Earlier this month, game engine maker Unity introduced a new "Decentralization" page to its Asset Store with 13 "Verified Solutions" meant to "support developers interested in technology that enables decentralization in gaming." Featured in this list were products from MetaMask, Aikon, and Nefta, all of which provide developers and end users with secure identity and fund management tools. This move was not only a vote of confidence for blockchain-powered technology, but also a reminder that, in the web3 world, everything starts with the wallet.

In crypto parlance, a wallet stores a user's public (the wallet address) and private keys and enables them to access and manage their assets. Wallets come in various shapes and sizes, spanning software (or "hot") and hardware (or "cold") wallets – plus custodial (where a user's private keys are stored by a third party) and non-custodial wallets (which don’t store those keys, leaving the onus of security in the hands of the end user).

As their name indicates, wallets were originally only meant to hold, access, and use funds. But over time, and as new use cases popped up for blockchain technology, the range of their capabilities has kept growing. Today, the wallet is the primary way users interface with web3: it "simultaneously represents your identity, carries value, provides access, and saves memorabilia.” It's your passport, your inventory, and the digital shelf to display and curate the things you love.

When it comes to gaming, these functionalities unlock exciting new use cases. By looking into players' interactions with smart contracts, a developer can assess what other games the player has been playing, and on which chains. By browsing their belongings, developers can filter players and open certain quests or areas of their games only to those who meet specific criteria. For example, Guild lets teams create composable membership requirements using granular "logic gates" (e.g. an NFT's attribute or minimum token ownership). Data portability is similarly important, since the much-touted promise of interoperability only makes sense if a user is able to port their assets, rankings, and achievements across games and game platforms. 

While wallets certainly matter in gaming, it’s fair to say that gaming should matter to wallet providers, too. DappRadar and BGA’s report found a 60% increase in Unique Active Wallets (UAW) involved with web3 games last year; on-chain game transactions were up 37% from 2021, and a whopping 3,260% from 2020. Overall, gaming accounted for almost 50% of all on-chain activity in 2022, making it hard to ignore for the many teams now trying to identify the most relevant use cases for their web3 offerings.

Here, we’ll take a look at the handful of wallet companies building with gaming in mind today, identify the industry’s main areas of focus, and suggest where to look next to make the most of the wallet’s potential.

The State of Wallets

As the hub for virtually every web3 interaction, the wallet needs to be adamantly secure and reliable; one small mistake and users’ funds everywhere may be siphoned for good. This largely explains why developers have been relying on generic solutions for their stacks rather than starting from scratch: owning the player experience with a branded solution just isn’t worth the reputational and financial risk.

But things are starting to change, as multiple providers are now taking on gaming with greater focus. As of recently, MetaMask is the preferred wallet to use on HyperPlay, the Game7-backed game launcher that launched in alpha earlier this month. In January, ImmutableX, the NFT & gaming-focused L2, announced Passport, an all-in-one toolkit due to launch in April that will consist of a non-custodial wallet, gamer profile, and authentication solution for “instant wallet onboarding.” In July last year, Justin Kan’s gaming-focused NFT marketplace Fractal introduced “Sign-in with Fractal,” which lets players create a wallet using only their Google account.

Below are the wallets that are most uniquely focused on supporting gaming today:

Plenty of others (for example WalletConnect and TrustWallet) continue to be used for that use case, but since they haven’t signaled any particular focus on gaming, we won’t be looking at them here.

Now, let’s take a look at some of the trends at play in the category: multichain adoption, security, and UX.

Multichain Expansion

As noted in our joint report with Delphi Digital, one notable trend last year has been the adoption of a multichain approach by both game developers and wallet providers. This is driven by several factors.

First, the growth of L2s like Polygon, ImmutableX, and Arbitrum —  and of L1s such as Solana and Avalanche — continues to expand the realm of possibilities for all stakeholders. DeFi Kingdoms, which originally debuted on Harmony One in August 2021, has since expanded onto its own Avalanche subnet (in April 2022) and to the Klaytn network (in December), while the Treasure ecosystem continues to grow on Arbitrum. Second, new chains continue to enter the market: Oasys, for example, has managed to attract established web2 publishers from Sega to Square Enix and from Ubisoft to Gree. For developers, this trend brings the promise of a greater addressable player base and vastly more liquidity.

