Most major crypto wallets (i.e., MetaMask and Phantom) support only one or two blockchain frameworks. For example, MetaMask only works with EVM-compatible blockchains, and Phantom works with Solana, Ethereum, and Polygon. Despite these two wallets being market leaders and widely adopted across the crypto community, chain-specific wallets don’t cater to the general behavior of chain-agnostic users.
Wallets are crucial in storing, managing, and transacting digital assets. With the growing popularity of decentralized finance (DeFi), evaluated at $11.96 billion in 2021 and expected to reach $232.20 billion by the end of 2030 – coupled with the increasing number of blockchain networks, the need for secure and user-friendly wallets catering to the different cross-chain needs of users has become an essential development in the ecosystem. Furthermore, 85% to 90% of crypto is self-custodial, with only 12% of BTC on exchanges and 10% of ETH.
With the growing expectations of users being agnostic to the chain, people's focus is to have a wallet that allows them to view the assets they own, their portfolio value, and what they can do with their tokens in one spot. In 2021, Morningstar Ventures participated in the seed round of XDEFI Wallet – a non-custodial multi-chain wallet that addresses users' needs, pioneered as the first Chrome extension wallet functioning across major blockchain frameworks. We are diving deeper into XDEFI Wallet for this month's project review. In the review below, we will cover everything from the founding team behind the wallet to the tokenomics, the business model, and unique Wallet features. As always, we will end the review with our own thesis of what we like about XDEFI Wallet and where we see potential challenges for the project.
What is XDEFI Wallet
Launched in a closed beta in 2021, XDEFI was originally the first multi-chain wallet Chrome extension, XDEFI Wallet now supports 30 chains, including EVM- compatible chains, Cosmos/Tendermint, Bitcoin UTXO, Solana, and NEAR frameworks. Through XDEFI’s custom RPC for EVM- compatible networks and Cosmos chains, they aim to give users access to more than 180 chains by early Q3 this year. This would make XDEFI the wallet with the widest chain coverage.
The project's mission is rebuilding and expanding the Web2 crypto experience in Web3. XDEFI realizes this mission in 4 core parts:
- Seamlessly swap and bridge 10,000+ assets: The wallet and WebApp allow users to swap and bridge over 10,000 assets across 30 blockchains, more than 60 times the assets CoinBase offers and 25 times more than Binance.
- Permissionless onboarding and unlimited withdrawals: Any user from where owning cryptocurrency is legal can instantly create an XDEFI wallet and start trading and have access to unlimited swaps and withdrawals.
- Seamlessly connect to every dApp: The wallet has to ability to connect to dApps in Web3 across every supported blockchain
- Creating a single gallery for all your NFTs: Users can display all their NFTs from every supported chain in a customizable gallery. This allows users to travel with their entire portfolio across blockchains.
The team strongly believes that the future is multi-chain and that Web3 will reproduce and improve current Web2 experiences. With unique features like its seamless token swap functionality, staking, and yield farming, enabling users to earn rewards on their crypto holdings – XDEFI Wallet is at the forefront of creating a multi-chain future.
Founding Team and Fundraising
XDEFI Wallet was founded in 2020 by Emile Dubié and David Phan, who had experience in TradFi and spun out startups from BCG Digital Ventures. They were early community members in Synthetix and THORChain and recognized the potential of decentralized, open protocols and the future of DeFi and crypto being multichain. They created XDEFI Wallet to provide a single wallet for all crypto and NFTs, realizing that this was necessary for DeFi to achieve global scale.
In 2021, XDEFI Wallet received funding from institutional venture capital firms such as Mechanism Capital, Sino Global Capital, CoinGecko, DeFiance Capital, Animoca Brands, and us at Morningstar Ventures. XDEFI Wallet was introduced as a closed beta in early 2022, and throughout 2022 the team worked to build out the product and team. XDEFI Wallet launched publicly in November 2022 and raised $19M via a public auction.
Since then, XDEFI Wallet has established itself as one of the fastest-growing wallets in the industry. For example, XDEFI grew 137% in 2022, outpacing the other leading wallets and making it the “Fastest-growing crypto extension in 2022.”
Further adding to the projects’ recent successes, XDEFI Wallet earned a 5-star rating in the Google Chrome store after 244 reviews. As of May 22, 2023, XDEFI Wallet has 198,500 weekly active users and an enthusiastic global community.
Tokenomics and Business Model
The $XDEFI token follows a similar mechanism to a veModel token, a design originally pioneered by Curve. It allows token holders to stake and earn a share of XDEFI swap and bridge fees. XDEFI generates revenue from swaps, both in-wallet and through its Web App, as well as through the single-sided staking (Zaps) feature.
Revenue model:
- 75% of XDEFI net revenue generated from all swaps, bridging, and staking are used to buy $XDEFI on the open market. The tokens are then rewarded to token holders who stake $XDEFI.
- XDEFI swap fees range between 0.3% – 0.5%. No charge fees on swaps <US$300 in value. Swaps fees via the THORChain DEX aggregator are 0.3%.
