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WEB3 Cryptocurrency Wallet Development — What Trends you Shout Know?

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Yuri Musienko
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Web3-wallet development doesn't stand still. Every year there are new technologies and practices that are making these applications better and better. In this article we will talk about such technologies and practices - 10 trends you need to know and consider when developing your WEB3 Wallet for cryptocurrency, smart contracts, Dapps, DeFi, GameFi and NFT.

Security enhancement

Cybercrime is perhaps the biggest problem in the world of cryptocurrency, blockchain and Web3. Hackers stole $1.3 billion from cryptocurrency exchanges, various DeFi platforms and individuals in the first three months of 2022 alone, according to research by Schainalicious. The largest number of hackers' victims is from DeFi - 97% of all crypto stolen in the first quarter of 2022 was taken from DeFi protocols, up from 72% in 2021 and 30% in 2020. Moreover, the biggest thefts are usually the result of security breaches and bugs in the code.

Volume of hacking losses in the cryptocurrency, blockchain and Web3 market

Volume of hacking losses in the cryptocurrency, blockchain and Web3 market

Cryptocurrency wallets have also become hacked more frequently. In August, hackers managed to steal $8 million in SOL and USDC tokens. According to Elliptic experts, the problem is apparently related to a bug in the code of the Slope hot cryptocurrency wallet (Phantom and Trust Wallet may also have been compromised). Another recent example is the hacking of the "most trusted" cryptocurrency wallet Trezor One. An American engineer, Joe Grand, hacked it to help the wallet's owner to recover $2 million stored on the device.

Based on this, it is safe to assume that all Web3-wallet developers in the future will pay more attention to their security. And this applies both to the protection of the wallet itself (the application that the user uses) and the protection of that wallet's web platform. Furthermore, developers will probably implement additional protection measures, which would help to keep tokens and users' data in case of hacking by third-party services (cryptocurrency exchanges, smart contracts, bridges, etc.).

GameFi area development

The second major trend in Web3 wallet design will be the development of integrations with GameFi. GameFi (a combination of Game and Finance) are blockchain-based games and non-exchangeable tokens (NFTs) operating on the play-to-earn (P2E, play and earn) model. Such projects have become very popular in the last two years and this market is only expected to grow: from $8.9 billion in 2021 to $74 billion by 2031 at a CAGR of 23.7%.

GameFi market statistics for August 2022.

GameFi market statistics for August 2022

AAA games will be the main growth drivers for GameFi. Illuvium, Guilt of Guardians, Star Atlas, Ember Sword, Otherside (a game from publishers Bored Ape Yacht Club, CryptoPunks and Meebits), as well as many other projects will be released by the end of 2022 or early 2023. Together with Decentraland, Axie Infinity and The Sandbox, which have already launched, they will greatly increase interest in the market - once teens realize that they can make money playing their favorite game, GameFi will be unstoppable.

When that happens, cryptocurrency Web3-wallet developers will start adding integrations with GameFi projects en masse - from buying and selling in-game money to smart escrow contracts that will enable players to exchange their NFTs from one video game for the NFTs of another game project quickly and securely. In addition, we are also likely to see integration of cryptocurrencies with platforms such as GameJolt, Origin, Epic Games Store, GameJolt, Google Stadia Twitch and maybe even Steam.

Enhancing DeFi regulation

The next trend, which is almost 100% likely to affect the development of cryptocurrency wallets is the strengthening of pressure regulation by regulators and other government agencies. The United States, the United Kingdom, the European Union, Japan, China and many other countries have already announced stricter regulations on the cryptocurrency market. These have either already introduced or planning to introduce new laws and accounting regulations that will oblige all market participants to disclose more data about their activities, as well as strengthen controls over compliance with anti-money laundering, anti-terrorist financing and sanctions enforcement rules.

This would imply for developers of cryptocurrency Web projects mandatory KYC/AIM practices and expanded functions responsible for collecting company and user data. In addition, it may also involve a ban on integration with anonymous tokens and mixers (such as Tornado Cash) allowing to hide details about the amount and transaction counterparties.

How countries treat cryptocurrencies by August 2020

How countries treat cryptocurrencies by August 2020

Privacy data protection

Another defining trend in Web3 is data ownership and privacy. In the past and now, our personal data is centrally stored and controlled by large technology companies such as Google, Facebook and Amazon. That not only leads to constant leaks and identity theft but also violates users' privacy rights to own and dispose of their data, from Instagram photos to online shopping data.

