Binance, one of the world’s largest cryptocurrency exchanges, has unveiled its Web3 wallet to cater to the growing decentralized finance (DeFi) ecosystem. The wallet, designed for use across 30 different blockchain networks, aims to provide users with more control over their financial activities in the decentralized world. The announcement came during the Binance Blockchain Week conference held in Istanbul, where the exchange’s CEO, Changpeng ‘CZ’ Zhao, emphasized the significance of Web3 wallets.
Web3 wallets extend beyond simply storing digital assets; they play a fundamental role in the Web3 framework, enabling individuals to have greater control over their financial operations in a self-sovereign manner, according to CZ Zhao. The Binance Web3 wallet now enters the competitive landscape occupied by established names like MetaMask and Trust Wallet, the latter of which Binance acquired in 2018.
Binance’s decision to create a futures market for Trust Wallet’s native token (TWT) recently saw a 7% drop in TWT’s price following the announcement.
Other leading centralized exchanges, including Coinbase and OKX, have also ventured into the realm of Web3 wallets to cater to the needs of DeFi enthusiasts. Binance users will have the opportunity to create a Web3 wallet directly through the exchange’s mobile app. Furthermore, the mobile app will serve as a platform for engaging in various DeFi activities, such as staking, lending, and borrowing.
An important yet unresolved question is whether users will be required to undergo a know-your-customer (KYC) process to create their wallets. The necessity of KYC procedures in the crypto space remains a topic of debate, and different platforms apply varying policies.
Enhancing Security with Multi-Party Computation (MPC)
One of the significant concerns associated with Web3 wallets is their susceptibility to security breaches. If a hacker obtains a user’s private key, it can lead to irreversible loss of funds. In an effort to enhance security without compromising user-friendliness, Binance has turned to multi-party computation (MPC).
MPC eliminates the need for users to memorize seed phrases while maintaining the advantages of security and self-custody. With MPC, a private key is divided into three parts called key shares. The wallet owner controls two of these key shares, while the remaining key share is managed by Binance. This approach minimizes the risk associated with single points of failure while providing robust security measures.
Interestingly, the decentralized cryptocurrency exchange HootDex is reported to be developing an MPC self-custody wallet that will facilitate cross-chain integration, enabling users to securely hold digital assets and trade across various platforms. HootDex’s security protocols are designed to protect users from potential exploits and breaches.
Web3 wallets are gaining traction as users seek more control and flexibility in the rapidly evolving world of DeFi. As the demand for secure and user-friendly wallets increases, the integration of MPC technology and similar security enhancements is likely to play a vital role in ensuring the safety and integrity of these platforms.
While the Binance Web3 wallet has now entered the market, the competition is expected to drive continuous innovation and improvements in security and usability in the world of Web3 wallets.