BRC20 intensifies CEX competition, Web3 wallets, Binance and others enter the market one after another

Author: flowie, ChainCatcher

Built-in Web3 wallets in centralized exchanges are becoming a trend. Following OKX's integration of a Web3 wallet, Binance and Bitget announced their built-in Web3 wallets this week; although gate.io has not directly announced a built-in Web3 wallet, it has also released its self-developed Web3 wallet. Previously, Bybit had already integrated a Web3 wallet.

The recent intensive launch of Web3 wallets by centralized exchanges, especially the built-in ones, is hard to ignore as a product of the pressure from OKX's Web3 wallet. This week, with the resurgence of BRC20, OKX has once again welcomed a traffic bonus due to its Web3 wallet. According to Dune data, as the trading volume of Bitcoin Ordinals surged, on November 8, the daily trading volume of Ordinals on OKX's Web3 wallet exceeded $12 million, capturing over 75% of the market share. The price of OKB also broke $58, reaching a historic high.

As OKX's Web3 wallet begins to show results, other directly competing exchanges are following suit, which is not surprising. However, the market's evaluation of the approach taken by these imitators to directly participate in the Web3 wallet competition is mixed. Especially for Binance, which is dominant and in a sensitive period, is it really advisable to adopt a winner-takes-all approach and compete directly with industry ecosystem participants?

Nevertheless, despite the controversies, driven by the user and capital advantages of CEXs, Web3 wallets are bound to enter a new era of chaos. At the same time, this also provides new insights into the competition for Web3 entry standards.

BRC20 Intensifies CEX's Internal Competition for Web3 Wallets?

CEXs venturing into Web3 wallets is not a new phenomenon. Coinbase launched Coinbase Wallet as early as 2017, Binance acquired Trust Wallet in 2018, and Bitget acquired a controlling stake in BitKeep in March this year. OKX's Web3 wallet was launched on the web as early as 2022. However, at that time, wallets were seen as a battleground, and exchanges with substantial funds acquiring or developing wallets was merely a routine strategy.

But in 2023, OKX has stepped on the gas with its Web3 wallet, causing CEXs to treat this battleground differently. From the disclosed information, OKX's Web3 wallet seems to have new developments almost every week, with notable actions including the full launch of the Ordinals market in April-May this year and the introduction of the AA smart contract wallet in July.

What are the original intentions and ambitions behind OKX's Web3 wallet? In March this year, Zakk, the head of the OKX Web3 wallet track, mentioned in an exclusive interview with ChainCatcher the original intention and vision behind the OKX Web3 wallet. He believes that users in the crypto industry face a significant pain point: in a multi-chain ecosystem, it is challenging for users to find a comprehensive multi-chain wallet in the market. They still need to use corresponding on-chain wallets for different chains, making asset transfers and transactions cumbersome.

In light of this industry pain point, OKX's Web3 wallet aims to become a Web3 portal, allowing users to manage over 80 chains across different ecosystems in one place, including heterogeneous multi-chains; it also aggregates multiple scenarios such as DEX and NFT, enabling users to engage with all scenarios through a single entry point. It can be said that behind OKX's efforts in developing the Web3 wallet lies an ambition to set the Web3 entry standards.

Indeed, OKX's Web3 wallet has been making significant progress this year. According to the latest data disclosed by OKX, in terms of its multi-chain strategy, the current OKX Web3 wallet has aggregated over 20 cross-chains and over 20 public chains. In terms of aggregated scenarios, the OKX Web3 wallet has already integrated over 300 DEXs, supporting mainstream NFT trading platforms such as OpenSea, Blur, Magic Eden, and LooksRare, as well as DeFi financial products. Additionally, OKX has capitalized on the hottest user demands in the market this year, reaping considerable benefits.

For instance, by being the first to fully launch the Ordinals market in April-May this year, the OKX Web3 wallet allows users to transfer, trade, and inscribe BRC-20 and BTC NFTs in one place, enabling easier participation in the Bitcoin ecosystem. With the recent resurgence of Ordinals, the data for OKX's Web3 wallet is impressive. According to Dune data, as the trading volume of Bitcoin Ordinals surged, on November 8, the daily trading volume of Ordinals on OKX's Web3 wallet exceeded $12 million, capturing over 75% of the market share.

On the other hand, the advantage of top CEXs in gaining traffic through token listings is gradually weakening. A clear trend is that second and third-tier CEXs are rushing to list tokens, while first-tier CEX users are becoming "dumping ground" buyers. First-tier players like Binance need to seek ways to maintain their "territory," while other competitors need to seize opportunities for growth. The Web3 wallet business indeed presents a promising new entry point.