We can already see this trend at the legislative level, for example in the European Union (General Data Protection Regulation, or GDPR) and at the app development level (Apple allowed to prohibit data collection by apps in iOS). Therefore, there is no doubt that cryptocurrency wallet developers will also add these features. At least if they intend to operate in the U.S., Canada, EU, UK, Japan and China jurisdictions.

In other words, data privacy is becoming more and more important to users and developers will be responding to this challenge by creating products that will give more control over their users' personal data. It includes the following features:

  • Tracking the data that the site/application generates.
  • Ability to prohibit the collection of personal data by the user.
  • Ability to decide independently who collects personal data and which ones.
  • The ability to monetize personal data.
  • Possibility to delete personal data.
  • Other things.

Improving the users' experience

As more people become interested in cryptocurrency, there will be a growing demand for products/services that are easy to understand and use. This will create some tension in the market because cryptocurrencies and other blockchain projects are still difficult to use - people often need some training to interact with tokens, DeFi, NFT and other Web3 technologies. In the future, this will have to change.

The design and navigation should become easier and closer to the design of applications in the traditional financial marketplace - buying and selling cryptocurrency must be as easy as transferring money in online banking and PayPal. In addition, the cryptocurrency vocabulary also needs changing - the outside user shouldn't have to learn new terms such as mining, yield farming, stealing, etc., because each new term reduces the target audience's reach.

Perfectly Web3-wallets for cryptocurrencies have to be as simple and easy to handle as Mint, Amazon, SHEIN, Alibaba, Walmart, that we are used to.

Integration of Web2- and Web3-platforms

This year, I expect the major centralized Web2 players to integrate with decentralized Web3 platforms. We are already seeing the beginning of this process in Twitter, which recently introduced NFT profile images and integration with OpenSea. In PayPal, where they added the ability to buy, sell and transfer cryptocurrencies through a mobile app. Also Walmart, which has not only added the ability to buy goods for crypto but also actively integrates blockchain technology into its business processes and supply chain.

We are going to see much more of these integrations in the future, for example:

  • Retailers and online stores will add support for cryptocurrencies.
  • Subscription services such as Netflix, Spotify, Xbox Game Pass and others will also let their users pay in cryptocurrency.
  • States will accept Bitcoin as the second official currency in the country (as El Salvador or the Central African Republic have done). In addition, states will also make it possible to pay taxes, fees and licenses in crypto.
Besides that, we can also expect blockchain integration into social networks to continue, e.g. to use virtual currency for payments, Web3-wallets for authorization, NFT for selling pictures (avatars, backgrounds, emoji, etc.). In the future, we can expect social networks to stop "taking away" rights to published content from users and allow them to manage their content through blockchain, smart contracts, NFT and cryptocurrencies.

Introducing Artificial Intelligence

Artificial intelligence Midjourney, which drew a picture called Théâtre D'opéra Spatial, won in an artist competition in Colorado, it can be trained to create NFTs or even design applications.
Artificial intelligence Midjourney, which drew a picture called Théâtre D'opéra Spatial, won in an artist competition in Colorado, it can be trained to create NFTs or even design applications
Artificial Intelligence (AI), Machine Learning (ML) and Artificial Neural Networks (ANN) are also going to play a big role in the development of Web 3.0. These technologies are already used extensively in search engines, translators, recommendation systems, image recognition solutions, business process automation, etc. But in the future, AI will become even more pervasive and integrated into our lives. Web3-wallet developers will have to take this into account.

Here are a few examples of how you can use AI in Web3 wallets:

  • Writing cryptocurrency wallet application code. AI is already helping to test and optimize application code. AI solutions are also being tested to write program code from scratch.
  • Using chatbots and digital assistants. You've probably come across or heard of Alexa and Siri. These artificial intelligence chatbots are getting more and more sophisticated; over time, they will become even more realistic and be able to perform more complicated tasks, from buying crypto upon your order to managing personal finances.
  • Generation of new NFTs in your wallet. The most popular and expensive NFTs collections (Bored Ape Yacht Club, CryptoPunks) are AI-generated pictures. What prevents adding an AI capability to generate NFTs to Web3-wallet so that users can create rather than buy NFTs? As the Colorado fine art contest shows, AI can paint beautiful pictures as well as professional artists.
  • AI on the security watchdog. Here's another thing with which artificial intelligence can help. It can be trained to look for "holes" in wallet protection, detect suspicious activity, block hacker attacks in real time, looking for the source of a hacker attack and so on.

