The expansion of the web3 has brought about a remarkable transformation in the blockchain industry. However, it has also brought to light a significant obstacle: the ability for different blockchains to work together seamlessly.
Fortunately, the web3 community has recognized this problem and come up with a solution known as blockchain bridges
In this article, we'll explore the concept of blockchain bridges, their applications, and the potential risks associated with them.
Blockchain bridges serve as a means of communication between separate blockchains, making it possible to smoothly transfer information and monetary assets from one chain to another.
These bridges play a vital role in enabling compatibility, allowing developers, investors, traders, and other individuals to engage with multiple chains.
The significance of bridges has become increasingly evident in recent times, as demonstrated by the substantial amount of over $9 billion locked in just the top three bridges, as reported by Defi lama statistics.
Blockchain bridges work in a similar way to real-world bridges, acting as connectors between different blockchains.
They use advanced scripts and smart contracts, deployed on different chains, to facilitate the transfer of assets or data. Establishing trust between chains is a challenge, as the receiving chain views the incoming information as external data.
To overcome this, bridges act as verifiers or intermediaries, taking information from the source chain and logging it on the destination chain.
Bridges use different mechanisms, including both trustless and trust-based approaches, depending on their architecture.
Source: https://li.fi/knowledge-hub/bridge-classification/
Trustless bridges: These bridges eliminate the need to trust a central authority, ensuring that the custody of tokens remains with the user during cross-chain transfers. Examples include Hop and Connext, which use atomic swap mechanisms.
Trust-based bridges: In contrast to trustless bridges, trust-based bridges involve a centralized authority taking control of user funds during cross-chain transfers. Examples include the Binance Ethereum Bridge and the Multichain Bridge.
L1 to L1 bridges: These bridges connect Layer 1 chains such as Ethereum, Solana, Avalanche and Algorand. The Wormhole Bridge connecting Ethereum and Solana is an example.
L1/L2 to L2 bridges: These bridges facilitate communication between Layer 1 and Layer 2 chains. The Arbitrum Bridge is an example, connecting Ethereum to the Arbitrum Layer 2 solution.
Bridges use different algorithms to move assets between chains:
Lock and Mint: This approach involves locking tokens on the source chain and simultaneously minting wrapped tokens on the destination chain. The Arbitrum Bridge uses this method.
Burn and Mint: Bridges such as Multichain use this approach, burning tokens on the source chain and minting equivalent tokens on the destination chain.
Enabling Interoperability: Bridges provide users with the ability to transfer assets and data across different protocols and chains, thus promoting interoperability in the web3.
Access to different protocols: Users can use bridges to access a wide range of protocols on different chains, expanding their options and capabilities.
Interoperable dApps: Bridges allow decentralised applications (dApps) to achieve interoperability with other chains, enabling them to leverage different ecosystems and user bases.
While blockchain bridges offer tremendous benefits, they also pose risks and challenges. Some of the key risks include:
Security vulnerabilities: Many bridges have experienced security breaches, resulting in the loss of billions of dollars in assets. The smart contracts used by bridges can be vulnerable to bugs and attacks, making security a paramount concern. For example in the high-profile Wormhole hack over $300 million was stolen, as a result of vulnerabilities in the smart contracts.
Custodial risks: Another risk associated with cross-chain bridges is the potential loss of user funds due to liveness issues. If the custodians or validators responsible for validating cross-chain bridges neglect their duties or fail to maintain the bridges, this can lead to security compromises and delays.
There is still a lot of progress to be made in strengthening smart contracts and developing improved cross-chain bridges that facilitate communication between different blockchains.
The ultimate goal is to achieve complete trustlessness in cross-chain bridges, but this will be a gradual process.
It is clear that interoperability is the future of blockchain technology, and the industry is undoubtedly taking steps in the right direction.
Blockchain bridges are an important solution for achieving interoperability between different blockchains in the web3 space.
They enable the transfer of assets, data and even arbitrary messages across different protocols, allowing users to access different dApps and unlock new opportunities.
The three main benefits of blockchain bridges are a better user experience, improved asset productivity and increased liquidity for dApps.
It's never been easier to create a token. It's a great innovation because you can raise equity very quickly. But as an investor, you have to be careful. This has led to a proliferation of meme coins in recent years, driven by the hype and excitement around them.
Often created as a joke or satire, meme coins have grown in popularity due to their low barriers to entry and the promise of huge returns in a short period of time. However, investing in meme coins is risky and can lead to losses.