This presents wallet developers with strong incentives to support multiple ecosystems. In January, MetaMask launched the beta of an in-app bridge aggregator. In November, Phantom added support for Ethereum mainnet and Polygon. The more chains they integrate with, the more opportunities developers will have to monetize through features like swaps, staking, and purchases. 

Security

Security remains a major concern, with good reason, as an already long history of contract failures, hacks, and phishing has made developers and users alike increasingly risk-aware. Gaming hasn't been immune, as evidenced by the infamous Ronin hack that struck Axie developer Sky Mavis in May 2022.

To date, wallet providers have addressed the issue in two main ways. One of them has to do with UI and, more specifically, readability. In its natural form, the instructions contained in a blockchain transaction come as a blob of code, a format that may be a computer's dream but undeniably obscures the meaning of a transaction for, you know, human users. By decoding this data into various fields (e.g. "tokenIn," recipient, etc.), solutions like MetaMask's Transaction Insights make it more readily understandable by all, limiting the risk of making costly mistakes.

Another approach has been through dedicated features. For example, Phantom lets users safely burn unwanted NFTs, a response to the pervading issue of NFT spam. It also runs and constantly updates its own blocklist to protect users against the hundreds of fraudulent websites trying to phish them on a daily basis.

Both methods are now seconded by external tools that sit on top of the wallet infrastructure as another layer of security for end users: Harpie (an "on-chain firewall") and Blowfish, which flags malicious contracts before a user interacts with them, are good examples of this promising category.

All this may understandably seem like overkill for gaming. After all, the sums at play are likely to be smaller than in DeFi, where money-making is the goal. But fund safety shouldn’t have to be proportional to an individual’s capital or what they’re doing with it. Malicious contracts (unfortunately!) exist in games the same way they do in others segments, and we should urge game developers to equip themselves and protect their users like the rest of the industry.

User Experience

User Experience (UX) has long been a topic of contention in web3, and the wallet category happens to be representative of some of the space’s most enduring debates. Should friction be considered part of the journey or be eliminated entirely? Should developers adopt web2's legacy solutions or build only off web3's more revolutionary capabilities? Wallet providers are now trying to answer these questions in tangible ways across several areas. 

A major focus is player onboarding. Today, getting to play a web3 game requires a new user to first download a browser extension, create a wallet, and store their private keys safely. This process alone represents considerable friction and can understandably deter aspiring players from joining a game, or web3 in its entirety. To solve this issue, providers like Fractal (Sign-In With Fractal), ImmutableX (Passport), Venly and others are making the most of web2’s existing solutions like email- & social-based sign-in and recoverable passwords to ease players into web3.

Other features could be described as “quality of life” improvements. For example, Horizon Games’ wallet solution Sequence lets game developers “sponsor” transactions so they remain gasless (in other words, free) for players. Given gaming’s visual nature, a NFT-gallery also feels like a low-hanging fruit for any gaming-focused provider — notably, MetaMask still doesn’t have one.

Last but not least, one aspect of UX has to do with the device, and the features that it enables. Until recently, browser-only distribution saw sufficient traction, since most crypto offerings weren't originally built with mobile users in mind anyway. In this world, the wallet is a standalone extension that players have to open and fill every time they need to sign a transaction to change the blockchain state.

While intempestive pop-ups may soon be a problem of the past, it’s getting increasingly hard to picture a truly mainstream future for web3 if its primary entry point lives only on PC. This feels especially true for gaming, of which mobile represented 50% of the total market in 2022, according to Newzoo. For this reason, we expect cross-device expansion to be a key driver in UX innovation. For example, developers could leverage built-in Two-Factor Authentication (2FA for short), OS notifications, and scrolling mechanics for NFT viewing (more on this in the next section!). The fact that NFTs would constitute native in-app purchases when bought on mobile should also decrease friction.

Ultimately, we can only hope that complexity continues to fade into the background and wallets become easier to use. Friction isn’t a “right of passage”; it only takes away from players’ ability to spend time in their favorite games, rather than bridging across chains, filling pop-up signature requests, and other tedious tasks. Abstracting away both the web3 lingo and the most tedious mechanics behind it feels like an important goal to build toward.

What’s Next for Wallets?

As gaming solidifies its place as a major use case, today’s one-size-fits-all approach is likely to feel increasingly limiting to players. This could create opportunities for new players to unbundle the wallet into specific product experiences in order to serve clearly defined user personas.

