Keeping track of digital assets is hard.
People have digital assets spread between cold wallets, hot wallets or apps, cryptocurrency exchanges and NFT platforms.
Some of these locations are compatible with one another, others have their own walled gardens surrounding them. Unless you're very disciplined with managing your digital assets, very quickly you find your view of your assets is as decentralised as the underlying networks they reside on!
Simplifying the user experience for engaging with Web3 technologies, be that decentralised applications (DApps), DeFi protocols, NFTs or cryptocurrencies are a key obstacle we need to overcome. These challenges are also why I believe centralised gateway services for Web3 will be crucial in the near term.
Whilst decentralised technology and services are a core tenant of Web3, we don't want the end-users having a web of assets to keep track of themselves. We need smart solutions that make their lives better than they are at present.
For digital asset management, specialist cryptocurrency tax software can actually help provide a consolidated view of various holdings across a number of different locations. However, this doesn't seem like the most intuitive way to manage these assets in the long run.
In Web1/Web2 you can access the vast majority of the web products and services built on top of it via a browser. However, when you start using a smartphone things get more complex. You can use a browser, however, most companies would rather you use their own apps to access their services. This has resulted in users installing tens or even hundreds of apps on their phones.
In Web3, you don't have a single network underpinning products and services, you have multiple protocols, each with its own ecosystems on top of them. The web browser equivalent for Web3 is your cryptocurrency wallet. However, each network protocol has its own wallet, resulting in a somewhat segmented ecosystem at present. Some of these need to be used in conjunction with web browsers or are standalone smartphone apps, but it's still less than desirable.
So where do we want to get to? What would be a less clunky experience for users, that provides a more coherent view of their Web3 assets?
A helpful analogy can be to think of Web3 protocols like bank accounts. With a bank, you typically have a balance of one or more currencies spread across a number of accounts.
It's similar to assets held on a blockchain. On the Ethereum network I could hold a number of different tokens as well as its cryptocurrency Ether.
Likewise, on the Solana network I could hold some of its SOL token, and tokens for some of the projects on the network.
However, with a multichain world, things start to get more complex. For instance, if I hold the stable coin USDC, I could hold this on both Ethereum and Solana, or Hedera, or one of the other networks it supports.
I now no longer have a consolidated view of my USDC positions in one place. However, this is no different to where we are right now with bank accounts or investments for that matter — most people have assets spread across a number of different financial custodians.
Where Web3 will shine is the ease with which views of multiple holdings across protocols could easily be aggregated into crypto wallets. Once you have the plumbing in place to query both Ethereum and Solana for instance you can easily build a picture of your overall asset holdings. Such multiple protocol or multi-chain views are likely to become more commonplace as the winners of Web3 start to emerge. There are already platforms for this such as Zerion, but this is definitely going to be a significant growth area.
What makes all of this possible is that these different Web3 networks are built out in the open, with well-understood protocols underpinning them and common standards for use cases such as representing digital assets. Hence access to them is straightforward compared with many of the existing web-based services. Whilst they may be API based, each platform tightly controls access to them and may change them on a whim without considerations for their existing users.
It is no different with NFTs. Due to the standardisation of NFTs across many different blockchains, services will emerge to provide consolidated views of holdings. Imagine if you could see details of digital purchases you've made across different platforms such as iTunes, Amazon or Google Play in one place. NFTs are something that will facilitate this in the future.
So where does this leave the app experience on smartphones? Will we find ourselves even more inundated with apps for working with various Web3 products and services, with duplication of apps due to the different blockchains they each use behind the scene?
For Web3 products services to thrive they need to be simple. The savvy creators of these offerings are aware of the need to make their platforms available on multiple blockchains, DeFi protocols such as USDC and Aave are already multi-chain. If Web3 requires even more apps for users on their phones then Web3 will not be living up to its full potential.
It's likely that cryptocurrency wallets will start to support ever broader ecosystems of Web3 products and services. We're already seeing this with the significant valuations they are achieving and that companies such as Ledger are integrating Web3 products and services onto their platforms.
Hence, whilst many banks have tried, but many have failed to grow the ecosystems significantly with additional services during the era of Web2, it seems likely that the dominant cryptocurrency wallets and custodians of digital assets such as exchanges will not only establish themselves as the banks of Web3, but also be able to build significant ecosystems around their offers that are more akin to app stores for Web3, which is why there is so much to play for right now, and that existing incumbents really should be scrambling to get a foothold in.