Do you know what kind of business model an encrypted wallet is?
Cryptocurrency wallets are usually used as a tool to help users manage cryptocurrency funds (sending and receiving digital assets and public/private key management), focusing on accumulating the number of users and total funds, and most wallets are for users to download for free. This limits their profitability as a business model.
What kind of business model is an encrypted wallet, and how does it make a profit?
First of all, the wallet will not make money by charging user transaction fees, which is different from the centralized exchanges charging fees. The fees incurred by transactions on the wallet are actually network fees, which are paid to the miners.
Starting a business in the Internet field, if revenue has not yet been generated or the revenue is far below the cost paid, the company’s story to the capital must be inseparable from the growth rate, PV/UV, retention rate and other data, and these data ultimately point to “flow”.
Similarly, encrypted wallets also use traffic to attract traditional institutions into the game. Take Blockchain.com as an example. Blockchain.com, an established crypto wallet and transaction provider established in 2011, is in an environment of internal and external troubles. The company’s longest-serving chief operating officer and executive vice president of finance both announced their departure. In 2019 alone, five executives from Blockchain.com have chosen to leave. Although other businesses are not outstanding, 31 million authenticated users and 65 million wallets from more than 200 countries are the confidence that Blockchain.com can obtain huge financing. On the last day of the Chinese New Year holiday in 2021, Blockchain.com announced that it has received US$120 million in financing. Subsequently, in less than a month, Blockchain.com received another 300 million US dollars in financing.
Therefore, in the field of digital currency, flow is also the king.
Sitting on the flow entrance, how to realize the money has become a difficult problem in the crypto wallet industry.
At present, the main profit models of encrypted wallets on the market are mainly divided into Tob and Toc.
Tob ：
1.Undertake the cryptocurrency custody of some large institutions and users with large capital volume, such as the institutional-level custody of MetaMask Enterprise Edition and Cobo wallet custody;
2.Provide financial derivatives services for institutions. For example, BitGo provides digital wallets for institutional customers to help them perform asset portfolio management and loan operations.
3.Accept the advertisement of some projects;
4.Cooperate and integrate with some public chains, etc.
Toc ：
1.Earn handling fees through built-in functions such as OTC, small currency exchange, and integration of Swap, such as Bitpie’s OTC (now closed) and so on. However, in this part of the business, the amount of income varies greatly for different wallets.
2.Provide PoS project staking business, for example, most wallets support wallet users to participate in ETH 2.0 staking after charging a certain fee.
3.Sell hardware wallets. There are also some hardware wallets that are sold at low cost and profit through other channels.
According to Coinbase’s public statements, from 2019 to 2020, its pledge income increased by 5438.38%, and custody income increased by 516.85%. The two businesses contributed approximately US$30 million in revenue to Coinbase in 2020.
In fact, the current wallet development stage is still very young, and the entire industry seems to be waiting for a better time. Whether it is encrypted wallets, exchanges or media organizations, they are interdependent. As long as there are new capital injections, new regulatory regulations, and new cryptocurrency economic development, this industry will have constant opportunities.
Wallets are a basic part of the cryptocurrency economy. Everyone will have a cryptocurrency wallet, just like everyone has a mobile phone and a camera. Cryptocurrency wallets will occupy a considerable share of this industry. They are equivalent to new web browsers or e-mail clients.
