I mentioned in my previous article (https://x.com/weihaoming/status/1861719980913643966) that OKX has carved out a niche in the on-chain business and established a firm foothold with its on-chain data business + years of resource accumulation + high-quality services. Obviously, the possibility of Binance replicating this is slim at this time, so it needs to find another way.
Judging from the information currently disclosed, Binance Wallet mainly starts from two aspects:
Using MPC Wallet
Prioritize serving Binance’s 200 million+ users
The benefits of MPC wallet are:
1. Private key sharding: Cryptography technology is used to split the private key into multiple "shards", each of which is held by different parties. Each holder only knows his or her part, and the complete private key cannot be derived from any single shard. Even if a shard is stolen, the attacker cannot reconstruct the complete private key, and it can also effectively avoid the occurrence of single point failures.
2. Threshold signature protection: The wallet can complete the signature operation only if the number of private key shards exceeding the threshold agrees. For example, a 3/5 MPC wallet means there are 5 private key shards, but only participants from any 3 shards are needed to generate a valid signature. In this way, even if some devices or nodes fail, users can still perform transactions.
3. Secure recovery mechanism: Even if a shard is lost or some devices are unavailable, the recovery process of the MPC wallet remains secure. Because a single shard cannot derive a complete private key, an attacker cannot directly control the wallet even if they obtain part of the shard. Only shards that meet the threshold requirements can collaborate to generate a signature, avoiding complete loss of wallet control due to the loss of part of the shard.
4. Social recovery mechanism: Some MPC wallets may incorporate a social recovery mechanism, where users can designate trusted contacts or institutions to assist in recovery. If a user loses enough shards, they can request these designated third parties to perform recovery.
After having a brief understanding of the MPC wallet, we can understand what kind of experience Binance's MPC wallet will bring 👇🏻
Binance Wallet will divide the private key into multiple "shards" (here we assume there are 3). First, 1 shard is stored on Binance's server, 1 shard is stored on the user's own device, and 1 shard is placed on a backup server.
When conducting a transaction, normally only two private key shards of Binance and the user are needed to sign. The private key shard of the backup server is mainly used to regenerate a new private key shard for the user through the two private key shards of the Binance server and the backup server when the user accidentally loses or leaks the private key shard.
This greatly improves the security of the wallet and optimizes the user experience in wallet operation. These improvements in user experience will gradually be accepted by its own users, thereby achieving more user conversion rates to complete the cold start.
Comparing the user data, we can see that Binance currently has more than 200 million users. Even if its wallet user conversion rate is only 20%, it can still have more than 40 million users. OKX currently has more than 50 million users, so the gap is still quite large.
Therefore, I think the most important point in the development of Binance Wallet is to improve the user experience. This is also the point that the first version of Binance Wallet has been criticized for.
At this point, I actually have a bold idea. Since Binance Wallet is already one step behind, we might as well use the best technology at the user experience level - "chain abstraction", so as to elevate the user's on-chain experience to a new level.
Compared with the MPC wallet, the chain abstract wallet will be more user-friendly and directly address the pain points of current users in multi-chain interactions.
It will make users no longer need to care about the distribution of wallet assets on multiple chains. This is equivalent to that when users perform on-chain operations, they can directly interact with dApps on different chains without cross-chain and without the concept of asset distribution.
Although the development of chain abstract wallets is still in its early stages, it is still a key tool for Binance to overtake others in the current on-chain market competition🫡.
We can also get a glimpse of the future form of the chain abstract wallet from the tweet video below.
https://x.com/TABASCOweb3/status/1859545315780550749
