On November 10th, Binance, the largest crypto exchange, revealed its brand-new Web3-wallet. While some crypto community members share compliments about it, others criticise the tool for lacking originality, high centralization, and non-proved security. Let’s learn in more detail the claims surrounding Binance's new Web3-wallet.
Binance Web3-wallet promises
Binance Web3-wallet is a conventional crypto wallet, which facilitates storage, buying, selling, and swapping of cryptocurrencies. It supports 18 networks, including Ethereum, Polygon, Arbitrum One, Avalanche, and BNB Smart Chain. Additionally, the wallet integrates 8 decentralised apps (dApps): the Uniswap exchange, the OpenSea NFT marketplace, and the lending protocol Balancer.
Binance Web3-wallet is only available for the exchange’s app users on Android and iOS devices.
The tool is presented as a self-custody wallet, which means that only the crypto owner has access to its storage. Frankly, it is all settled in a slightly different way.
Learn more about self-custody wallets and other ways to store crypto with our comprehensive guide.
Problem #1: Trust Wallet Copycat
Binance Web3-wallet is built upon the Trust Wallet WaaS solution (wallet as a service). Trust Wallet has pioneered a solution that others could adopt to create their own wallets.
To illustrate, let’s assume that John wants to start his own clothing brand, but he is not ready to run the production. He finds a facility that can produce clothes and asks its director to put his brand’s label on the purchased consignment of goods. Now, John may sell clothes by his name, making others believe he has produced them. In this scheme, Trust Wallet is the facility that agrees to produce goods and stamp other people’s labels. All that is left for Binance is to run the presentation.
Trust Wallet already has one Web3-wallet named after the company. By the way, Binance acquired Trust Wallet in 2018. Following that, the crypto exchange promoted it as a basic solution for customers who wanted to dive into Web3.
The new Binance Web3-wallet is supposed to replace Trust Wallet. Anyway, Binance chose not to highlight the fact that its "brand-new tool” is nothing more than another company’s invention. That is already a good reason to dig deeper.
Problem #2: Binance’s new wallet fake Web3 ties
Binance’s new wallet is only available for exchange users who have passed registration. In order to gain access, users should complete the process of verification.
The Web3 concept actually emphasises anonymous settlements, requiring a high level of privacy. Crypto is a goal-achieving tool. In the Binance Web3-wallet case, there is no place for anonymity. The customer is supposed to provide a full set of private data to gain access to the wallet.
Here is another misconception — lack of decentralisation. Customers use the Binance platform, which can freeze their account access as well as their assets. Such a centralised approach is totally misconceived for Web3.
Problem #3: Unproven security of Binance Web3 Wallet
Two red flags emerge. The first is the use of Multi-Party Computation (MPC) technology by Binance. It splits access keys into several parts, designating the exchange as a custodian for one part. Even a small data leak poses a real risk. Unfortunately, Binance already faced such incidents back in 2019.
We have already found out that Binance Web3-wallet is built upon Trust Wallet. Here is where the second red flag comes in. Trust Wallet is not an unbreakable system either. On April 20, 2023, scammers withdrew $170k in crypto from Trust Wallet. Although the company refunded these losses, it never managed to regain trust.
There were more security issues. For example, in April 2023, the Trust Wallet Team revealed data about code bug fixing, which means it took place. Fortunately, scammers never managed to use them.
Considering these flags, it is prudent to question the safety of Binance Web3-wallet. Nobody knows exactly how many issues it contains.
Is it worth making a Binance Web3 wallet account?
If you have a Binance account, it means the exchange has already collected all the private data it needs. So, you will not lose anything by creating a new Web3-wallet.
Remember that all those fairytales about full decentralisation could be ruined by your account blocking. Binance is a centralised exchange, and it can make such solutions unilaterally. Unfortunately, that is not a rare case.
If the Binance Web3-wallet does not fit your needs, you can always find a better solution using our guide.
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.