What is a wallet as a service (WaaS)?

Web3 adoption is accelerating with both cryptocurrency or web3-native companies and web2 brands launching products and experiences that employ web3 components like NFTs, DeFi, or metaverse. However, the onboarding experience to web3 is still daunting, and a critical reason is the complexity of crypto or web3 wallets. 

From seed phrases to needing multiple wallets for different blockchains, the user experience could be better on multiple fronts. This friction is a direct threat to adoption.

Wallets-as-a-service solutions aim to solve this by enabling brands to integrate user-friendly cryptocurrency wallets into their platforms easily.

In this article, we'll learn more about these solutions and look at how they simplify web3 onboarding. 

What is a Wallet-as-a-Service (WaaS)?

Wallets-as-a-Service (WaaS) refers to solutions that provide ready-made cryptocurrency wallet integration for applications and platforms. By opting for WaaS, companies bypass key management, security, and infrastructure complexities yet have a fully functional wallet for their users.

WaaS providers also ensure enterprise-grade security and compliance with financial regulations. This way, businesses can focus on their core offerings rather than worrying about such nuances.  

Overall, the integration with a Wallet-as-a-Service solution accelerates the time-to-market and provides transaction capabilities and digital asset storage to end users.

How a Wallet-as-a-Service provider works

Here's a breakdown of the core components of a Wallet-as-a-Service (WaaS) provider:

API integration from wallet as a service platform to other services

API integration connects the Wallet as a Service platform and the business' existing systems or third-party services. APIs facilitate a wide range of functionalities:

• Wallet operations:  Enables web3 wallet creation, transactions (payments, transfers, exchanges), and real-time balance checks via API calls.

• Customization & flexibility: APIs allow businesses to tailor the wallet experience (UI, loyalty programs, features) to fit their specific needs.

• Scalability: APIs support growth, handling increased transaction volumes and users without major infrastructure overhauls.

Backend infrastructure

The backend infrastructure of Wallet as a Service (WaaS) providers is designed to ensure the seamless operation, security, and scalability of digital wallet services.

• Database management:  WaaS systems utilize secure, high-performance databases to store user data, transaction records, and wallet balances. These are optimized for quick access and transaction processing.

• Transaction processing engine: This core component handles transaction initiation, monitoring, and status updates on the blockchain. It may also offer fee estimation and security features like address whitelisting.

• Security and compliance: WaaS platforms prioritize security with encryption and multi-factor authentication features and provide tools to comply with AML/KYC regulations.

User interface (UI)

Wallet as a Service (waas) providers also often offer customizable UI templates and components, allowing businesses to tailor their web3 apps to match user expectations.

• Brand alignment: WaaS providers offer customizable UIs, allowing businesses to integrate their wallets with their overall brand identity (colors, logos, fonts).

• Tailored user journeys: WaaS platforms give the flexibility to design user experiences that match the needs of different target audiences.

Different wallet types offered by WaaS providers

Wallet as a Service (WaaS) platforms typically offer a variety of web3 wallets as part of their services to cater to different needs and use cases. 

These wallets can be broadly classified into: 

1. Custodial wallets, where a third party manages private keys, simplify the user experience. These are often used by centralized exchanges or applications (like the Starbucks Odyssey loyalty program), where accessibility is the primary goal.

2. Non-custodial wallets give users more control over their funds. These can be used to access DeFi platforms, NFT marketplaces, web3 games, and more. User autonomy, privacy, and control over assets are the priorities here.  

If you're building a decentralized app or web3 enabled app, your best option is to use a non-custodial wallet, as these offer the most web3 functionalities and align with the ethos of the decentralized ecosystem.

Types of web3 wallets used by WaaS providers

Smart wallets

A smart wallet is a digital wallet managed by a smart contract (following the ERC-4337 specification) instead of being controlled solely by a private key like in an Externally Owned Account or EOA. 

It offers enhanced security, recovery options, and programmable transactions for users.