In this blog post, we discuss the rise and fall of meme coins, the dangers of investing in them, and how to protect yourself from scams.
Meme coins are cryptocurrencies created for fun, humour or satire. They are often associated with popular internet memes, celebrities or cultural references.
Unlike other cryptocurrencies that have a strong underlying technology or use case, meme coins are created as a joke and have no real-world utility or value.
Meme coins are often launched as a low-cost alternative to popular cryptocurrencies such as Bitcoin or Ethereum, and marketed as a way to make a quick profit.
They typically have no fundamentals, no real use case and no real-world adoption, making them highly speculative investments.
Meme coins have been around for a while, but their popularity has exploded in recent years with the rise of decentralized finance (DeFi).
The success of Dogecoin, which was launched as a joke in 2013, and its subsequent surge in value paved the way for other meme coins to enter the market.
The hype surrounding meme coins often leads to massive price increases, but it is also short-lived. Once the hype dies down, the price of meme coins plummets, leaving many investors with significant losses.
This was recently seen with PEPE, which grew to a market cap of over $1 billion in less than a month, but lost around half its value in just a few days.
Investing in meme coins is risky and experts warn that it can lead to significant losses. Meme coins are highly speculative and lack fundamentals, making them vulnerable to market volatility and manipulation.
In addition, meme coins are often associated with scams, rug pulls and pump-and-dump schemes. Scammers use the hype around meme coins to lure unsuspecting investors into investing their money in fraudulent projects.
Once the price of the meme coin rises, scammers quickly sell off their holdings, leaving investors with worthless coins.
If you are considering investing in meme coins, it is important to do your research and exercise caution. Here are some tips to help you avoid scams:
Recently a Twitter user Loopify shared a video showing how to create a meme coin in just 27 seconds. While the video received a remarkable 11,000 likes, what really stands out is the impressive 15,000 bookmarks. With numbers like these, it seems unlikely that the meme coin trend will die out any time soon.
Meme coins are a risky investment, and they can lead to significant losses. Although meme coins can provide short-term gains, they lack fundamentals and are highly speculative.
In addition, meme coins are often associated with scams, rug pulls and pump-and-dump schemes. Therefore, it is important to do your research, exercise caution and use tools to protect yourself.
Launching a token for your business can be a great way to raise capital, but it's not always the right decision. We've put together some factors to consider before deciding if launching a token is the right way to fund your business.
The first step in determining whether launching a token is right for your business is to assess your funding needs. If you can make a profit and generate revenue on your own, you may not need to raise funds.
For example, if you're a media company, you may not need funding. Instead, your main focus should be on making your business profitable.
However, if you're building a technology platform or product that requires significant investment, launching a token may be an option to consider. You can get funding globally, and it's easier than getting funding through traditional means. But before you start raising capital, make sure you've achieved some form of product-market fit, you've done market research and you understand your customer. You only get one chance to launch a token.
If you already have revenue, you may not need to raise funding. However, if you want to scale faster, you can use a token to raise capital. Before launching a token, make sure you have a strong product or community and a purpose for launching a token. You also need to have a way to create demand for your token so it doesn't inflate away or go to zero, which can damage your brand.
Launching a token involves building with a community (a bunch of internet strangers), which is very different from traditional funding where you answer to a VC or a small number of investors.
Tokenized capital can also be programmable, for example with voting or access rights. Tokens are basically wrappers for some kind of utility on the internet.
Pros
Cons
Pros
Cons
Fungible tokens feel more like equity with monetary governance. Non-fungible tokens can be branded and may have more long-term potential, like branded equity (think of Moonbirds, whose community members change their social media profile picture to Moonbird, which they own). With non-fungible tokens, you can also limit the number of people and have more control over who your investors are.
Creating fungible tokens may also be more difficult because you have to be strategic in developing a healthy tokenomics.
Arbitrum is an example of launching a token the right way. They built a great product that was tested and had a huge community before launching their token. Launching the token supercharged their community and every user and company got a token to use for further funding. This created great network effects.
Launching a token can be a great way to fund your business, but it's not always the right decision. You should consider the type of business, whether you need funding, and whether you have a strong product or community before launching a token. If you decide to launch a token, you need to have a purpose for it and create demand for it. With the right approach, launching a token can bring great network effects and provide the capital you need to grow your business.
Blockchain technology has revolutionized the way we think about data management and security. Some of the most important concepts in the blockchain ecosystem are the mainnet and the testnet. These are two separate networks with different purposes, and understanding them is essential for developers, investors and users alike. In this post, we'll discuss what mainnet and testnet are, their use cases, and answer some of the most common questions people have about these two networks.
