YZi Labs takes action, betting twice in seven years, is hardware wallet still a good business?

Author: Web3 Farmer Frank

On June 5, YZi Labs tweeted that it had invested in open source hardware wallet company OneKey.

This is the hardware wallet project supported by Binance Resources after 7 years after investing in SafePal in 2018 ( Note: In 2022, Binance Labs announced a strategic investment in Belgian hardware wallet manufacturer NGRAVE, the amount was not disclosed, and the attention in the Chinese-speaking area is low, and this article will not be involved for the time being). It can be called "restraint", so it is particularly worth paying attention to, and it has also heated up the industry's discussion on "whether hardware wallet is a good business."

From the timeline, the importance of self-custody has been repeatedly verified after the FTX event in 2022. The two (public) investments in Binance's seven-year period also fully demonstrate that it is not random, but selective betting logic.

So the question is: Is hardware wallet a good business? In other words, today, after experiencing bull and bear cycles, regulatory storms and security incidents, has it already surpassed a purely profitable business and become a trustworthy Web3 infrastructure?

Is hardware wallet a good business?

Hardware wallets have always been a business that "it is difficult for novices to enter and difficult for old brands to grow."

High threshold, high education costs, thin hardware profits and long user conversion cycles are inherent structural challenges in this track. Therefore, even though hardware wallets have always been regarded as the "ultimate solution" for asset security in more than ten years of development in Web3, there is always a psychological and use threshold when it comes to large-scale popularization.

If you look back at the development history of these mainstream hardware wallet products on the market, you will find that the starting point of the industry can be traced back to 2014, with a very large span:

• 2014: Trezor launched the world's first hardware wallet, and Ledger also launched the classic Nano series in the same year, marking the starting point of cold wallet security technology;
• 2018: SafePal became the first hardware wallet project to be selected for the Binance Labs Incubator, and received strategic investment from Binance at the end of the same year, and launched the S1 classic product the following year;
• 2019: OneKey was officially established, and it entered the positioning of "open source × minimalist". It was popular with OneKey Classic during the Summer period on the chain, becoming one of the most representative hardware wallet brands in the minds of Chinese-speaking users;

But it is worth noting that although almost all of them have established or launched mature hardware wallet products before 2020, the key nodes in these product dimensions have not directly contributed to the transformation of hardware wallets from "geek tools" to "mainstream user portals".

What really pushes hardware wallets back to the core of user vision are two unexpected industry events:

• First, the explosion of on-chain Summer in 2020 catalyzed a group of on-chain Degen users to use hardware wallets to interact with secure signatures and contracts, completing a key step for many users to educate from 0 to 1;
• Second, the FTX crash in 2022. The trust crisis brought about by the CEX collapse has caused a large number of users to face private key management again. "Not your keys, not your coins" has changed from an idealistic slogan to a realistic pain point, and the attention to hardware wallets has surged;

Since then, the hardware wallet, which was originally located in a corner, has officially entered the center of Web3 security narrative.

But to be honest, the era of Trezor and Ledger 's hardware wallet 1.0 is indeed not suitable for ordinary users . The process of initial setup and backup is complex, the operation threshold is high, the supporting software is difficult to use, and the price of hundreds of thousands of yuan is often dissuaded from most people before they experience the value.

The emergence of brands such as SafePal and OneKey has greatly lowered the entry threshold by lowering pricing and reconstructing the experience to a certain extent, making hardware wallets move from geeks to popularization. It can be said that this strategy of "demolizing the price wall and paying attention to user experience" is precisely an important catalyst for promoting hardware wallets to move from geek circles to the mass market.

In fact, as long as it is cheap enough and has a friendly user experience, even if users just "try it first", they will be more willing to take the first step of self-hosting. Once the experience is good and the sense of asset security is improved, they may transform from a "tryer" to a long-term user.

The market demand for security has always been rigid, especially with the continuous expansion of Web3 user volume, security should not be an advanced configuration, but a basic public service.

This is also why we say that security is not an accessory to Web3, but the foundation of Web3 - or the same thing, behind every successful scam, there may be a user who stops using Web3, and the Web3 ecosystem will have nowhere to go without any new users.

From this perspective, no matter whether the hardware wallet is a "good business" or not, at least it is becoming an indispensable business.

A list of mainstream hardware wallets on the market

If hardware wallets were still exclusive equipment for geek players a few years ago, they are gradually evolving into encryption infrastructure for a wider user base.