Benefits:

• No Private keys or seed phrases: Eliminates the risk of losing access due to forgotten keys or phrases.

• Social & multi-sig recovery: Allows wallet recovery through trusted contacts or multi-signature setups, enhancing security..

• Programmability: Smart wallets can be customized with smart contract capabilities, allowing for automatic transactions.

• Gasless transactions: Projects and protocols can sponsor gas fees on users' behalf, creating a seamless and welcoming user experience.

Unlock programmable smart wallets with thirdweb Account Abstraction

Embedded wallets

Embedded wallets are digital wallets built directly into applications. They allow users to manage their assets and interact with the blockchain without switching between apps or websites.

Benefits: 

• Simplified user experience: Embedded wallets allow users to log in using familiar methods from multiple devices without additional passwords. 

• Enhanced security: They offer advanced security features, including multi-factor authentication and improved account recovery options. 

• Customized experiences: developers can create branded wallets that align with the project's aesthetics and functional needs

Get started with thirdweb In-app wallets

Multi-sig wallets

A multi-sig (multi-signature) wallet is a smart contract wallet that enhances security by requiring multiple approvals to execute transactions. 

These wallets ensure that no single individual has unilateral control over the wallet's assets, making it ideal for collaborative financial management and reducing the risk of unauthorized access.

Benefits: 

• Enhanced security: Multisig wallets significantly reduce the risk of theft, unauthorized access, and single points of failure.

• Flexible access control: Multisig wallets allow for customizable approval schemes, enabling users to set specific rules for transaction approvals based on their unique needs.

Multi-party computation wallets

An MPC (Multi-Party Computation) wallet is a smart contract wallet that uses cryptographic techniques to split a private key into multiple shares and distribute it among various parties. It makes it harder for unauthorized users to compromise the wallet as it ensures that no single entity can access the complete key.

Benefits:

• Advanced access control: Allows for granular permission settings and roles among participants, enhancing the wallet's security and operational efficiency.

• Flexibility and control: Supports complex transaction requirements and can be adapted to various use cases, from organizational asset management to escrow services.

• Chain-agnostic: Works across all EVM-compatible blockchains, offering versatility in application and integration.

Simply put, the core difference between multi-sig and MPC wallets is how the private keys are managed. Multi-sig wallets have multiple private keys for an account; a pre-defined number is needed for a transaction. In an MPC wallet, a single private key is sharded and distributed amongst different parties.  

Simplify web3 onboarding with thirdweb

thirdweb Connect offers more than just Wallet-as-a-Service solution (WaaS); it offers a comprehensive toolkit that simplifies the onboarding process for users and makes blockchain apps accessible to everyone.

There are 2 main types of wallets to choose from: in-app wallets or smart wallets.

Both let your users onboard with just an email, phone number, or social media account, which significantly lowers the entry barrier. They also monetize your web3 app with, since all thirdweb wallets automatically activate our web3 payment solutions designed to faciliate onramping and bridging in-app.

Plus, you can also authenticate sessions with session keys, handle permissions and build management structures you're comfortable with.

thirdweb Smart Wallets

thirdweb account abstraction makes it easier to deploy smart crypto wallets with next-generation features. With account abstraction, it's easy to implement seamless transactions, abstracting away blockchain logins away from users thus allowing them to interact with blockchain applications without understanding the underlying technical complexities. 

Get started with smart wallets

thirdweb In-app wallets

thirdweb in-app wallets are embedded web3 wallets with extensive customizability options and powerful hooks, offering enterprise-grade performance. With thirdweb's in-app wallets, you can your wallet experience to fit your app or game's specific needs and branding.

Get started with In-app Wallets

The future of WaaS solutions

By offering intuitive user interfaces, flexibility, and robust security, WaaS solutions pave the way for the widespread adoption of decentralized applications. This positions them as a crucial component of a tech stack that ensures smooth and enjoyable experiences. 

And if you want to create a web3 wallet for your application right away, get started with thirdweb's web3 tools & SDKs!