Mainnet is the main blockchain network of a particular cryptocurrency or blockchain project. It is the primary network where all transactions and operations are processed and recorded on a permanent ledger. When a blockchain project launches its mainnet, it is considered to be live and fully functional.
The mainnet is designed to be secure, decentralized, and immutable, allowing participants to transact and communicate with each other without the need for intermediaries. Transactions on the mainnet are confirmed by nodes on the network, which are operated by independent individuals and organizations. The mainnet is considered the backbone of a blockchain project, as it represents the full potential of the network and allows users to interact with the blockchain in a real-world environment.
The mainnet is an essential component of blockchain technology, enabling various use cases such as:
A testnet is a blockchain network designed to test the functionality and performance of a blockchain project before it is launched on the mainnet. It is essentially a simulation of the mainnet, where developers can experiment with different features and functionalities without the risk of affecting the main blockchain network.
Testnets are similar to mainnets in terms of functionality, but they use a different cryptocurrency and have no real-world value. Testnets are generally open to the public and developers can use them to test their applications, smart contracts and new features in a sandbox environment.
Testnets have several use cases, including
Wait, there's more? Some blockchain protocols, such as Solana, have both a devnet and a testnet. Devnets and testnets are two separate environments that serve different purposes in the blockchain ecosystem. Solana's devnet acts as a playground for users and developers to experiment with the protocol, while the testnet is used to stress test the performance and stability of the network.
Like the testnet cryptocurrency, devnet coins generally have no real value and can be obtained through mining, faucet services or airdrops. However, you should be careful not to accidentally purchase devnet assets when intending to purchase mainnet assets.
Q: Can I use the same wallet on both mainnet and testnet?
A: No, you cannot use the same wallet on both networks. You need to create separate wallets for each network.
Q: What is the difference between a public and private mainnet?
A: A public mainnet is accessible to anyone, while a private mainnet is only available to select individuals or organizations.
Q: What are the advantages of using testnet?
A: Testnets provide a safe environment for developers to test their applications, experiment with new features, and identify any potential issues before launching on the mainnet.
Q: Can anyone access testnet?
A: Yes, testnets are usually open for public use, and anyone can access them to test their applications and smart contracts.
Q: How can I acquire testnet tokens?
A: Testnet tokens can usually be acquired through a faucet, which is a website that distributes free tokens to users for testing purposes. Some projects may require users to apply for testnet tokens through a form or request process.
Q: Are testnet tokens valuable?
A: Testnet tokens have no real-world value and are solely for testing purposes. They cannot be used to purchase goods or services and cannot be traded on exchanges. However, they can be useful for developers who want to test their applications or smart contracts before deploying them on the mainnet.
In summary, mainnets and testnets play different roles in the blockchain ecosystem, but are equally important. Mainnets enable real-world transactions and dApp operations, while testnets provide a secure and regulated environment for experimentation and testing. Together, they work in harmony to drive the growth and development of blockchain technology.
In February 2023, cryptocurrency exchange giant Coinbase announced a new Optimism-based Ethereum layer two (L2) chain called "Base". It's designed to increase Ethereum's scalability, provide a new option for dApp development, and bring in the next billion users.
In this article, we will explore what Base is, its main features, challenges and opportunities.
Base is a layer 2 blockchain protocol, currently in the testnet phase. It is built on top of Ethereum and designed to improve scalability, security and user experience. Its main innovation lies in the use of 'off-chain' channels, which enable faster and cheaper transactions without sacrificing the security and decentralization of the underlying blockchain.
One of Base's key advantages is its ability to reduce congestion on the Ethereum network by allowing large volumes of transactions to be processed off-chain.
This is achieved through the use of state channels, which are secure, bi-directional communication channels that allow a series of transactions to be executed without the need for each individual transaction to be recorded on the blockchain.
Instead, only the final state of the channel is committed to the Ethereum blockchain, resulting in significant cost savings and faster transaction times.
Base has several notable features. These include:
Base is easy to use and provides simple APIs and toolkits to help developers build anything freely. As the platform offers Ethereum equivalence, developers can implement code without modification.
This makes Base a developer-friendly platform that is secure, scalable and easy to use.
The Base network relies on the security of the Ethereum blockchain, as it operates on a different blockchain layer to L1. The platform ensures the security of users' data by adopting best practices.
