In the first DeFi section of the 2023 CMC Crypto Playbook series, Trust Wallet lays out the key trends in crypto self-custody moving into 2023.
Note: This information was collected through user surveys conducted with Trust Wallet users.
The end of 2022 has brought the “not your keys, not your coins” movement to the forefront on a scale that crypto has never seen before. As we’ve seen more and more big crypto institutions collapse, halting withdrawals and filing for bankruptcy, crypto users are experiencing the real-time effects of what can happen when you trust your keys to a centralized entity.
While 2022 is ending with the very foundations of the crypto markets shaken, the instability has also given crypto enthusiasts a chance to learn more about the potential benefits of self-custody. How can the crypto space come into 2023 stronger and more knowledgeable, applying the lessons they’ve now learned the hard way about centralized exchanges? Where are crypto traders now going to store their coins?
There are two main takeaways from observing Trust Wallet user behavior.
Takeaway 1: There is a shift from custodial to self-custodial solutions by Trust Wallet users
43% of surveyed Trust Wallet users still store a considerable amount of their crypto holdings on centralized exchanges. However, the remaining 57% of users self-custody most of their assets on Trust Wallet.
Main contributing factors:
Given the recent events in the crypto industry, centralized exchange customers have lost confidence and are taking back control of their cryptocurrency by adopting solutions that allow them to have complete ownership over their assets. This trend is being fueled by the benefits that come with true ownership, and it’s bringing about greater incentives for storing cryptocurrencies in decentralized hot or cold wallets. The aftermath of FTX’s downfall is very unfortunate, but it also highlights why crypto users have more urgency now than ever before to move their funds from centralized exchanges or custodians and into noncustodial wallets where they have full control over their private keys. In fact, Trust Wallet saw a 140% increase in active users in the first few days of the FTX incident and continues to see a week-on-week increase in active users since the incident.
Takeaway 2: New Trust Wallet users are looking to adopt a one-stop-shop wallet solution for all their crypto needs
New users who started using Trust Wallet in 2022 prefer only using one wallet for all their crypto activities. Naturally, wallets with an extensive multi-chain coverage will be in a better position to serve the demands coming from users who are looking for an easy to use solution that enables them to manage their assets across multiple blockchain networks all in one place.
Main contributing factors:
It is clear that the future of crypto is multi-chain. Users do not want to have to manage multiple wallets to be able to interact with different blockchains and have full utility on their assets. On the contrary, they look for seamless wallet experiences that enable them to do that all in one place. They mainly want to store and manage their crypto assets from all the leading blockchain ecosystems. They also want to be able to swap their assets across different chains, connect to DApps on different ecosystems, store and trade NFTs on multiple chains and stake different cryptocurrencies on a single wallet where they can easily track and have visibility on all their assets.
It is clear that there is a fundamental need for self-custody solutions. However, reaching mass adoption requires industry players to collaboratively work together to overcome key challenges. This will ultimately empower everyone’s ownership of digital assets and accessibility to Web3.
This includes delivering a secure and scalable infrastructure that is easy to use. Right now, we are still at the stage where we need to read into the code level, which means that the solution is not there yet. Users need to be relatively crypto-educated in order to be comfortable with self-custodial wallets. As well, in order to further develop the industry, wallet providers should focus their efforts on delivering real user value by enabling cryptocurrency utility in different ways.
Last but not least, we should work closely together as an industry to deliver the right Web3 education. We should focus on education on a larger scale that goes beyond our users — we must take on the challenge of showing the benefits of cryptocurrency to regulators and other stakeholders to empower each other to be able to fulfill the Web3 mission.