From the overall situation of exchanges, the voice of CEXs is relatively weak compared to DEXs and the entire Web3 narrative. Crypto analyst @tmel0211 pointed out that competitors like Uniswap and other DEXs are gradually narrowing the user experience gap with CEXs through micro-innovations such as account abstraction, gas payment on behalf, and auction-style routing. "As advantages in token listings, traffic, and service are gradually weakened, actively moving towards a decentralized environment and aligning with more Web3 gameplay is essentially a form of industry progress." Moreover, wallets as a new product matrix, utilizing MPC and account abstraction technology, can indeed lower some user participation barriers and help CEXs reshape their overly centralized image in core trading business.

Therefore, it is not difficult to understand why CEXs, which are making money effortlessly, feel the need to enter the Web3 wallet space.

CEXs Entering the Web3 Wallet Arena: Why is Binance Facing Scrutiny?

Within almost two days, three exchanges represented by Binance, Bitget, and gate.io announced new developments regarding their Web3 wallets. From the already announced integrated wallets of Binance, Bitget, and Bybit, their product functionalities are similar to OKX's Web3 wallet, all planning to integrate a series of Web3 services, including decentralized wallets, swaps, NFT markets, DeFi financial products, and DApps.

However, it seems that their products are somewhat lacking in functionality compared to OKX, which may have just launched. As the top two exchanges, Binance and OKX are being compared comprehensively. Currently, whether in terms of multi-chain capabilities or the aggregation of other NFT and financial product scenarios, Binance's offerings appear simpler. For example, Binance's Web3 Wallet currently supports 37 public chains, including most Layer 1 and Layer 2 chains, while OKX supports 61 chains, notably including the Bitcoin network. In terms of NFTs, Binance only supports the OpenSea market, while OKX supports seven mainstream platforms, including OpenSea and Blur. Recommended reading: “Web3 Wallet Analysis: Detailed Comparison of OKX and Binance Wallet Functions”

Regarding Binance's recent pursuit in the Web3 wallet space, crypto community users have raised some concerns, mainly focusing on the topic of "winner-takes-all." Previously, OKX faced little external scrutiny due to its smaller size and industry status compared to Binance. However, as a leading giant in the industry, Binance has deep layouts in secondary trading, venture capital, public chains, data tools, and other sectors, and is exploring new directions, such as the well-known BNBChain and the recently reported social product Binance Messenger currently in testing.

Crypto KOL @WutalkWu analyzed that the Web3 wallet actually has strategic contradictions with BNBChain. For a Web3 wallet to gain widespread use, it needs broad investment and overall ecosystem support, especially from strong players like Ethereum and L2. Yet Binance is also entering the market as a competitor to its partner BNBChain and the L2 on BNBChain.

The founder of the investment research community 7updao, @26x14eth, compared Binance to Tencent, stating that Binance should learn from Tencent's organizational and strategic changes before and after the 2010 3Q war, and avoid direct competition with industry ecosystem participants. Because for Binance, which is currently in a sensitive moment, "it should not create many enemies."

Looking back at the century-long battle between Tencent and 360 in 2010, although Tencent was at its peak, it became the "public enemy" of the industry, accused of plagiarism and monopoly. After the 3Q war, Tencent underwent a thorough reflection from top to bottom and established a new development strategy, shifting from "closed-door development" to "connecting everything." This means that while core businesses are handled internally, other businesses are left to partners. Ma Huateng once described in an internal company letter that they handed over "half of their life" to partners. It was precisely after the 3Q war that Tencent was forced to make strategic reforms, leading to a new round of rapid development.

The Standard Battle for Web3 Entry Behind the Entry of Major Players

Despite the controversies, driven by the user and capital advantages of CEXs, Web3 wallets are entering a new chaotic era.

Looking back over the past year, Web3 wallets have attracted more major players. In addition to the entry of CEXs, the layout of another traffic-advantaged social platform cannot be overlooked. At the Token2049 event in Singapore in September, Telegram and the TON Foundation officially announced their partnership, integrating the self-custody crypto wallet "TON Space" launched by TON. Additionally, leading DEXs like Uniswap, dYdX, and ParaSwap have released their mobile wallets, while traditional Web2 giants like PayPal and Reddit are also developing their crypto wallets.

Moreover, the native leader in Web3 wallets, MetaMask, launched a significant feature this year—the user-customizable wallet feature plugin platform MetaMask Snap. Major players seem to intend to compete for on-chain users through Web3 wallets, aiming to establish new Web3 super entry standards based on their accumulated traffic advantages.

However, it remains uncertain which type of player—Web3 social platforms, exchanges, payment systems, or crypto-native wallets—will become the first Web3 super entry point. For users, lower barriers and better user experiences are key, and the competition following the entry of major players will inevitably create a new high ground.