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Why do traditional institutions invest in crypto wallets?
项目动态 2021年07月27日 16:05
The imagination of the wallet is not what it used to be.

In the first half of 2021, a total of 404 companies in the cryptocurrency space raised $7.271 billion. Nine crypto wallet companies raised $863 million, well above the industry average. The crypto wallet industry has become one of the most lucrative sectors in the cryptocurrency space outside of trading platforms. According to public data, 10 crypto-wallet related companies raised a total of $872 million in 2021. One of the largest was a $380 million Series C round by Ledger, a maker of crypto hardware wallets. At the time, it was the second-largest single fundraising in the cryptocurrency industry, behind Bitmain's $400 million fundraising in 2018.


The list of institutions involved in the crypto wallet industry fundraising includes traditional fintech-focused investment institutions. However, few of these institutions have invested in DeFi, which is more aligned with their field of focus. It has to be curious why traditional institutions like to invest in crypto wallet.


What is an encrypted wallet


According to whether it can be connected to the Internet, encrypted wallet can be divided into cold wallet, hot wallet, cold wallet can be divided into hardware wallet, paper wallet and so on according to the different storage medium, hot wallet can also be divided into mobile wallet, web wallet and so on according to the tools of networking; According to whether the encryption wallet is on the chain, it can be divided into decentralized wallet and centralized wallet. In addition, encrypted wallets can also be divided according to the public chain ecology, whether hosted, and so on.




After years of development, the threshold of crypto wallet technology is gradually lowered, and a crypto wallet product has been able to complete many functions. For example, hot wallet can be added to support offline creation, and cold wallet can be created when the network is disconnected. Mai Mai Wallet, a decentralized crypto wallet that just received a $12 million round B funding from Binance Labs in December 2020, has supported more than 60 public chains, while imToken, which also received a $30 million round B funding this year, has supported 12 public chains.


Therefore, for investment institutions, through the crypto wallet simple category division is not significant.


What is the business model of crypto wallet?


If you're starting a business in the Internet space and you're not generating revenue or you're generating much less than what you're paying for, you're telling your story to capital with growth rates, PV/UV, retention rates, etc., which all point to "traffic."


Similarly, encrypted wallets also attract traditional institutions with traffic.


Even before the two fundraising rounds, Blockchain.com, an established crypto wallet and transaction provider founded in 2011, was being questioned about its business model, both within and outside the industry. Liana Douillet Guzman, the longest-serving chief operating officer inside the company, and Chris Lavery, executive vice president of finance, also announced their departures. Blockchain.com has seen five executives leave in 2019 alone.


The rest of the business isn't great, but Blockchain.com has 31 million certified users and 65 million wallets in over 200 countries that allow it to raise a lot of money. On the last day of the 2021 Lunar New Year holiday, Blockchain.com announced a $120 million funding round. Then, in less than a month, Blockchain.com raised another $300 million.


Of course, Blockchain.com is also actively exploring other areas of business. According to CoinMarketCap, Blockchain.com has created a trading platform with a daily turnover of just $13 million. The top 20 trading platforms are all trading more than $1 billion a day.


The flow story is not only being pursued by investment institutions, but also by capital markets.


Opera, a multi-platform web browser founded in 1995, announced on July 24, 2020 that its built-in encrypted money package has reached 170,000 monthly users. The news after six trading days, Opera Group has gained 13.37%.


With traffic entry, how to monetize it has become a problem for crypto wallets.


At present, the main profit model of the crypto wallet in the market is mainly divided into two types: TO B and to C.


To B field:


- Undertake crypto custody for large institutions and users with large funds, such as institutional-level custody for MetaMask Enterprise edition and Cobo Wallet custody;

- Financial derivatives services for institutions, such as BitGo, which provides digital wallets for institutional clients to help with portfolio management and loan operations.

-Accept advertising of some projects;

- Cooperation and integration with some public chains, etc.


It's to C, rather than to B, where most of the money comes from.


To C field:


- Earn commissions through built-in functions such as OTC, small currency exchange, integrated Swap, etc., such as Bette's OTC (now closed), etc. However, this part of the business for different wallets, the amount of income is also larger.

