Enhancing DeFi Connectivity with WalletConnect

Introduction

The WalletConnect Network is the on-chain UX platform powered by the Connect Token (WCT). It features a chain-agnostic protocol that connects hundreds of wallets with thousands of decentralized applications (dApps), allowing users to securely interact with these applications directly from their wallets. The WalletConnect Network boasts unrivaled reliability, lightning-fast speed, and world-class latency while facilitating over 150 million monthly connections.

The WalletConnect Network enables seamless interoperability between wallets and apps and continuously builds and refines its infrastructure to support a variety of use cases.

Decentralization has been a part of WalletConnect goals since its inception. The Network is a landmark step towards decentralization since it marks several pivotal milestones, including its migration from v1 to v2 in the same year. Recently, the WalletConnect Network formed the WalletConnect Foundation, which will work toward supporting the future of the Internet. The foundation aims to facilitate the decentralization of the WalletConnect Network and the introduction of the Connect Token (WCT).

Following this announcement, WalletConnect Inc. has rebranded as Reown, focusing on building developer products to improve onchain UX. Operating within the WalletConnect Foundation, these separate projects will focus on different aspects of the broader vision.

Reown will offer AppKit and WalletKit, free-to-use builder kits that provide developers with everything they need to create excellent Web3 products.

This article will explore the WalletConnect Network’s vision and success, as well as provide a detailed look at the offerings from Reown, including AppKit and WalletKit.

What's Next For DeFi?

With some market analysts predicting the crypto market will grow into a $10 trillion industry, DeFi is here to stay. Decentralized Exchanges (DEXs) give users greater control over trading. Yield farming brings new opportunities to earn rewards, and NFTs offer unique ways to use assets as collateral. Every innovation within the DeFi sector strives to meet users' growing demand for more transparent, simplified, and customizable financial services.

Improving financial services unveils new opportunities for investors, and DeFi is poised to grow significantly in the coming years. Most importantly, innovation coupled with a simpler, more user-centric design will drive the growth of DeFi adoption. However, this pending rosy future depends on DeFi platforms properly addressing user needs—and that's where the WalletConnect Network comes in.

WalletConnect Pulse Report

Pedro Gomes, WalletConnect's Founder, stated in the 2024 Crypto Consumer Report that "DeFi remains the king of crypto use cases, but bringing in a greater spectrum of users will require a broader range of sticky, feature-filled experiences."

The same report drilled down to 11% of hyper-engaged respondents with DeFi. This group, known as "DeFi Degens," constantly explores the latest dApps and features.

Cross-platform activity lies at the core of their work. Constantly leveraging multiple protocols and networks, this group says it primarily looks for developments in NFTs, Web3 social and messaging, community and governance models.

The research indicates that this active group of DeFi users gravitates toward modular DeFi protocols. They are interested in how modular protocols can transform the financial sector by introducing innovation and flexibility.

They also prefer cross-chain capabilities with seamless communication between blockchain networks. Scalability, interoperability, and accessibility are features that sit at the top of the list.

DeFi Security

Security is paramount in DeFi. However, there is a gap between users' reported confidence in using crypto products and DeFi Degens' relatively low adoption rate of security features (18%), which exposes a need for better tools and education. Scammers act fast, and their attacks are growing increasingly sophisticated.

While 58% of the DeFi Degens participating in the report have experienced security-related losses, they still maintain an optimistic outlook for the future conditional upon the industry delivering on the demand for advanced security measures manifesting in the space. This includes decentralized identity solutions and verifiable credentials emerging as promising strategies to mitigate risks and enhance authentication processes.

They also have a wallet wishlist that considers what the most hardcore DeFi enthusiasts are looking for. They are more than willing to dabble with different wallets and dApps, with WalletConnect's research indicating that 58% possess two or more wallets. This finding suggests they need a practical approach to managing their decentralized assets.

Understanding active DeFi users' wallet preferences uncovers hidden insights into their behaviors and priorities. Regarding wallet choice, there is clearly an emphasis on efficiency and functionality. More specifically, they prioritize the following features: broad cryptocurrency support, advanced security, and low transaction fees. DeFi Degens are concerned about the lack of wallet features, which suggests a greater demand for more sophisticated and personalized functionalities.