Before such a more vertical landscape materializes, there are several areas that could serve as a product wedge to win players’ hearts.

Communications

There are two aspects to communications in gaming. At the core of the experience are, of course, player-to-player comms: whether they come as text (e.g. World of Warcraft) or audio (Fortnite), whether they're about collaborating or bragging, these make playing more social, and thus more engaging and exciting. But developers communicate with players too: email, DMs, chat, and push notifications are routinely used to share important game updates, live events, or account-related information.

By contrast, the current state of web3 seems pretty quiet. First, games that natively include voice chat (or any kind of chat at all) are still few and far between. Second, when it comes to developer-to-player communications, the wallet is often the only touchpoint a developer has at its disposal to reach a player. While there's plenty of insights that can be drawn from it, it also makes "communication" mostly transactional, by way of purchases, transfers, and airdrops.

Several companies are now tackling this problem with a range of wallet-based communication methods. For example, connecting users’ wallets to their social accounts means Venly enables “NFT2EMAIL,” a convenient way for developers to keep players up to date with new mints. Metalink’s standalone app lets users link up with fellow collectors based on their NFT holdings. XMTP offers event-based mobile notifications at the OS layer, and one-to-many broadcast and direct messaging in-app. All these channels represent promising ways for game developers to make their games more engaging.

Commerce

Web3 enabled-commerce has seen significant traction outside of gaming, with consumer brands such as Nike, Starbucks, and Adidas leading the way. Building off NFT ownership, these companies are leveraging mechanics such as token-gating and airdrops to engage and reward their communities. Importantly, they're developing their own branded destinations (.SWOOSH for Nike, Odyssey for Starbucks) for an end-to-end buying experience.

Blockchain gaming would certainly benefit from this sort of integration. Today, gaming NFTs are exchanged either on generic marketplaces like OpenSea or on title-specific ones like those offered by Axie Infinity or Vulcan Forged. Either way, the actual buying and selling happen outside the wallet, which only serves to hold assets and sign transactions. But what if users could instead browse collections, trade, and don new attire and accessories, all from their wallets? With more and more providers integrating built-in galleries, the wallet could turn from an inventory into a fully-fledged wardrobe — or thrift store.

The Wallet as a Playzone

Can the wallet itself be the place where play happens? Some projects have entertained this possibility. One of them is The Worm, a "Share to Mint" NFT that's "on a mission to visit every wallet on the Ethereum blockchain." When a user shares The Worm, it leaves behind a numbered Hologram (a non-transferable copy of itself) that marks the wallet as having had The Worm and makes it a member of “The Church of the Worm.”

Although The Worm isn’t a game per se, it’s definitely fun. Importantly, it makes use of the blockchain’s unique features in clever ways, by turning transactions, NFTs, and soul-bound tokens into simple yet playful mechanics that can all be completed from a central UI that most participants in web3 have at the ready. Granted, most games will never live in the wallet, but experiments such as The Worm are an invitation for developers to think bigger about what this tool can do and be. If the wallet itself can be a playzone, we’ll all have all the more reasons to spend time in it.

Parting Words

That web3 gaming was able to grow so much in the past few years, when developers and players had only generic solutions to turn to, is encouraging. If the current pace of innovation can be maintained, we’re confident we’ll see many more dedicated solutions very soon. Adoption, retention, and, yes, enjoyment, all depend on it.

For now, game developers looking to leverage the wallet’s unique capabilities in their games have serious options to consider. As the industry’s pioneer, MetaMask has both distribution and trust, but still lacks even an NFT gallery. Meanwhile, smaller players such as Sequence and Fractal bring to the table various features across security and ease of use that are worth exploring. We’re also excited to see where Immutable’s Passport toolkit goes from here. At the end of the day, it’s about making life easier for players.

Our takeaways:

• The wallet is just as central to gaming as it is to the rest of web3. As a player’s blockchain-native inventory and passport, it unlocks promising mechanics for developers.
• Despite growing competition in the category, gaming remains the focus of only a handful of products. Removing existing friction all across the player journey will be key to onboarding the next wave of casual players.
• Introducing new features like built-in communications and commerce may help specialized wallet providers stand out to win players’ hearts. 

In any case, the wallet offers plenty of room for experimentation, so we urge the industry to make the most of it. 

A big thanks to Maxime Eyraud for writing this essay! If Naavik can be of help as you build or fund games, please reach out.