Base's security and scalability make it an ideal platform for launching dApps, and it easily interacts with Ethereum L1, the Coinbase ecosystem and other compatible chains.
The Base L2 network has an Ethereum Virtual Machine (EVM) feature that offers EVM equivalence, providing an interactive environment for users.
EVM equivalence makes the Base L2 network more efficient than most EVM-compatible solutions, as it allows for full compatibility with the L1 blockchain. This makes Base a viable solution for executing complex smart contracts.
Base makes the Ethereum network scalable and lowers its cost. By moving transaction processing off-chain, it reduces the gas fee. The platform may move to gasless transactions in the future. Base does not have a separate native token and uses ETH for all native token purposes, so gas fees are paid in ETH.
Initially, the platform is charging a fee similar to most popular L2 solutions such as Optimism or Arbitrum, which is around $0.10-$0.20 per transaction. However, Coinbase is working to reduce this fee to a minimum of $0.01, making it one of the most cost-effective L2 solutions. There is no plan to issue a new network token.
One of the key challenges facing Base is adoption. While the platform offers a number of benefits, it is still relatively new and many developers may be reluctant to switch from established Layer 1 or Layer 2 solutions.
However Base has advantage of established Coinbase ecosystem that can help with that. And that brings us to its opportunity.
Coinbase is one of the largest cryptocurrency platforms in the world, Coinbase's integration with Base gives developers access to a wide range of tools and services, including fiat-to-crypto onramps, offramps and access to over $80 billion in digital assets.
This integration has potential to drive adoption and increase the platform's user base. Base is also launching with dozens of partners who’ve committed to building in and supporting the ecosystem, including Chainlink, Etherscan, and Aave.
Base is an exciting new development in the world of blockchain technology. By using off-chain channels, Base has the potential to significantly improve scalability and reduce transaction fees on the Ethereum network.
While it still faces some challenges, its flexibility, interoperability and developed Coinbase ecosystem make it a promising platform for developers and users alike.
As the blockchain space continues to evolve, it will be interesting to see how Base and other layer 2 blockchain protocols shape the future of decentralized applications and the wider blockchain ecosystem.
Check Base here:
Web3 domain adoption is on the rise and it's having an impact on businesses. Web3 domains are becoming increasingly popular as more and more businesses realize the benefits of using them. They are much more than just an identifier to put in front of a website. It also serves as your brand's web3 identity across the entire web3 ecosystem. You can also use them as:
This gives brands new ways to engage with customers and create unique experiences. By adopting web3 domains, web2 brands can improve customer engagement, create novel marketing campaigns and develop new revenue streams, all under a single name.
The trend towards web3 domain adoption is reminiscent of the early 2000s, when web2 domain adoption skyrocketed from a few million to hundreds of millions by the 2020s. Despite this growth, web3 domains are still in their infancy, with the two largest registries, Unstoppable Domains and Ethereum Name Service (ENS), together hosting 'only' 6 million domains.
It's not just the hype that's driving these companies into the Web3 space. They're starting to realise the new ways they can interact and build closer relationships with their customers.
Fashion icons such as Gucci, Prada, Ralph Lauren, Puma and Nike have already begun experimenting with web3 and many have acquired their own web3 domains.
Other industries are also recognizing the potential of web3 and the metaverse, with the automotive, sports, technology, hospitality and retail sectors all jumping on board.
Celebrities such as Anthony Hopkins, Jimmy Fallon, Jay-Z, Shaquille O'Neal and many more are also extending their personal branding into the world of web3.
Web3 domains offer companies a greater level of control over their brand identity and reputation online.
Web3 domains are a no-brainer for personal or corporate brands.
They signal your web3 knowledge and enable easier brand consistency across the web3 space. All activity is visible on the chain, reinforcing the legitimacy and authenticity of your brand.
So, as more and more companies begin to adopt web3 domains, we can expect to see a continued increase in domain purchases and public reaction to web2 brands entering the web3 space.
If you want to buy an Ethereum Name Service domain, which would be yourname.eth, you will need a web3 wallet like MetaMask with some ETH in it. The price of the domain depends on its length, registration period and gas fee. The cheapest ENS domain and registration for one year would be about 0.011 ETH.
To buy an ENS domain, follow these steps:
Step 1: Open the ENS App by visiting app.ens.domains/. This is where you can buy .ETH domains.
Step 2: Connect your wallet by clicking on the "Connect" button in the top-left corner of the ENS App. You can choose among many leading web3 wallets.
Step 3: Use the search box to find the name you would like to use for your domain (e.g., brandexample.eth).