The author has successively used a variety of hardware wallets including Cobo, imKey, OneKey and SafePal. In addition to the differences in experience, I also clearly feel the rapid evolution of the industry - especially among the Chinese-speaking user groups, in addition to Trezor and Ledger, the two overseas veteran manufacturers, the ones with the highest recognition and the most active product iteration are OneKey and SafePal.

1.OneKey: Quick construction of open source philosophy + user mind

Among the mainstream hardware wallet manufacturers, OneKey, which was independent of Coinxin, started early, but with the help of the narrative dividends of Summer on the chain, it has quickly established a strong (Chinese-speaking area) user awareness and formed a clear brand label -minimalist, secure, and open source.

Especially in recent years, a series of OneKey products have gained a lot of user favors in the Chinese-speaking market, and its representative products include:

• OneKey Classic 1S / 1S Pure: a lightweight credit card hardware wallet for users who are first exposed to cold wallets;
• OneKey Pro: supports Air-gapped air signature, fingerprint encryption verification and wireless charging, taking into account security and convenience, and is aimed at advanced users;

Especially the classic product OneKey Classic released in 2020, riding on the wind of Summer on the chain, it once became a favorite of Degen users on the chain, but the model has been sold out now.

In recent years, OneKey has also begun to try to "break the circle" of products, such as the recently launched USDC revenue module, which has attracted more than US$62 million in subscription amounts, indirectly reflecting its active user base and community stickiness.

2.SafePal: From hardware to full stack, Binance's development system

"wallet OG"

Compared with OneKey, which just obtained YZi Labs investment, SafePal is actually Binance’s earliest hardware wallet project, and its growth path is more inclined to Binance’s cultivation project:

In September 2018, SafePal, as the only wallet brand, was selected as the first phase of Binance Labs incubator program and went to San Francisco for 10 weeks. At the end of the same year, it received investment from Binance and officially launched its first hardware wallet product S1 in the first half of 2019.

Then SafePal adopted the "small step and fast running" product strategy to gradually expand its models to cover different market segments and build a product matrix for different user levels:

• The entry-level hardware S1 (2019), Bluetooth X1 (2023), and advanced version S1 Pro (2024), and are all open source;
• Supporting software wallet app (2020) and browser plug-in wallet (2022);
• Telegram mini-program wallet (2024), on-chain bank account/Mastercard (2024) and other services;

However, although SafePal has mass-produced a number of hardware wallets, it still takes the general approach. For example, among the products currently on sale, the S1 Pro is the highest price, which is only US$89.99, the X1 Bluetooth model is US$69.9, and the S1 is as low as US$49.99.

It is worth noting that SafePal is one of the few hardware wallet projects with tokens. In 2021, SFP was released through Binance IEO Launchpad, which is further well known to many Chinese-speaking users. Because of this, the characteristics of SafePal have always been reflected in the deep linkage Binance system:

SafePal is currently the only wallet product that deeply integrates Binance -spot trading, leveraged trading, contract trading and financial management functions (sub-account form) directly to Binance in the APP. It also lightly integrates Binance 's fiat currency inlet and exit channel, which means that Binance's trading liquidity and inlet and exit channels can be shared in one stop within the SafePal wallet, which can basically meet daily trading needs.

In addition, SafePal also has first-mover advantages in supporting BNB Chain on-chain activities and ecological collaboration. For example, it currently supports stablecoins on BNB Chain for free Gas transfer (currently, I use the SafePal App to transfer USDT/USDC and other stablecoins to save Gas fees).

It is worth noting that in April, SafePal Veronica became the mentor of YZi Labs' new incubator, which to some extent reflects its long-term relationship with Binance VC and its industry influence.

3.Ledger and Trezor

As mentioned above, Ledger and Trezor are the oldest overseas manufacturers in the hardware wallet track, but they have been complained about "hard to use" and "too expensive".

Among them, Ledger is currently the world's highest cumulative sales hardware wallet manufacturer. The Nano S/Nano X series has accumulated more than 6 million units. It has extremely high brand reputation and compliance endorsement in the European and American markets. It is suitable for institutions and high net worth users with high requirements for private key hardware isolation and security certification.

Trezor is recognized by the industry as the "original originator of hardware wallets". In 2014, it released its first hardware wallet in the world. Its two products, Trezor One and Trezor Model T, have a strong reputation in the BTC community, geek users and liberal circles, and its operation logic is biased towards geek users.

4.Keystone: Focus on the ultimate safe QR offline solution

Keystone is a fully open source Air-Gap security product (no Bluetooth, USB, Wi-Fi) that uses embedded systems. It scans QR codes through the camera to complete address generation, transaction signature and other operations, ensuring that the private key never touches the Internet. It is also the official cooperative hardware wallet of MetaMask and supports linkage with MetaMask.