- Offering PoS project Staking, for example, most wallets Staking for a fee support ETH 2.0 Staking.

- Sell hardware wallets. There are also some hardware wallets that are sold at low cost and make money in other ways.


Hardware wallet OneKey selling price and cost


Staking, wheat Wallet, with more than 2 million users, tells me that its main revenue source is Staking and Swap, but good luck with good habits rather than short-term business Staking.


At the moment, we can't get the internal data of the crypto wallet from the open market, but we can refer to Coinbase, which is listed and related to the type of business.


According to Coinbase's public statements, pledge revenue grew 5,438.38% and custody revenue grew 516.85% between 2019 and 2020, contributing about $30 million to Coinbase's revenue in 2020.



Original picture source: Citic Construction Investment


Of course, there are also wallets that choose to set up investment institutions after receiving institutional investment and profit from the investment. After all, wallets with huge amounts of user data may be the ones that best understand what users want. After saying that it would not set up its own investment institution at present, Maze Wallet also agreed with wallet companies to set up their own investment institution, just like Tencent discovered Pinduoduo through wechat and invested in Pinduoduo.


Why do traditional institutions invest less in other areas of cryptocurrencies?


According to CB Insights, in the first half of 2021, a total of 404 companies in the cryptocurrency space raised $7.271 billion. Nine crypto wallet companies raised $863 million, well above the industry average.


Why do most traditional institutions invest less in areas other than wallets when there are more than just wallets to invest in cryptocurrency?


Before answering this question, it is important to consider why investment institutions are not buying bitcoin at $4,000, or even $10,000 or $20,000, but at $30,000 or $40,000.


One important point is that crypto assets are too small compared to other financial markets, both as risk assets and as safe havens. So at $4,000, $10,000, bitcoin's market cap preclates it from being included in portfolios that manage large amounts of capital. When the price of Bitcoin rises to $30,000, bitcoin becomes a mandatory asset (even if it is a small part) for some types of investment, such as when funds tracking the S&P 500 are forced to buy Tesla shares after the index is included.


Similarly, the rest of the cryptocurrency space is still not big enough.


Taking the loan market as an example, the total amount of loans in the entire DeFi sector, including ETH, BSC and Heco, is $23.2 billion. Among them, the largest mortgage lending platform Compound has a total amount of $6.9 billion and a total of 380,000 wallet addresses.


Marcus, an online lending platform launched by Goldman Sachs in 2016, now has $97 billion in deposits and $8 billion in consumer loans, and more than 4 million users in the UK and US. Of course, Marcus is not an appropriate example to compare the DeFi loan market, but it also indirectly illustrates the small coverage of DeFi and the insufficient market scale.


Why do crypto funds choose wallets?


Let's say that traditional institutions only understand the traffic and the small size of the market, so they choose to invest in crypto wallets. So for investors who have been immersed in the cryptocurrency industry for years, why do they choose wallets?


In the cryptocurrency space, crypto wallets are not stand-alone products, but a necessary part of the ecosystem, especially with the rise of DeFi, using decentralized wallets has become a necessary skill.


For investment institutions ploughing cryptocurrency, investing in crypto wallet is more of a 1+1& GT; Investment of 2.


For example, wheat Wallet received A $7.8 million series A+ funding round led by Alameda Research. Six months later, the foundation behind Wheat Wallet announced A $20 million fund to invest in Solana Ecosystem. Both FTX, a trading platform founded by Sam Bankman-Fried, founder of Alameda Research, who invested in Wheat Wallet, and Solana's first seed investor were Chris McCann.

Wallet is DeFi traffic entry, at the same time, wallet is also an integral part of the encryption ecosystem. For example, Solana attracts users with its public chain design, but lacks an easy-to-use wallet software. The Phantom wallet has attracted investment from investors including A16Z and Coinbase.

律动 BlockBeats 提醒,根据银保监会等五部门于 2018 年 8 月发布《关于防范以「虚拟货币」「区块链」名义进行非法集资的风险提示》的文件,请广大公众理性看待区块链,不要盲目相信天花乱坠的承诺,树立正确的货币观念和投资理念,切实提高风险意识;对发现的违法犯罪线索,可积极向有关部门举报反映。




专业区块链研究机构 与资讯平台