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Let’s start by quickly understanding what Programmable Wallets are.
Programmable wallets simplify the creation and management of secure web3 wallets for developers. They provide a suite of tools and services to handle security, transaction monitoring, and account recovery. This frees developers from building these functionalities from scratch and allows them to focus on their core application logic. Circle’s solution leverages MPC technology to distribute private keys across multiple parties for enhanced security.
Now, let’s take a look at different types of programmable wallets.
Wallet Types
Circle Programmable Wallets offer two infrastructure models: User-Controlled Wallets
and Developer-Controlled Wallets
. Let's look at their differences and use cases.
What are User-Controlled Wallets?
User-controlled wallets are exactly how they sound (no surprises here :)). With the user-controlled wallet, the user has full control over his/her wallet. Even though they have full control over their wallet, the complexity of using a web3 wallet is hidden by Circle, and users can use their wallet just by memorizing a PIN code. They also set up security questions and answers in case they lose or forget their PIN code. They are still using their private key behind the curtains, but instead of dealing with all the burden that web3 brings such as safekeeping seed phrases, they can have the benefits of a fast and secure blockchain with the familiar methods.
Where to Use User-Controlled Wallets?
User-controlled wallets are essential whenever we want to give users direct authority over their assets and transactions. Let's look at some use cases:
Cryptocurrency and Web3 Applications
- Decentralized exchanges (DEXs): Users need full control of their crypto assets for trades. User-controlled wallets allow them to approve token swaps directly.
- NFT Marketplaces: Buyers and sellers alike require user-controlled wallets to facilitate the secure purchase, sale, and management of unique digital assets (NFTs).
- Decentralized social media: User-controlled wallets enable control over personal data and transactions within a social media environment built on blockchain principles.
Beyond Crypto: User-Controlled Wallets in Traditional Applications
User-controlled wallets provide advantages that extend to familiar app experiences:
- Marketplace Apps: Facilitate secure peer-to-peer transactions for buying and selling goods or services. User-controlled wallets streamline payments and offer transparent transaction histories.
- Neobanks: These digital-only banks can integrate user-controlled wallets to improve security and empower users to manage spending, savings, and investments directly within the banking app.
- Remittance Apps: Sending money across borders can be streamlined and made more secure by integrating user-controlled wallets. This gives users more control over their funds and can potentially reduce transfer fees.
- Gaming Applications: In-game purchases, rewards, and the trading of virtual assets become more secure and user-driven when integrated with user-controlled wallets.
User-controlled wallets are powerful tools that give users direct ownership and control over their transactions, increasing security, transparency, and the overall user experience.
What are Developer Controlled Wallets?
Developer controlled wallets, as the name suggests, are controlled by the developers. Unlike user controlled wallets, the users do not have direct control over these wallets. Instead, the developers manage the wallets on behalf of the users. This can simplify the user experience, as users do not need to remember a pin code or answer security questions. However, it also means that the developers have the responsibility of managing and securing the wallets, which can be a complex task. Despite this, developer controlled wallets can provide a seamless user experience, as all the complexities of blockchain are handled by the developers.
Where to Use Developer-Controlled Wallets?
Developer-controlled wallets are ideal in scenarios where you want to provide a seamless user experience, without requiring the users to manage their own wallets. They are particularly useful
in applications where the users are not familiar with blockchain technology, as they can interact with the application without having to understand the complexities of blockchain. However, they require a high level of trust between the users and the developers, as the developers have control over the wallets.
- A traditional gaming platform that has integrated blockchain technology on the backend is a good example of a use case for developer-controlled wallets. In this scenario, the users of the platform are gamers who may not be familiar with or interested in the intricacies of blockchain technology. They just want to play games and earn or spend in-game currency.
The developers of the gaming platform can use developer-controlled wallets to manage the in-game currency on behalf of the users. The gamers can earn or spend the in-game currency without having to manage a wallet or understand blockchain technology. All the complexities of managing the blockchain transactions are handled by the developers, providing a seamless gaming experience for the users.
- Another good example is centralized exchanges, where they want users to deposit digital assets, but manage the digital assets in a pool and a centralized ledger to facilitate high volume orders and reduce transaction costs.
- Developers can also use developer wallets to manage their own digital assets. E.g. pre-minting tokens into a wallet they own, before distributing it to their users, or holding native tokens used to pay for gas in various use cases.
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