Crypto exchange Binance announced the launch of its new Web3 wallet at the Binance Blockchain Week conference in Istanbul, to be made available to all users via the Binance mobile app.
During the launch, Changpeng “CZ” Zhao, CEO of Binance, revealed the intent behind launching the service:
“Web3 wallets represent more than just storing digital assets — they are an integral part of the Web3 framework, empowering individuals with the ability for self-sovereign finance.”
For the purpose of simplicity, Binance’s Web3 wallet launches within the primary Binance app, which is predominantly used for trading cryptocurrencies. The wallet uses multiparty computation (MPC), which is used to break a user’s private keys into three smaller parts known as key shares.
“Having the key shares split across three different locations mitigates the risk of the keys being compromised and reduces the vulnerability of the system.”
Two of the three key shares will be controlled by the user at all times, allowing for self-custody. Binance spokesperson confirmed with Cointelegraph that the Binance Web3 Wallet is not available to users in the US as Binance.com is not available in the US. CZ added:
“Binance’s Web3 Wallet lowers the barriers of entry for users to achieve full self-custody of their assets, and it is an important, convenient bridge towards DeFi empowerment. Ultimately, our priority is to ensure users can explore Web3 with us within a user-friendly and protected environment.”
According to Richard Teng, head of regional markets at Binance, the MPC technology removes the fear of losing one’s seed phrase. “We want our users to be assured that they are interacting with Web3 within a secure and protected ecosystem. That is why we have incorporated MPC technology as well as Binance’s trusted security infrastructure within the Web3 Wallet,” he added.
Speaking to Cointelegraph, a Binance spokesperson clarified that users should still safeguard their wallet’s assets and access.
“If a user forgets their recovery password AND loses their device/delete the Binance app, they won’t be able to access their Web3 Wallet and Binance will not be able to restore it for them.”
The three shares of the keys will be held in three places — the first part will be with Binance, the second part will get stored locally on the user’s mobile phone and the third part will get encrypted by the user’s recovery password and backed up to their personal cloud storage such as iCloud or Google Drive.
Binance’s decision to delve into other crypto services comes at a time when its spot trading business appears to be struggling to retain investors. A report from blockchain analytics firm 0xScope suggested that Binance’s spot trading market share fell to 40% in 2023. According to the researchers:
“Binance’s spot trading volume has seen a significant decline in the past year, perhaps due to its listing strategy. Most popular coins experienced a downturn immediately after being listed on Binance.”
On the contrary, Korean crypto exchange Upbit saw the most significant increase, with its spot market share increasing from 5% to 15.3% during the same period. CZ, too, saw his net worth slashed by 38% amid a slump in exchange volumes, according to the Bloomberg Billionaires Index.