- Swap fees via other routes are 0.5% (41% less than the 0.85% charged at MetaMask and Phantom as of 20 Jan 2023).
- Single-sided staking (Zaps) fees are 0.25%
As more users adopt the XDEFI Wallet and Web App, the volume of swaps is expected to increase, resulting in higher swap fees. This increase in swap fees is anticipated to generate more buying pressure on $XDEFI and ultimately lead to greater rewards for $XDEFI stakers. Therefore, the growth of the XDEFI ecosystem could potentially benefit both users and token holders alike.
How the XDEFI Wallet Works
XDEFI Wallet prides itself on providing an intuitive and user-friendly interface, making chains less abstract and more accessible. With its innovative swap functionality, XDEFI Wallet aggregates leading decentralized exchanges and bridges, allowing users to easily trade over 10,000 assets and migrate funds across chains. Additionally, XDEFI Wallet is addressing one of the most significant user experience issues by working on gas abstraction, removing the need for users to think about gas when interacting with different chains.
The team behind XDEFI Wallet is focused on bringing liquidity into the Cosmos ecosystem through their swap functionality and integration of Squid powered by Axelar. Thanks to its BTC Ordinals support, XDEFI Wallet also boasts the broadest support for NFTs among self-custody wallets.
Key features include aggregating balances at the asset level, displaying all NFTs from all chains in a single gallery, and the wallet's ability to sum the balances across all accounts and chains, displayed as a single balance on your wallet, which are elements that users like about XDEFI.
Academy:
To help users get onboarded seamlessly, the team has also created an Academy with 192 articles that provide step-by-step instructions on how to set up one Wallet and have more information on what DeFi and Crypto are on a broader scale. Educating users is important to ensure they know how to manage their digital assets securely. The Academy is a strong point of the team's product and also nods to its vision of creating a more secure and decentralized future.
Our Analysis
Strong points of XDEFI:
- XDEFI Wallet was the first Chrome extension wallet to be built chain agnostic, giving them a first-mover advantage. As DeFi is predicted to become a $232 billion market by 2030, and crypto users are becoming increasingly chain agnostic, XDEFI finds itself in a strong position for wider adoption. As part of the fundraising round, we at Morningstar Ventures saw an opportunity for growth since XDEFI Wallet presented a high-quality product and strong product-market fit, with users looking for more solutions to track their portfolio, consolidate their digital assets in one place and more security. XDEFI combines all these aforementioned features into its easy-to-use extension. Since its launch, XDEFI has had over 190,000 weekly active users and is deemed one of the largest Chrome Extensions in the industry. Recently, XDEFI Wallet announced that they have natively integrated 14 Cosmos chains, including Cosmos Hub, Stride, Osmosis, and Axelar. The objective is to become the reference wallet for users interacting with EVM networks and Cosmos chains and managing their funds seamlessly across these two ecosystems.
- Security is a fundamental driver in any blockchain product. Almost 90% of users are offboarded because they don’t understand the security behind certain dApps and therefore don’t adopt crypto. Similarly, seed phrases, keys, and other wallets often have a “difficult” reputation, given the number of hacks and fraudulent activities. XDEFI wallet takes security very seriously and makes it easy for users to understand how to set up their accounts and safely store their assets. For example, via their Academy, they give a comprehensive step-by-step guide on setting up one's wallet, securing assets safely, and how blockchain and crypto work.
- The team's upcoming Mobile wallet launch is highly anticipated and sought after by the XDEFI community. It will give another option for current users to store their assets and open up more opportunities for new users and easier onboarding.
Potential challenges for XDEFI
- XDEFI is in a high-potential vertical that may be difficult to penetrate and gain market share, especially considering that more builders want to create multi-chain solutions. Furthermore, there is an entry barrier due to self-custody. Thus it is harder to attract a mass audience compared with custodial solutions. As XDEFI continues to grow the user base and transaction volume increase, XDEFI Wallet must also ensure scalability to handle the growing demand. This includes optimizing performance, mitigating network congestion, and exploring layer 2 solutions to improve transaction throughput.
What’s Next for XDEFI
In the upcoming months ahead, XDEFI is focused on launching three key initiatives:
- XDEFI Mobile App
- XDEFI will release a gas abstraction feature later in 2023. This removes the complexity of needing gas tokens for every chain and address. The wallet will abstract the concept of gas to make the user experience more seamless.
- Open Source: With this, the team aims to open source XDEFI gradually over the coming year.
We look forward to the upcoming developments and the open beta later this year. For more information on upcoming releases, follow the XDEFI channels below.
Learn more about XDEFI ⬇️
🌐 Official website: https://www.xdefi.io/
📡 Official Global Telegram Community: https://t.me/xdefi_announcements
🐦 Official Twitter: https://twitter.com/xdefi_wallet
📜 Academy: https://www.xdefi.io/support/
🕹️ Discord channel: https://discord.com/invite/xdefiwallet
