Leading analytical services and experts are convinced that the cryptocurrency market size is expected to grow from $1.6 billion in 2021 to $2.2 billion by 2026, at a CAGR of 7.1%. The transparency of distributed ledger technologies and growth in venture capital investments are the key factors driving the growth of the cryptocurrency market. The effects of the COVID-19 pandemic have had a colossal impact on the cryptocurrency and decentralized markets as a combination of factors have led to a major exodus of users from the traditional economy into the digital assets environment.
The dropping rates of bank interests and the overall downturn in the global economy have resulted in a migration of users into the decentralized economy in search of new earning opportunities, as well as passive income generation instruments. Such an influx of capital and retail, as well as institutional investors onto the market, has resulted in the advent of numerous new instruments and market sectors, Decentralized Finance, or DeFi, in particular. A combination of new tools and revenue generating activities, like mining, liquidity mining, staking, and many others, offer tremendous opportunities to millions of users to migrate into the decentralized industry and capitalize on the services on offer. And that has resulted in the billowing increase in the number of new wallets registered by unique or existing users.
Statista gives clear insights into the growth of the number of active wallets worldwide. The dynamics show a sudden surge in wallet registrations from May of 2019 at 38 million users to around 54 million by September of the next year. The growth in registrations then spiked again, reaching 74 million users by June of 2021. The growth then reached a relative trough and evened out over the ensuing two months, before leveling out at around 75 million to present.
A more recent survey revealed that there are currently anywhere around 75 million blockchain wallet users. The number of blockchain wallet users is expected to further grow in 2021 as mobile accessibility improves rapidly and the attractiveness of the decentralized industry increases among a growing number of people disenchanted by the traditional financial system.
Such widespread use of wallets and the digital currencies stored in the, is leading to the emergence of numerous dedicated programs tailored for managing virtual assets. However, despite having much in common in terms of functions and features, all of the services and repositories in these categories differ in the way they store the assets entrusted to them, and the number of supported tokens.
Among the most popular solutions that are emerging as a result of the market’s growth and increasing demand for digital currencies are the following sector players:
· Desktop wallets as a demanded, convenient and highly versatile application that can be easily integrated into a variety of decentralized or conventional services and used from laptops and even mobile devices for ease of accessibility to digital currencies.
· Hardware wallets as a secure and oftentimes status-defining item, especially for users who hold large volumes of cryptocurrencies as long-term investment portfolios adhering to so-called “HODL” strategies.
· Mobile application-based wallets tailored for users who value on-the-go accessibility and connectivity to various decentralized applications, exchanges, trading platforms, and any other number of services that require instant reaction and payments with round-the-clock support.
· Online storage services with integrated portfolio tracking and many other functions that allow real-time market monitoring and safe storage of digital assets for instant investments in selected projects or coins.
· Cryptocurrency exchange deposits acting as convenient, single-point-of-access wallets for using a variety of services and products provided by their host platforms and ecosystems.
· Mono and multi-currency wallets for storing either specific coins at favorable terms with tailored functionality, or versatile options for adding numerous different assets to a single portfolio.
Such an abundance of service offerings and functionality is stimulating coin-issuing projects and platforms to abandon their mono-currency wallets. Since it is becoming unprofitable and inconvenient for users to access numerous wallets for using a variety of coins, the logical conclusion is to resort to multi-currency wallets that provide a wholesome user experience with easy onboarding procedures, streamlined operations, extensive functionality, and responsive support.
Cryptocurrency wallet security is another major factor that is spurring the development of new and innovative solutions in the decentralized currencies sector. A shining example of the poor degree of security on the decentralized market is the hack of the DeFi Poly Network platform, which took place on the 12th of August 2021. The attackers managed to steal some $600 million in cryptocurrencies from the decentralized finance platform, setting the theft as the biggest in history. Though the platform managed to return about $261 million, the effect had already been made and numerous users were left without funds.
The DeFi market is the most affected by hacks, as statistics indicate that over 75% of all crypto hacks took place within that specific sector of the decentralized economy. CipherTrace states that over $361 million had been stolen from DeFi platforms in 2021, prior to the Poly Network hack, or 2.7 times more than in 2020. Though crypto crime in general is declining compared with previous years, it still totaled $4.5 billion in 2019, $1.9 billion in 2020, and dropped to $681 million in the first seven months of 2021, resulting in significant losses for those affected.
However, despite the problems with security, the biggest drawback of the decentralized wallets market is the limited ability of most of them to work with fiat funds. Crypto wallets cannot receive fiat funds, making their use limited and, effectively, leaving them as a separate class of asset repositories – a factor, which is considerably hampering and slowing the adoption of digital currencies among users who have both little or significant experience in using such assets.
Though some crypto banks offer the opportunity to hold crypto bank cards with support for VISA, MasterCard and other payment systems, the wallets backing such cards are still decentralized at heart and have no integration with fiat channels in a two-way stream. Such wallets can only convert incoming fiat to selected crypto assets, or vice versa, thus making their use as a wholesome currency repository bridging the traditional and digital economies impossible.