#BNB
Abstract
Digital wallets are core tools in the Web3 world, not only serving as carriers for managing crypto assets but also as passports for users entering the blockchain world. This article provides a systematic and forward-looking research report through an in-depth exploration of the functions, historical evolution, security, and future development trends of digital wallets. The full text is divided into seven parts, including basic definitions of wallets, historical evolution, core functions, security analysis, common scams, and future outlook.
1. Wallets: Key Bridge from Web2 to Web3
1. What is a digital wallet?
Digital wallets (Crypto Wallets) are tools for users to manage crypto assets and interact with blockchains in the Web3 world. Unlike traditional 'wallets', digital wallets are not just for storing assets but also carry functions for user identity verification and interaction with decentralized applications (DApps). They are essential tools in the Web3 world, equivalent to 'health codes' in the blockchain world; without wallets, users cannot enter Web3.
Digital wallets can be likened to 'Alipay' in the Web3 world. However, unlike Alipay:
Anonymity: Wallets can be created without ID cards or phone numbers.
Decentralization: Wallets are driven by blockchain technology and are almost impossible to manipulate artificially.
Asset ownership: Assets in the wallet fully belong to the user, not the custodial institution.
Irrecoverability: If the private key is lost, it cannot be retrieved; security relies on the user themselves.
2. The importance of wallets
The emergence of wallets has lowered the usage threshold of blockchain, allowing more people to participate in the Web3 world. Early blockchain wallets were complex to operate, requiring synchronization of the entire blockchain ledger, which could only be used by tech-savvy users. With the advent of mobile wallets, ordinary users can easily manage crypto assets.
According to surveys, there are still 1.7 billion people globally without bank accounts, and digital wallets can provide these individuals with barrier-free financial services, granting them equal economic rights. The popularization of wallets not only brings more users but also promotes the prosperity of the Web3 ecosystem.
3. What would the Web3 world be like without wallets?
Without digital wallets, the development of Web3 would be severely limited. Just as early computers were difficult to popularize due to their large size and complexity, blockchain technology also needs to lower the usage threshold to attract users. The existence of wallets is the cornerstone of the development of the Web3 ecosystem. If wallets are not simple and easy to use, the popularization of the Web3 world will be out of the question.
2. The evolution of wallets: From accounting tools to multi-scenario service platforms
1. Wallet 1.0 Era: Accounting Tools (2009-2013)
In 2009, the Bitcoin mainnet officially went live, and blockchain technology began to operate. Wallets at this time only had simple transfer and accounting functions, mainly used to record Bitcoin transaction history. The first Bitcoin wallet developed by Satoshi Nakamoto was a desktop application that was complex to operate, with very few users.
2. Wallet 2.0 Era: The Smart Contract Era (2014-2018)
In 2014, the birth of Ethereum marked the beginning of the Blockchain 2.0 era. The emergence of smart contracts expanded blockchain from simple accounting functions to supporting decentralized applications (DApps). Wallets were also upgraded to not only support transfer functions but also interact with smart contracts. During this period, the blockchain ecosystem began to diversify, accompanied by a large number of air coins and scams.
3. Wallet 3.0 Era: The multi-scenario era (2018-present)
As the blockchain ecosystem expands, Ethereum’s performance bottlenecks are gradually becoming apparent, with high Gas fees and transaction congestion prompting the emergence of high-performance public chains and Layer 2 solutions. Wallets have also entered a multi-scenario era, gradually supporting multi-chain asset management and cross-chain interactions. Modern wallets are not only tools for managing crypto assets but also integrate functions such as trading, socializing, and information, becoming comprehensive platforms for users to explore the Web3 world.
3. Cryptography and Wallet Generation: Technical Principles and Security
1. The principle of wallet generation
The core of a wallet lies in the private key. The process of generating a wallet involves using cryptographic algorithms to generate a private key, from which the public key and wallet address are derived. The private key is akin to an account password; possessing the private key means having control over the wallet.
2. The security of private keys
The difficulty of breaking a private key is extremely high. Taking Bitcoin as an example, its private key's possibility space is (2^{256}), even using supercomputers for brute force cracking would require thousands of years. Therefore, under current technological levels, the security of private keys is guaranteed.
3. The introduction of mnemonic phrases
Due to the difficulty of remembering private keys, wallets have introduced mnemonic phrases as another form of private key representation. Mnemonic phrases typically consist of 12 or 24 words, making them easier to record and save. However, the exposure of mnemonic phrases can also lead to asset theft, so they need to be securely stored.
4. Core Functions of Wallets: Multi-functional Tools in the Crypto World
1. Asset management and visualization
Wallets enable visual management of crypto assets on the blockchain. Users can view asset balances, transaction histories, and perform transfers and receipts through the wallet interface.
2. Interaction with blockchain applications
Wallets are key tools for users to interact with DApps. Interaction methods include:
Identity verification (signature): used for off-chain operations, requiring no Gas fee.
Smart contract interaction: used for on-chain operations, requiring payment of Gas fee.
3. A new paradigm for identity verification
In the Web3 world, wallets are not only tools for asset management but also carriers of identity. Users can achieve decentralized identity (DID) authentication through wallets, freeing themselves from dependence on centralized authorities. In the future, wallet-based identity systems may change the operational model of social relationships.
5. Asset security and wallet selection: How to protect your wealth?
1. Custodial wallets and non-custodial wallets
Custodial wallets: Private keys are managed by third-party institutions; users only have usage rights, with lower security.
Non-custodial wallets: Private keys are kept by users themselves, with the highest security but higher usage thresholds.
Hybrid custodial wallets: Private keys are jointly managed by users and service providers, with moderate security and convenience.
2. Cold wallets and hot wallets
Cold wallets: Private keys are not connected to the internet, suitable for long-term storage of large assets.
Hot wallets: Private keys are connected to the internet, suitable for daily high-frequency trading.
3. Risks of centralized exchange wallets
Although centralized exchange wallets have the highest number of users, they have the lowest security. Users' assets are actually controlled by the exchange; if the exchange misappropriates funds or declares bankruptcy, user assets may be unrecoverable.
6. Dark Forest: Analysis of Common Wallet Scams
Authorization phishing scam: stealing user authorizations through counterfeit DApps.
Clipboard virus trap: tampering with the wallet address copied by the user.
Signature scam: exploiting user signature permissions to steal assets.
NFT airdrop scam: inducing users to interact with malicious contracts.
Deliberate private key leak scam: stealing by exploiting users' greed.
7. Future outlook: The development trends of wallets
1. Lowering the threshold for use
The user experience of wallets will continue to be optimized to attract more non-technical users. Seamless operation and multi-language support may become key focuses in future wallet design.
2. Identity and privacy protection
Decentralized identity (DID) technology will further develop, and wallets may become the core tools for users to manage digital identities and privacy.
3. Cross-chain and multi-functional integration
Future wallets will support the management and interaction of assets across more blockchain networks, becoming a unified entry point for users to explore multi-chain ecosystems.
4. The popularization of hardware wallets
As users' awareness of asset security increases, hardware wallets may become the mainstream choice.
Conclusion
Digital wallets are not only passports for the Web3 world but also key tools for users to interact with blockchain. With continuous technological advancements and ongoing ecological development, the functions and application scenarios of wallets will become richer. In the future, wallets are expected to become the first stop for every user entering the Web3 world, laying the foundation for the popularization and application of blockchain technology.