Step 4: If the name is available, click on the name to select it. If not, repeat the search using the search box at the top of the page.
Step 5: Once you select the available name, consider your plan for this domain before hitting the "Request to Register" button. You can choose your registration period and increase it if you want to commit to the name for a longer period.
Step 6: Wait for one minute, which is the waiting period to ensure no one else is trying to buy the same domain name.
Step 7: Click on the "Register" button and confirm the second transaction in your wallet to complete the ENS domain registration. You can now view your domain under the NFT section of your wallet.
Step 8: If you want to assign your new ENS domain to your wallet you can do it immediately after finishing the seventh step. You will come across the option to "Set As Primary ENS Name". Or you can always access this option by visiting the “My Account” page of the ENS app.
Note: As with regular domains, you will need to renew your registration from time to time. You can enable the ENS notification feature which will notify you by email when your domain is about to expire.
ENS is specific to the Ethereum blockchain, but if you explore, you will also find name services for other blockchains. For example, Bonfida provides a name service for the Solana blockchain.
The primary use of .eth domains is to associate a readable name with a crypto wallet address, making it easier for people to send and receive digital assets securely. But there are more capabilities of ENS domains, which become fully functional when paired with web3 wallets and decentralized storage services like IPFS. These domains can be utilized for various purposes such as banking, billing, hosting, and authentication.
That's it. You are now equipped with all you need to know about web3 domains. You don't have a web3 domain yet? What are you waiting for? Go and get one!
Welcome to our comprehensive guide to the world of crypto wallets. In this article, we'll dive into the fascinating topic of crypto wallets from multiple angles. We'll examine the different types of wallets available, exploring their various features and functions. We'll also address key questions such as how crypto wallets generate revenue, and provide you with practical tips for using them safely and effectively. Finally, we'll take a look at the future of crypto wallets and offer our perspective on what lies ahead. So let's get started from the beginning!
Cryptocurrency wallets store users' public and private keys, while providing an easy-to-use interface for managing digital assets. They also support cryptocurrency transfers via the blockchain. Some wallets even allow users to perform certain actions with their digital assets, such as buying and selling or interacting with decentralized applications.
It is important to remember that cryptocurrency transactions do not involve 'sending' digital assets from one person's mobile phone to another person's mobile phone. When digital assets are sent, a user's private key signs the transaction and sends it to the blockchain network. The network then incorporates the transaction to reflect the updated balance in both the sender's and recipient's address.
The term 'wallet' is therefore somewhat misleading, as crypto wallets don't actually store cryptocurrency in the same way that physical wallets store cash. Instead, they read the public ledger to show a user's balances, and hold the private keys that allow the user to make transactions.
As mentioned above, wallets store two types of keys.
A public key allows users to receive cryptocurrency transactions. It is public and available to everyone in the system.
A user's private key proves ownership of their respective public key. It must be stored separately and kept secret. In simple terms, it can be thought of as a password to a bank account.
There is one more thing about public keys. It is sometimes misinterpreted as a wallet address, but wallet addresses are essentially hashed versions of the public key. Public keys are compressed and shortened to make it easier to send an address.
Example of what keys and address looks like
Crypto wallets fall into several categories. There are 3 main categories that we will talk about in this article.
The main difference between hot and cold wallets is whether they are connected to the internet. Hot wallets are connected to the internet, while cold wallets are kept offline. This means that funds stored in hot wallets are more accessible and therefore easier for hackers to access.
Types of cold wallets:
Types of hot wallets:
Cold wallets are great because of their portability, they are often small, plug-in devices that can be carried around. They are also the most secure type of wallet. One of the drawbacks is the price. They usually cost between $79 (Trezor Model One) and $316 (Ledger Stax). They're also less convenient for transfers, so the best use for them is to keep safe assets that you don't need to access often.
Hot wallets are generally easy to use because they are connected to the internet, so you can easily access your assets from anywhere. Most are also free to use. Security is the main concern with hot wallets as they can be vulnerable to hacking.
These types of wallets are typically offered on centralised cryptocurrency exchanges such as Kraken, Crypto.com and others. They are convenient and easy to use, and are particularly popular with newcomers.
The main thing about custodial wallets is that users do not have full control over their digital assets and the private key needed to sign transactions. They are only held by the exchange or other custodian.
With a wave of centralised exchange scandals, most recently FTX, people are less willing to keep their digital assets in custodial wallets because there is no guarantee they will not lose them. There is a common saying about this - not your keys, not your crypto.