Currently, the flagship model Keystone Pro is equipped with 4-inch touch screen, fingerprint recognition and multi-security chips (3 independent CC EAL5+ certified chips), supports up to 3 sets of mnemonic management, and can be linked to mainstream wallets such as MetaMask and Solflare through QR code.

Overall, different hardware wallet players currently have their own emphasis on product positioning, but they are all committed to building the next stage of "security × use × linkage" encryption entrance product.

More than "cold storage", from single hardware to full-stack service

The starting point of a hardware wallet is security, but the real end point is much more than that.

This is also a common trend among almost all mainstream wallet manufacturers at present: cold storage is certainly a core competitiveness, but relying solely on one or more hardware devices, it is difficult to form a sufficient barrier to differentiation.

From a commercial perspective, the user tags of hardware wallets are generally market segments with extreme demand for security, such as "on-chain Degen", "diamond holder", "Crypto high-net-worth users", etc., so for "hardware wallets", its core value lies in offline storage and isolation protection of private keys.

However, as the encrypted user group migrates from geeks to daily users, the capital sinking with "secure storage" as the core is just the first step -more and more users are beginning to expect that the wallet is not just a warehouse for refrigerated coins, but an operating platform that can smoothly use assets: covering a wider range of experiences such as transactions, interactions, financial management and even off-chain payments.

In other words, the competitive dimension of hardware wallets is extending from "security capability" to "service capability".

This is also the reason why hardware wallet manufacturers are currently turning to "full stack". SafePal, OneKey, etc. have long extended their functions to DeFi and TradFi scenarios, rather than just "storing coins":

• Upgrading of on-chain operation experience: supports one-click Swap, synchronous display of multi-chain assets, contract authorization analysis and other functions, lowering the threshold for on-chain interaction;
• On-chain payment scenario access: Integrate lightning network, cross-chain bridge, and stablecoin protocol to realize on-chain fast payment and inter-chain asset flow;
• Ecological tools are connected: provide contract authorization analysis/removal authorization tools, Gas gas stations, built-in DApp browsers, plug-in wallets, Telegram applets and other interactive modules, covering the "last mile" of activities on the user chain;

There is even a SafePal attempt to "moval" exchanges (Binance, Bitget) into wallets, and imToken, SafePal, TokenPocket, etc., to integrate Fiat24 and other banks to realize consumer-grade innovation in bank account/Mastercard payments, so as to further open up fiat currency channels and off-chain consumption.

From left to right, the SafePal "Bank" page, OneKey financial management page, imToken Card page

This "full-stack path" is quite representative of Binance's earliest hardware wallet project, SafePal: from entering the early hardware wallet to building App wallets, plug-in wallets, off-chain payment accounts and bank card services, it has now formed a complete asset management closed loop covering "cold storage-on-chain interaction-off-chain use".

This also means that the hardware wallet is no longer an isolated device here, but a physical security base for the entire multi-end product matrix, taking into account "hardware coin storing + APP/plugin interaction + off-chain consumption payment", which is a microcosm of this major trend.

Looking at the entire industry, this is a signal that consensus is forming. Objectively speaking, today when we discuss the competitiveness of hardware wallets, we are constantly broadening its role boundaries from "retainable", to "affordable", and then to "useful", from cold storage to multi-chain interaction, from on-chain asset management to off-chain deposits and withdrawals, the role boundaries of hardware wallets are continuously broadening.

This may also be one of the reasons why Binance has entered the hardware wallet track again after 7 years. No matter which path wins, the second half of the hardware wallet is obviously just beginning.

Written at the end

Wallets have always been regarded as a dispute over the Web3 entrance, and are the intersection of the on-chain identity system and off-chain payment channels.

Because of this, this track seems to be diverted, and players from all walks of life actually have the same path: whether it is Ledger, Trezor, or the rising stars SafePal, OneKey, and Keystone, they are ultimately moving in the same direction, that is, building a comprehensive crypto wallet system that integrates private key security, on-chain interaction and off-chain payment.

So, is hardware wallet still a good business?

Judging from the current signs, especially YZi Labs' re-take, the answer tends to be yes - but it is no longer the "cold wallet" business that simply sells equipment and is aimed at niche geeks, but is evolving into a base role that self-custodial, secure interaction and chain landing.

A true "good business" is often not just about making money, but is penetrated into the underlying logic of the industry and becomes an indispensable part.

The next stop for hardware wallets may be like this.