Ricardian smart contracts

The Ricardian type of contract was invented by Jan Grigg in 1996. The idea behind it is that there are two contracts - one in a text format that will look like a regular contract and the other will be a digital version that only humans can read. That is to say, a Ricardian contract puts the defining elements of a legal agreement into a format that can be expressed and executed in software code (a smart contract).

smart contracts vs ricardian

Despite being revolutionary, the concept was not widely used when it was first presented because the technology at the time simply did not allow the concept to be put into practice. However, this is not a problem anymore. Thanks to the advent of blockchain technology, which seems to have everything to make full use of this idea.

In the context of blockchain technology, a Ricardian contract is a special kind of smart contract that is written as a textual agreement and can be read by humans and machines alike.

A Ricardian smart contract has many advantages:

  • If there is any discrepancy or disagreement in the reading, counterparties can take such a contract to court, which is almost impossible with a conventional blockchain-based smart contract.
  • A Ricardian contract would be understandable to ordinary people without any knowledge of programming or blockchain. They will be able to both read it and create as if it was an ordinary textual legal document.
  • Ricardian contracts can integrate blockchain and smart contracts features into ordinary legal agreements, resulting in greater transparency, lower costs and faster dispute resolution.

The Environmental Agenda

One of the main obstacles to the bright future of blockchain is the enormous amount of electricity it uses. Bitcoin and other PoW blockchains require too many resources to operate properly and therefore leave a carbon footprint that is too large and thus aggravate the world's ecology. That is why a lot of people and organizations are against the mass adoption of Bitcoin. For example, in 2021 Elon Musk, the CEO of Tesla, even announced that the company would not accept Bitcoin because it is against greenhouse gas pollution.

Given the growing importance of the eco-trend, the world of blockchain and cryptocurrencies will have to respond to this demand. For example, by abandoning PoW blockchains and related Web3 applications. Which could become not just a private initiative of users and developers, but also a legal norm: in early 2022, Eric Teden, vice chairman of the European Securities and Markets Authority (ESMA), proposed to completely ban energy-intensive mining based on the Proof-of-Work mechanism.

Another way is to switch from Proof-of-Work to Proof-of-Stake, as the Ethereum blockchain network plans to do in late 2022 or early 2023, for example. This would free up huge amounts of capacity reserved for PoW-mining, thereby reducing the Earth's carbon footprint.

Compare the power consumption of PoW and PoS networks

Compare the power consumption of PoW and PoS networks

Another possible way is to direct PoW computation to useful purposes, such as finding cures for cancer, deciphering some meaningful data sets or at least weather forecasting.

Low-code and no-code

The latest trend that will affect Web3 cryptocurrency development is the development of websites and applications using low-code and no-code. Low-code is the creation of software with minimal coding, while no-code is the development of websites and applications without any coding. Instead of traditional "high" coding to create interface or software logic, a drag-n-drop graphical interface is used which allows software to be created quickly and easily by matching function "blocks" from a pre-defined set of templates - like LEGO bricks.

In recent years, low-code and no-code are gaining popularity due to the fact that there are not enough ordinary developers for all and their costs are constantly growing: in 2021 the global shortage of programmers exceeded 40 million qualified specialists and it is expected that by 2030 their deficit will increase to 85 million. Against this background, development of not so "smart" application quickly and for small money is a great solution.

In the world of blockchain and cryptocurrencies, low-code and no-code solutions are still scarce and have rather limited capabilities. However, to create a template Web3-wallet, there are enough of them. Here are a few such platforms that you can use when developing your cryptocurrency wallet:

  • A low-code service platform for launching smart contracts and decentralized applications, as well as their deployment in Ethereum Virtual Machine (EVM)-compatible blockchain networks.
  • A toolkit for developing Web3 solutions using modules and minimal coding. Suitable for integrating blockchain into business processes and launching simple Web3 solutions
  • It's a low-code solution tailored for NFT. With Thirdweb artists and other creative people can mint their NFT assets and run related smart contracts and Web3 applications.
  • This project has two tools: DappStarter, a development environment for blockchain: Hyperverse, a tool for creating simple smart contracts and Dapps as easy as APIs in Web2.

Final Thoughts

In 2022 and 2023 we will not see anything revolutionary in the development of cryptocurrency wallets and other Web3 solutions. However, it doesn't mean that everything will need to be done as before. Regulatory pressure, the development of artificial intelligence, the demand for sustainability, Ricardian contracts and other trends will have a rather strong impact on blockchain development and these are trends you should know and consider when launching your own cryptocurrency wallet.

Merehead does professional development of Web3 cryptocurrency wallet development. If you have questions, contact us for a free consultation.

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