Kraken - custodial wallet
Non-custodial wallets, on the other hand, allow a user to retain full control of their digital assets because the private key is stored locally with the user.
When starting a non-custodial wallet, the user is asked to write down and securely store a list of 12 or 24 randomly generated words, known as a "recovery", "seed" or "mnemonic" phrase. This phrase can be used to generate the user's public and private keys. This acts as a backup or recovery mechanism should the user lose access to their device.
A hardware wallet, often a small plug-in device, is a portable key to securely access your crypto assets from anywhere.
Hardware wallets are considered cold wallets because they isolate your private keys from the Internet, reducing the risk of your assets being compromised in an online attack.
Private keys stored on the hardware wallet are protected by a PIN and optional passphrase. If someone steals your hardware wallet, it's almost impossible for them to extract the keys. The keys are never exposed to the Internet, so they can't be stolen.
If the hardware wallet is lost, the assets are secured with a single seed phrase. A seed phrase, also known as a recovery phrase, is a list of words that will regenerate your private key. The seed phrase can be used to move keys to another hardware wallet.
Most hardware wallets use a protected microcontroller where the chip that connects to the Internet is separate from the chip that stores the private key on the device.
They allow transactions to be physically and manually signed and verified while offline. Physical buttons or touchscreens allow the PIN to be entered, while the on-screen display allows the user to confirm that the address is exactly as desired.
Most have additional security methods such as PIN lock, 2-factor authentication, biometric security and other security procedures.
The most trusted hardware wallets are made by Ledger and Trezor.
Ledger Stax
Browser wallets are built directly into the browser. The main advantage over browser extension wallets is that they are less vulnerable to fake versions of an app, phishing and theft.
Browser wallets are currently offered by Brave, Opera and we understand that Microsoft Edge is working on one.
Brave Browser Wallet
These are browser extensions that you can access using a supported browser such as Chrome, Brave or Opera. The software runs on the browser as a non-custodial wallet, with all your information stored there. Browser extension wallets are usually built for specific blockchains, but there are a few browser extension wallets that support multiple chains (Coinbase, Zerion, Backpack).
Browser extension wallets are excellent for interacting with decentralized applications, decentralized exchanges, NFTs and other decentralized applications.
There are probably the most wallets in this category. To name just a few:
Metamask Browser Extension
Desktop wallets are computer programs that run on a PC or laptop.
They store and manage private keys just like any other wallet, but they often have a few more features than you'll find in other types of wallets.
Each desktop wallet has a different set of features and functions.
Examples of desktop wallets include Exodus or Atomic Wallet.
Exodus Desktop Wallet
Mobile crypto wallets are software programs that secure users' funds and allow them to interact with their crypto holdings using their mobile phone or other internet-connected mobile device.
The main benefit of a mobile wallet is the convenience of taking your crypto spending power with you wherever you go. The apps are generally user-friendly and make it easy to buy, store, exchange, spend or otherwise manage digital assets from a mobile device.
Trust Mobile Wallet
Sending and receiving digital assets is a key feature of crypto wallets. Unlike traditional fiat currencies, you can send crypto to anyone, anywhere in the world.
Most wallets also allow you to buy crypto from their partners. This makes it easy to get new users up and running. They also allow you to exchange tokens for others.
Most wallets offer the flexibility to add multiple accounts. This can be useful for managing different activities such as crypto trading, NFT trading and DeFi investments.
Staking allows you to passively earn rewards for holding crypto assets. A liquidity pool is a collection of crowdsourced cryptocurrency or tokens from which people can lend cryptocurrency and liquidity providers are rewarded for doing so. Some wallets allow you to participate in staking and contribute to liquidity pools directly within the wallet.
You may be wondering how crypto wallets make money. And no, they do not take a cut of the transactions you make.
Most wallets run on affiliates. Because they attract a lot of users and usage, they are able to offer all sorts of features that are nothing more than a way to generate an affiliate commission from third-party services.
The most popular would be the ability to buy or exchange cryptocurrency.
The most basic wallet best practice is to use 3 types of wallets. Hot, cold and what we like to call the YOLO wallet.
If you have more than $1000 in digital assets it is good practice to invest in a hardware (cold wallet). Use a separate hot wallet for daily use with trusted applications and exchanges. If you want to try something new and aren't 100% sure of the security, use the YOLO wallet (another hot wallet), which holds nothing of value and only a small amount of crypto that you can afford to lose.
