiple approvals to enhance security, plus compatibility with hardware wallets like Ledger. 

Smart wallets to shake things up

Competition in the Wallet Wars is fierce, but the arrival of Ambire Wallet, which represents a new generation of so-called “smart wallets” could blow the conflict wide open due to the way they alleviate the burden of security from the user. 

With traditional wallets, users are required to safeguard their private keys themselves, and that means there’s no comeback in the event they lose that all-important seed phrase. That’s in stark contrast to the fall backs provided by legacy finance, where you can always access your money by showing a legitimate ID. 

Smart contract-based wallets like Ambire Wallet enable something called “account abstraction”, and include a basic application layer that lives alongside an on-chain smart contract account where the transactions are processed. This combination allows Ambire Wallet to incorporate Web2-style account recovery features that provide a solution to the security headaches of traditional crypto wallets. 

Because the security keys for the wallet are encrypted and stored on the user’s device, Ambire Wallet supports custom signature verification logic, which can utilize the security mechanisms found on smartphones and laptops. This means the wallet can be unlocked with a simple fingerprint scan or face scan. The process is then verified on-chain using smart contract logic, ensuring no unauthorized users can access it, even if they do obtain the seed phrase. It also means users can continue to use Ambire Wallet even if they forget their password. 

Most important of all, Ambire Wallet does all this with taking custody of the user’s funds. Users accounts are under the control of the users only, just as Satoshi Nakamoto envisaged. 

Smart wallets like Ambire Wallet have a long way to go before they can claim victory in the Wallet Wars, but they have a strong advantage, solving the most critical flaw of traditional wallets. With its novel account recovery features, we finally have a wallet that matches the expectations of Web2 users. 

It’s too soon to say if MetaMask will share the fate of Microsoft’s IE, which went from hero to zero in the span of just a few years, but it’s clear that smart wallets can be a gamechanger. They radically simplify the all-important onboarding experience for new crypto users. If Web3 is to achieve its longstanding goal of accumulating its first billion users, it will need the enhanced accessibility that only smart wallets provide.