Crypto Wallets: How to Survive in This Business Over the Years

The number of cryptocurrency users has recently exceeded 40 million. Despite the recession in the market, people continue to mine, sell and buy tokens. Bitnewstoday has prepared a review on how the cryptocurrency wallet business performs and how “entrance barriers” work today.



Pic. 1. The number of cryptocurrency users
Source: Statista

In the modern financial system, intermediaries are the main source of expenses when sending a payment. Until the money reaches from point A to point B, the sender’s bank, the beneficiary’s bank, the intermediary bank (which sometimes uses the sender’s bank) and the payment system will take a bite from the initial balance.

It may seem that cryptocurrency wallets should work on a similar principle: receive a fixed payment from the transfer. But this is not so as the percentage that part of the crypto wallets collect is the reward of the miners for recording the operation in the ledger while the business model of crypto wallets is completely different. Basically, these are partnership agreements with crypto exchanges and exchange services. As an example, description of the ShapeShift affiliate program is here.

Below, also as an example, you can see the Ledger Nano S wallet software. It has a section that offers options to buy, sell and exchange currency. You can choose from a list of 12 services, the list of top-four is presented:



Pic. 2. Screenshot of Ledger Live software account


Clicking on each of the links clearly demonstrates that the link is affiliate.



Pic. 3. Referral link to BTCDirect

This is called CPA (Cost per action) — the companies agree on what conditions the target company will pay to Ledger. Most often, this is a percentage of the turnover of clients’ funds on the site. The period may be agreed or it may be indefinite. It may happen that a major trader who once followed a link, perhaps without realizing it, provided a crypto wallet with thousands of dollars in profit over the years — because of the commission paid to the service which he visited via the referral link.

The terms of transactions between cryptocurrency owners and partner sites depend on the popularity of both, on the flexibility of domestic policy and on the ability to negotiate. Some users deliberately delete the referral marks in the address bar so that they cannot earn money, but often the sites are arranged in such a way that the link has already been memorized and will be activated, even if you delete extra characters. For those who are worried about this, it’s better not to click on the affiliate links, but directly enter the website address into the browser.

In the crypto world, success largely depends on the ability to present the project and establish contacts with contractors. Partnerships between exchanges, exchangers and cryptocurrency wallets provide brand awareness, which helps to stay afloat and live through difficult times. In addition to affiliate rewards, the income of crypto wallets comes from direct advertising. The wallet, unlike many other projects, is not too demanding on the labor costs after the release.

Fixed costs are covered by several partnerships that attract customers. Since users choose cryptocurrency wallets with a good reputation, new players in the market may have a hard time. Just a few of the users would think of exchanging a reliable Ledger or Trezor for an unnamed product simply because it was released.

Identifying significant vulnerabilities can provoke a transition, but there are none. Old wallets might not support Segwit or cost more than new brands, but the advantages outweigh since the cryptocurrency market is primarily about security. Also, veterans don’t stand still, they carry on fixing bugs and updating software. A couple of recommendations from MarketAcross Account Manager Ronnie LEVI:

“For Bitcoin: Electrum — veteran, community-based, open-source and great wallet, with mobile apps as well (hot wallet and can be cold as well). For multiple cryptocurrencies, including Ethereum: Edge — offers much friendlier UX, supports many coins, is beginner oriented (hot wallet, with a bit less security than Electrum).”‌

As for security, it is best to turn to statistics: the largest thefts happened on exchanges. Satoshi's wallets haven’t been cracked. There is only one conclusion: to control your assets, you cannot trust private keys to anyone. Only cold storage, and there is plenty to choose from. In special cases, it is worth buying a laptop that will have only an HD wallet and which will only connect to the Internet for software installation. So, this is a piece of professional advice from people who have lost everything because of a stupid mistake.

There is much debate about which HD wallet is better and which is not worth installing. Below is a table with the best desktop wallets of 2017 and 2019. Information is compiled from various independent sources.



As you can see, 7 out of 10 wallets stay in the top after two years. The three remaining ones continue to work, and besides, in some ratings, they are in the top, which suggests that the ratings are a matter of opinion. The business model itself can survive turbulent times and stay afloat if there are no security problems. But since HD wallets are considered reliable, new strong manufacturers have appeared in this segment, only increasing competition.

The situation with online wallet security is different. Using them is like playing with fire. The same applies to mobile versions, although they are convenient if you keep the amount to pay for fast food with coffee for a month in advance.Charles PHAN, the CTO of Interdax, comments:

“Samourai is a unique bitcoin wallet for Android mobiles that is focused on protecting your privacy. You can connect the wallet to your own Bitcoin node and has Tor in-built. The wallet also offers its own CoinJoin method known as Whirlpool to obscure your transaction history. There is also support for Reusable Payment Codes, a secure way to receive bitcoin with just one QR code that can be used more than once without affecting your privacy.”

Mobile wallets are a nice opportunity for companies, since the market is not saturated, more competitive, and the user is likely to switch from an uncomfortable wallet to a better one simply because of the low amounts in cryptocurrency. It is better to choose hardware, desktop and even online wallets among reputable brands. The principle is simple: the more capital will be in the wallet, the more attention to its protection.