Store your seed safely and only physically. Somewhere on a piece of paper that you keep at home. The next level is to engrave your seed into a metal plate, which will protect you in the event of a fire. There are even more advanced measures, such as splitting the seed in half and storing it in a couple of safes in two different places. Under no circumstances should you store the seed virtually, online, on a screen or written on a PC, as you could be hacked and lose everything.
Don't search for protocols and projects on Google. Often the first ones you see are a scam pretending to be an official projects. Always go through official social networks. Always check the URL.
Don't click on links sent to you by strangers. Be vigilant, don't trust anyone and consider everything a risk until you have verified it in some way.
Use Chrome extensions like Pocket Universe and the like. Even a simple gasless signature can mean that you activate a private sale of all your NFTs for 0 ETH to a scammer.
There are a number of things that can be improved within the wallets, and we believe they will be in the future.
In the future, there should be better protection of seed phrases. For example, we can see seed phrases being automatically backed up to iCloud when a wallet is created. Another thing is seed recovery. At the moment there is no way to recover seeds, but this will be changed in the future. There has been a new standard ERC-4337 introduced on Ethereum that allows account abstraction and will give wallets similar functionality to bank accounts.
At the moment, wallet addresses are a bit clunky. They are not as easy to use as email. There are options to buy ENS or unstoppable domains that you can assign to your wallet and then you can send cryptocurrency to cleevio.eth instead of 0x..... The problem is that domains have an expiration date and you have to remember to renew them. Wallets could help with this.
The signing transaction is a big mess right now. 99% of people don't know what they're signing because transactions look like code. We need wallets to translate transactions for us so we can be informed, be safe and make better decisions.
Another thing is interactions with DeFi protocols. We imagine that in the future, if we put cryptocurrency into a liquidity pool, for example, the wallet will tell us how much we have there and how much we are earning from it.
In the future, phones could act as hardware wallets. At the hardware level. It would be a lot more convenient. We don't see anybody thinking about it now, Google or Apple are not embracing this technology fast enough. It will probably be someone in the crypto industry who develops such a phone first.
The last feature we are missing in the wallets is notifications and messages. There are a few wallets that offer notifications, but it is far from perfect at the moment. It would be very convenient if we could get notifications about price changes, eligibility for airdrops and so on. We could also see the benefits of sending messages between wallets. Of course, there is a risk of spam and phishing attacks, so this system has to be very well thought out.
As we close this guide, it's clear that the world of crypto wallets is still in its infancy, with new developments and innovations emerging all the time. It remains to be seen whether a single dominant wallet will emerge, or whether users will continue to use multiple wallets for different purposes. What is certain, however, is that the future of crypto wallets is bright and there are exciting developments on the horizon. We hope this guide has provided you with a solid foundation of knowledge to help you navigate the ever-evolving landscape of crypto wallets.
RockawayX, the leading crypto & web3 investment firm, and Dealroom.co, the global startup & venture capital intelligence platform, have produced a State of European Crypto Startups report, which looks at the European state of crypto startups compared to the global market over the past few years. They found interesting trends in investment and we summarised them for you.
Looking from the top, the data shows that the total amount of VC funding in European crypto grew by 14% in 2022, with a total investment of $5.7 billion, and European companies accounted for 20% of total global early-stage startup funding. And while Europe has the largest number of crypto startups, the US still leads in the number of unicorns created.
Source: State of European Crypto Startups report by RockawayX and Dealroom.co
Speaking of unicorns, their creation reached a global peak in 2021. The most notable unicorns created in Europe are Blockchain.com (crypto trending), Bitpanda (crypto broker), Sorare (Web3 gaming / NFT), Copper (institutional crypto custody) and Ledger (hardware wallet).
It's also interesting to note that in 2022, 52% of funding went to companies developing financial products and services, 32% to blockchain infrastructure and the remaining 16% to other Web3 startups. The report also highlights that within crypto financial services, CeFi (centralized finance) companies continue to attract the most funding and DeFi (decentralized finance) projects managed to narrow the funding gap in 2022, growing by 120% year-on-year to reach $1.2 billion in investment. This demonstrates the growing interest in DeFi and the potential for this sector to disrupt traditional financial services.
The report also highlights the growing investment in blockchain infrastructure, led by layer 1s and developer tools. According to the report, funding for blockchain infrastructure is on the rise, with total investment expected to reach $1.8 billion by 2022.
The report also talks about the crypto hubs of Europe. London leads, followed by the fast-emerging Swiss cities of Zug and Zurich, which grew 123% in crypto startup investment. Berlin came third and Paris fourth, while other emerging crypto hotspots include Stockholm, Tallinn and Barcelona.
