Blockchain wallet technology breakthrough: From simple self-management to a multi-dimensional ecosystem

Introduction: The Silent Changes in 2025

2025 is seen as a pivotal year for the blockchain wallet industry. Although no new “hot” players have emerged, current competitors have undergone major repositioning regarding underlying technology and ecosystem architecture.

The clearest signs are:

• Major platforms have implemented TEE (Trusted Execution Environments) technology to handle private keys
• Social login features have become standard for account recovery
• MPC architecture and smart contracts have been integrated into storage layers
• Key management services are fragmented and distributed across multiple points

Beneath these technical changes lies a profound evolution: blockchain users no longer just want to store assets securely; they want to actively operate their assets, seek higher yields, and experience near Web2 usability.

The Development Stages of the Wallet Industry

Stage 1: One-way Tool Era (2017–2022)

Initially, blockchain wallets primarily served one purpose: secure storage and ease of use. Applications like popular key managers of that time focused on helping users control assets without trusting intermediaries.

As the public ecosystem expanded from 2017–2022, blockchain diversity increased, but the architecture mostly followed similar models. For wallet developers, good compatibility with the main chain was enough to meet market needs.

At this stage, “stability, security, ease of use” were the main competitive criteria. While potential business opportunities like becoming traffic gateways or connecting to DEXs existed, these were considered secondary.

Stage 2: Multi-chain Era (2022–2024)

As Solana, Aptos, Bitcoin (during inscription period), and other unique chains began attracting large capital flows, wallet platforms had to adapt quickly. Even long-standing names were forced to expand support to these new chains.

A sign of maturity in this phase was seamless cross-chain interoperability. As deploying EVM chains became easier, single-chain wallets gradually lost their competitive edge. Wallets focused on specific ecosystems often found that market hotspots kept shifting, putting them in difficult positions.

Multi-chain compatibility has now become a minimum standard, not a competitive advantage.

Stage 3: Competition in Value-Added Services

Once basic tools are sufficiently advanced, users start demanding more. They not only want to store assets but also seek ways to optimize their holdings. This is when features like DEX aggregation, cross-chain bridges, and derivatives trading tools become crucial.

Profit strategies on-chain are highly diverse:

• Perps: Staking ETH yields around 4% APY, while staking Solana combined with MEV can reach 8% APY
• Stablecoins: Although yields are lower, combining looping strategies can boost performance
• Liquidity: Participating in liquidity pools or cross-chain LP bridges offers higher returns but also greater risks

However, to execute these strategies effectively, users need advanced features like dynamic portfolio rebalancing, time-limited orders, DCA (Dollar-Cost Averaging), and automatic stop-loss. These functions go beyond fully self-managed models.

Technological Breakthrough: Abandoning Absolute Self-Management

Social Recovery: Balancing Security and Convenience

While locally encrypted private keys are ideal, reality is different. When devices are lost, users can lose all assets. When synchronization across multiple devices or backups is needed, clipboard access becomes a vulnerability.

Wallet service providers have found solutions through social recovery. This approach allows users to recover accounts via social authentication while keeping private keys never exposed in plaintext on servers.

First approach: Use TOPRF (Threshold Oblivious Pseudorandom Function) combined with Shamir Secret Sharing (SSS). The private key is encrypted with a derived value from the user’s email and password. This value is then split into multiple parts and distributed to different authenticators. Full decryption requires combining social verification and password.

Second approach: The encrypted key is split into two parts—one stored on a third-party service, the other accessible only through social authentication combined with a personal PIN. If the third-party service is built as a decentralized network with multiple validators, security is significantly increased.

Both methods achieve a balance: users are not experts, can recover accounts easily, but security risks are minimized through distributed architecture.

TEE Technology: The Next Upgrade Station

Social recovery addresses account recovery but does not meet the need for automated transactions. This is where Trusted Execution Environment (TEE) technology steps in.

TEE is a special computing environment where even service providers cannot read or interfere with memory and execution processes. When a program runs inside TEE, it produces an attestation (Attestation) that allows external parties to verify that the program is running the correct published version.

TEE is not a new concept — it has been widely used:

• Official cross-chain bridges use SGX (a type of TEE) to run validators
• About 40% of Ethereum blockchains utilize TEE platforms for transaction processing
• Major banks and exchanges have invested in TEE for managing hot/cold wallets

However, TEE also has limitations: low performance, risk of downtime/memory loss, and complex upgrades.

Practical Deployment: Different Models

Centralized TEE Model: Some large platforms use TEE to generate and sign private keys entirely within TEE. Users authenticate via backend, then commands are transferred into TEE for transaction execution. The advantage is that the user’s private key never leaves the TEE. The downside is users cannot verify whether the backend inserts unwanted commands unless on-chain proof is checked.

This model fundamentally relies on trust in the provider — similar to traditional centralized exchange trust models.

Hybrid MPC and TEE Model: Some platforms use MPC (Multi-Party Computation) combined with TEE. During transactions, users must authenticate their intent via a separate signing interface. TEE verifies this intent before signing. Users send a fragment from their local device into TEE, which combines it with other parts to produce a signature.

This model offers higher control for users — they can clearly see what they are signing — but is more complex in user experience.

Encrypted Mnemonic Model: Some platforms require users to send an encrypted mnemonic into TEE. Communication between TEE and client uses asymmetric encryption, where only the TEE’s private key can decrypt the transmitted data.

This approach completely eliminates MITM (Man-in-the-Middle) attack risks, as no one else can read the transmitted data.

Future Trends of the Industry

2025: The Year of Transition

2025 is a “quiet” year but full of major changes. In the current multi-chain landscape, creating a good tool alone is not enough to sustain a large development team. Providers need to offer value-added services to survive.

Fortunately, this year has seen explosive growth in new application fields:

• Perps (perpetual contracts): enabling leveraged trading
• RWA (real-world assets like stocks): expanding tradable asset scope
• Blockchain payments: connecting with traditional e-commerce
• Prediction markets: expected to heat up in late 2025

Who will hold the advantage?

Major reputable platforms will continue to lead. They can invest in TEE and maintain complex infrastructure. However, TEE remains a “big players’ game” — not easily copied by smaller competitors.

Meanwhile, user demand is not limited to DEX trading. Many simply want to earn safely through promotions, airdrops, and APY yields. Products combining centralized and decentralized (CeDeFi) with dedicated addresses will become the first stop for many users from centralized exchanges.

Other Technologies in Development

Besides TEE, other cryptographic technologies like passkeys are also advancing. Ethereum, Solana, and many other blockchains have integrated R1 curve (passkey-supported by default). Although passkey-integrated wallets still face challenges in recovery and multi-device synchronization, they represent a significant unknown for the future.

Conclusion

2025 is not the year of leaps or revolutionary products. It is a year of simplification, platform technology upgrades, and ecosystem building. The wallet products that can most easily simplify high-frequency trading needs will stand strongest in the future.

The market is no longer divided between “full self-management” and “trusted intermediaries.” It is shifting toward a new model: trust verified by technology — where users retain control but do not always need to be experts.