Binance made the announcement that it will be launching its Web3 wallet at the beginning of November. The company said that the wallet would bring an extra billion people to product offerings from Web3. On the other hand, according to Bloomberg, MetaMask, which is the most popular cryptocurrency wallet in the world, has just 21 million active users. Then why would Binance anticipate reaching one billion?
The grounds for making such a bold remark are straightforward: it is a product that Binance offers, it is handy, and there is a possibility that there will be a lot of improvements in the future that will make this wallet similar to Apple Pay in terms of its standardization. Let's jump right in.
How does the Binance Web3 Wallet work?
The Binance Web3 Wallet is a wallet that stores cryptocurrency in a custodial storage facility. In all honesty, if you have ever used a service like MetaMask, TronLink, Trust Wallet, or any other service that is comparable, accessing Binance's wallet will be a snap for you.
It support 38 of the most prominent blockchains, enables token trading through decentralized exchanges (DEXs), and enables cross-chain bridging using Binance Bridge. Additionally, it allows for wire transactions to be made directly from Binance to Web3 Wallet and vice versa.
Therefore, what are the advantages, and why would a centralized exchange such as Binance introduce a wallet that is designed exclusively for decentralized finance?
You are able to use decentralized applications (dApps), such as Uniswap, Aave, Curve Finance, and many more. It is obvious that Binance's goal is to increase the number of users on its BNB Chain.
You have the ability to purchase meme coins before to their registration on any centralized exchange.
This means that you are able to send and receive any token, even if Binance or any other centralized exchange does not currently handle that particular token.
On the other hand, this fantastic functionality comes with a number of severe drawbacks.
First, regardless of what Binance may claim about self-custody, it is a wallet that is held in custody. Using multi-party computation (MPC) technology, the private key that controls your wallet address is divided into shards and saved on your device, in a cloud storage that is secured with a password, and on Binance's servers as well. This ensures that your wallet address is protected during the whole process. You will not even be able to decipher your private key or seed phrase, and you will not be able to back it up on paper in the same way that you can with conventional wallets that do not require custodial services. As is the case with ordinary backups, MPC makes it possible for you to retrieve your wallet in the event that you misplace your smartphone.
Second, in order to use this wallet, you will be required to pass the Know Your Customer (KYC) test. Considering that your Binance Web3 Wallet is connected to your Binance account, the on-chain transactions that you conduct using your "Web3" wallet are not only pseudonymous; rather, they are accompanied with a label that includes your name and surname, in a figurative sense.
Third, although it makes an effort to be the most comprehensive and cutting-edge wallet possible by supporting intricate chains like Axelar and Injective, it does not support Solana, NEAR Protocol, Tezos, and a few other chains that are highly popular. It is possible that the developers are unable to implement all of the chains that are supported by Binance due to technological constraints and deadlines; nonetheless, this circumstance appears to be somewhat peculiar.
The consequences of the compromises are rather severe, as can be shown. This brings up an important question: how can this wallet, which is primarily generic, bring in an additional billion people to Web3? The answers are straightforward: the pool of crypto enthusiasts is small, and the majority of people do not care about any of the aforementioned topics.
It is possible to implement the plan to attract one billion users.
Now, let's talk about MPC that has a storage facility for private keys. Due to the fact that they are accustomed to placing their faith in centralized exchanges, banks, governments, and other institutions, the normies do not worry about self-custody. They are not prepared and are not willing to take care of their keys, and Binance is not compelled to use its wallet rather than Trezor, Bitcoin Client, or any other wallet that we like to use in order to feel secure.
The onboarding process is made easier by multi-party computation. There are no peculiar terms to support, and there are no bottlenecks in the process. Create the wallet, add funds to it, and then farm those three to one hundred percent annual percentage yields on whatever decentralized finance platform you want.
The majority of consumers are accustomed to going through Know Your Customer procedures. On each and every occasion, they are required to provide their identification, and there is no question that they would divulge their personal information to another individual for the very last time. A complicated denial of service strategy or anonymity? They frequently have difficulty with chores such as backing up their seed phrase, and they are inclined to farm or purchase whatever the wallet offers at the moment, even if doing so requires them to disclose their transactions to law enforcement organizations.
It is true that the global ecosystem wallet that does not support some of the top ten chains appears peculiar; however, this is only the case if you are not familiar with the politics and controversies surrounding cryptocurrencies. The blockchains with which Binance has a positive relationship were added to the Web3 wallet, while the remaining chains were left off-board. There is a possibility that the team will add support for Solana (SOL) in the future; however, this is not the case at the moment.