Source: State of European Crypto Startups report by RockawayX and Dealroom.co
The report also mentions regulation as a key issue for crypto startups. New regulations are being developed in Europe that will set a global standard and address various aspects of crypto-assets, including the offering and marketing of crypto-assets, the issuance of asset-referenced tokens and e-money tokens (stablecoins), the authorisation and operating conditions for crypto-asset service providers, the prevention of market abuse involving crypto-assets, and the role of competent authorities.
The regulation will be implemented by:
The report identifies MiCA as the most significant of these regulations, with 126 articles and more than 350 pages covering a wide range of new European rules. The expected timeline for application is Q1 2023 for publication in the EU Official Journal, and Q1 2024 for application of stablecoin rules / Q3 2024 for other rules.
Although new regulations may provide legal certainty for crypto asset service providers and stablecoin issuers, they may also pose challenges for crypto startups. Compliance with new regulations may be costly and time-consuming for startups, making it difficult for them to compete with established players.
Overall, the report paints a positive picture of the European crypto market and demonstrates the growing interest and investment in the sector. As the industry grows, we can expect to see more investors and companies entering the market and continued growth and innovation in the European crypto space.
To get the full picture, download the report. All credits go to RockawayX and Dealroom.co.
Dubai is at the forefront of digital transformation. It developed its own blockchain strategy in 2016, with the aim of becoming the world's first blockchain-powered city. And with the establishment of the Virtual Asset Regulatory Authority (VARA) in 2022, Dubai offers a mature regulatory framework for the digital asset industry. With its favourable ecosystem, Dubai has become the destination of choice for many crypto startups. Let’s explore why.
Dubai is known for it's appetite for innovation. The city's government has been committed to digital transformation since the announcement of its first ICT strategy in 1999, which led to the creation of several entities such as Dubai Internet City, Dubai E-government and Dubai Smart Government.
In October 2016, Dubai launched a citywide blockchain strategy to become the first blockchain-powered city. The aim was to continuously update traditional processes to ensure efficiency and speed in government-to-consumer and government-to-government services.
Dubai saw the potential of blockchain as a solution that uses open, distributed databases for transactions involving value, whether monetary or any type of digital asset.
Dubai also recognises blockchain technology as the ultimate trust mechanism. Blockchain eliminates the need for trusted third parties in transactions of any asset, an attribute that could significantly help simplify the Dubai government's evolving processes.
Its blockchain strategy is based on three pillars:
Dubai Blockchain Strategy. Source: https://www.digitaldubai.ae/initiatives/blockchain
It is also worth mentioning that there are crypto/blockchain events happening in Dubai almost all the time.
Dubai's Virtual Asset Regulatory Authority (VARA) was launched in Q1 2022 as the world's only independent and dedicated regulator for virtual assets, including cryptocurrencies or tradable digital tokens (NFTs). It aims to address the global money laundering and terrorist financing risks posed by the potential misuse of new technologies.
As the authority responsible for the supervision of virtual assets in Dubai, VARA aims to facilitate the economic stability, investor protection and legal resilience associated with virtual assets.
VARA recently issued new guidelines for virtual asset trading in the city, providing a comprehensive framework for virtual assets based on principles of economic sustainability and cross-border financial security.
Issuance is also a regulated activity under the VARA, allowing consumers to make informed decisions about new tokens being launched in Dubai and the associated obligations of the issuer.
Existing and new virtual asset providers are offered a pathway to full licensing. New services will be required to register with VARA and become fully compliant. Any breach of this condition will be subject to regulatory action.
VARA's regulations have been welcomed by the crypto industry, with some calling it a mature regulatory framework for the digital asset industry. It is also a major counterweight to the US SEC, which has taken an opposing view on crypto and has not issued any guidance to date.
Last but not least Dubai has very favourable tax policies. There is 0% personal income tax and no capital control restrictions. This means that cryptocurrency profits are not taxed in Dubai. This eliminates the need for extensive record keeping and filing.
The regulatory friendliness, activity of the crypto community, number of startups and future importance of the hub all point to Dubai. According to a report by Blockworks, the city boasts over 500 crypto companies operating within its borders and we can clearly see why.
Dubai's favourable ecosystem is starting to beat other crypto hubs such as London, Singapore and San Francisco. If Dubai can fight fraud with its regulations and attract the talent it needs, it has a good chance of emerging on top.
Would you reallocate to Dubai to start your business?