To sum up, DeFi's future trajectory hinges on technological advancements and successfully meeting the needs of a diverse group of users. This research highlights wallets' vital role in DeFi and spotlights the importance of wallet providers in customizing their offerings.

WalletConnect's Upgrades

Through its research, WalletConnect listened to the active DeFi community to better address their needs and enhance their overall UX within the DeFi space. Therefore, it is not surprising that the network has seen significant upgrades and innovations in collaboration with partners to make WalletConnect a cornerstone of the Web3 ecosystem.

Wallets are the gateway for users to interact with crypto by executing transactions, using dApps, and managing their assets. Moreover, crypto wallets stand at the forefront of the onboarding process. The biggest challenges for users have to do with getting started. It is too difficult, and overall UX levels are low. They also fear phishing and other scams. There are also issues for more experienced users who want more features and find there are not enough tokens supported in their wallets, forcing them to rotate between multiple wallets.

WalletConnect is responding to these issues by supporting wallet standards. Standards help ensure a consistent experience across the Web3 ecosystem and lay the foundation for future innovations, giving users more features. The network also helps developers build an engaging UX for their users. One example is Web3Inbox which WalletConnect launched last year. It is a groundbreaking Web3 communications tool that seamlessly connects wallets, dApps, and users through push notifications.

Their upgrades also allow users to connect beyond Ethereum, enjoy one-click authorization, wallet notifications, and their wallets to connect to multiple chains. WalletConnect also onboarded apps and wallets from other ecosystems, such as TON, Tron, Solana, Starknet, Polkadot, Cosmos, and other chains, helping to grow Web3.

The introduction of Chain Agnostic Improvement Proposals (CAIPs) made this expansion possible, allowing wallets to connect to multiple chains simultaneously and integrate with other blockchain ecosystems. However, the new upgrades to address some of the concerns of DeFi users are not limited to the application layer. Significant developments on the infrastructure layer are driving multiple paths to decentralization.

The network's expansion has reduced latency globally, especially in Latin America and Asia-Pacific. The team has also re-architected the storage capacity with a new database design to achieve low latency in a distributed manner. This design's advantage is bypassing cloud providers' vendor "lock-in."

Further, the WalletConnect Network prioritizes low latency and reliability. The team has tracked significant improvements in success rates across the top wallets, as well as major cost reductions for node operation. These upgrades testify to the importance of its modular network design, which enables continuous infrastructure improvements and upgradability with no downtime.

Collaborating with other node operators and staking service providers like Luganodes, maintaining the network has been incredibly rewarding for the participants and the WalletConnect team.

These upgrades are vital for new node operators who desire to run nodes in various infrastructure setups without impacting today's low-latency requirements. The team's focus on modularity paved the way for improved network connections and an enhanced UX around authentications and notifications.

While these upgrades from the WalletConnect Network are designed to help overcome DeFi's challenges, we also look at Reown's product offering, which includes its AppKit and WalletKit, and how it enhances DeFi’s growth and adoption by creating valuable developer products.

AppKit by Reown

DeFi and Web3, in general, need more and better dApps. However, many developers still find themselves burdened by complex tools with fragmented solutions, slowing the creation process. This is where AppKit comes in with its comprehensive stack, empowering developers of all levels to create dApps with unparalleled ease and efficiency. Whether crafting a simple dApp or something more complex, AppKit's feature set ensures developers get everything they need in one place.

Reown's AppKit enables developers to build powerful Web3 experiences through one seamless integration. Projects can access users across 500-plus wallets, unlocking multiple features to foster long-term growth and unlimited reach. Further, with AppKit, users can upgrade their embedded wallet to self-custody whenever desired.

UX-focused core features are baked in to create unrivaled wallet connection experiences. Meanwhile, developers can reduce risks and optimize building time by managing all their integrations with a single tool. They can also dig into real-time granular data for critical insights into user behavior to supercharge their dApps.

AppKit supports multiple frameworks so that builders can integrate with JavaScript and related frameworks like React, Vue, and Svelte. It's also multi-chain ready to easily support any EVM chain so that users can connect with MetaMask, Coinbase, and much more. Some of the key features include Swaps, Emails and Socials, On-Ramp, and Notifications.

AppKit Features - Swaps

With Swaps, users can switch between crypto assets inside the dApp and don't have to exit to swap tokens securely. Setup only takes minutes and one line of code.

AppKit Features - Emails and Socials

Email and Social login lets users seamlessly connect to your project's dApp with only an email address or social account. Setting up this function is simple, with just one line of code. With this feature, projects can offer users a seamless connection to their applications with only an email address.

The Email and Socials feature supports Algorand, Arbitrum, Berachain, Binance, Chiliz, Loopring, Near, Optimism, RARI Chain, ZetaChain, and many more.

AppKit Features - On-Ramp

The On-Ramp feature offers users secure access to over 100 cryptocurrencies within the project's application. Users can purchase tokens and transact across multiple chains with a few simple clicks. Once again, setting it up takes minutes with one line of code.

AppKit Features - Notifications

Notifications power communications between dApps. This feature allows projects to engage users with Web3-native notifications sent directly to their wallet address. Wallet notifications also enable users to subscribe to their favorite applications directly from their wallets. These notifications are relevant to their activity and are a significant step towards Web3-native communications.

WalletKit by Reown

Reown's WalletKit unlocks powerful features to provide users with a secure way to connect their wallets with multiple applications. WalletKit is chain agnostic, so it can support various chains without developers having to write separate integration code. Key features include One-Click Auth, Auth API, Notifications, and Verify.

WalletKit Features - One-Click Auth

With the One-Click Auth Standard (CAIP-222), users can sign in with their favorite wallet in a single step. Zerion, Trust, and Binance Web3 Wallet already support this feature, and support is expected from more wallets in the coming months.

One-Click Auth Standard lets users skip the traditional wallet connection process, enabling a seamless, single-step sign-in experience with their preferred wallet. It also allows users to connect to Web3 with a single tap.

This feature provides an all-around superior UX with improved connectivity speeds. Users can authenticate multiple chains and accounts simultaneously with one-tap multi-chain and multi-account signing.

Moreover, One-Click Auth is a step towards a broader vision of Smart Sessions in which transaction approvals can occur "in-app" without constantly redirecting users to their wallets.

WalletKit Features - Auth API

Auth API allows dApps to verify wallet address ownership with a single signature request.

WalletKit Features - Notifications

Web3 Notifications enrich users' wallet experience and can provide communities with direct access to critical updates in their favorite apps. Furthermore, wallet notification features allow users to subscribe and set permissions from their favorite apps.

WalletKit Features - Verify

With malicious actors on the rise, users need wallets with robust architecture to identify domain veracity better when connecting their wallets. App Verification is a first-of-its-kind layered security solution that protects users from phishing attacks.

WalletKit Other Features

The WalletKit network's data and transport layers remain separate, providing a more frugal bandwidth and reliable network connectivity. WebSocket-based connections are "multiplexed," meaning that devices only use a single connection while the system scales its load horizontally.

Web3 Wallet Best Practices

To ensure a smooth UX, WalletConnect partners with wallet providers to encourage the adoption of best practices. By implementing these guidelines, WalletConnect seeks to optimize performance and mitigate challenges, including suboptimal network conditions.

WalletConnect - Conclusion

WalletConnect has seen remarkable growth. The number of projects, including apps and wallets, has surged from 6.850 to over 26,000. Additionally, there has been a 400% increase in connections and over 330% growth in monthly unique wallets connected to the network over the past 12 months.

WalletConnect is on an incredible journey to become a highly active network interoperating between hundreds of wallets and applications across multiple chains. The team envisions their project continuing to evolve into a pivotal usability platform.

The WalletConnect Network is changing the connectivity landscape for good. With its "less clicks is more" mission, WalletConnect has milestones to celebrate and an exciting future ahead.

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 45+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.