I’ve had the privilege of witnessing the inception of blockchain and crypto wallets, observing their early developments. When the buzz around crypto wallets first emerged, I found it challenging to comprehend. Digital wallets? The concept seemed puzzling, but my curiosity was piqued.
Having now grasped the concept, I’m eager to share some valuable insights about the adoption of crypto wallets, focusing on one particular wallet that has become synonymous with online money storage: MetaMask. Let’s start at the beginning.
Having now grasped the concept, I’m eager to share some valuable insights about the adoption of crypto wallets, focusing on one particular wallet that has become synonymous with online money storage: MetaMask. Let’s start at the beginning.
It all started a while back, but it sparked like a fire in 2009 when people started talking about cryptocurrencies. Shortly after introducing the first cryptocurrencies, it became evident that a secure storage solution was needed. Keeping this new type of currency in mattresses or sugar bags, as done before, was simply impossible. This is where digital wallets come into play, they are virtual piggy banks in the digital realm.
When discussing crypto wallets, the prominent name of MetaMask immediately comes to mind. This wallet has earned a reputation as the top player for storing various ETH-based tokens. Indeed, MetaMask is a robust crypto wallet. Throughout its existence, the ConsenSys product has generated millions of dollars for its creators and significantly advanced technology. It’s high time to delve into what exactly MetaMask is and how the company generates revenue, explained in simple terms.
MetaMask is primarily known as a digital wallet designed to facilitate the seamless transfer and management of cryptocurrencies. Besides its primary functions as a wallet, it also serves as an identifier to access specific online platforms and services via identity verification and interaction authentication. At its core, MetaMask is a browser extension that acts as a crypto wallet and a gateway to various decentralized applications, or “dApps.” It enables you to manage your digital assets, interact with dApps, and execute transactions on the Ethereum blockchain – all from the comfort of your web browser.
Before we dig into the history of the MetaMask wallet, it’s important to describe the state of crypto wallets before their emergence. The earliest crypto wallets followed the birth of Bitcoin in 2009.
These wallets operated through command-line interfaces, requiring users to interact with them via text-based commands in a terminal or command prompt. Though functional, their complexity made them less user-friendly, primarily catering to early adopters and tech-savvy individuals. Bitcoin Core stands out as the most renowned command-line wallet.
To make cryptocurrency more accessible to the general public, the second generation of software desktop wallets arrived fairly soon. These were graphical user interface (GUI) desktop applications, providing a more intuitive and user-friendly experience.
As cryptocurrencies gained popularity, web-based wallets were introduced. The third generation of crypto wallets brought about a significant shift in accessibility and usability. Many third-generation wallets were accessible through a web browser, offering more convenience but also raising security concerns as private keys were stored online. MetaMask, in particular, played a pivotal role in this evolution.
MetaMask’s journey began in 2016 as a humble open-source project by ConsenSys, a blockchain technology company. Originally designed to enable regular users to easily interact with Ethereum’s blockchain, it quickly gained traction due to its intuitive design and user-centric approach. The intensive organic growth paved the way for its official launch in 2016, and it has since evolved into an indispensable tool for the crypto ecosystem.
MetaMask seamlessly integrates with web browsers like Chrome and Firefox, allowing users to manage their Ethereum-based assets directly within their web browsers. This innovation has significantly enhanced the convenience of interacting with decentralized applications (dApps) and the Ethereum blockchain, eliminating the need for users to download and install standalone applications. MetaMask’s success has, in turn, sparked the development of similar browser extension wallets for other blockchains, ushering in a new era in crypto wallet accessibility and adoption.
MetaMask boasts an array of advantages. First, it provides a user-friendly interface compared to its predecessors and competitors, making it accessible to both newcomers and experienced users. The convenience of a single wallet for multiple dApps eliminates the need to manage different accounts for various platforms or download separate wallet applications. MetaMask supports desktop and mobile devices, allowing users to access their wallets across various platforms. Additionally, it supports multiple types of cryptocurrencies, functioning like a Swiss Army knife that can handle different tokens.
However, like any tool, MetaMask has its downsides. As a browser extension, it is inherently tied to the security of your browser, and if you’re not careful, online attackers could attempt to steal your tokens. In mid-2022, some research identified certain encryption issues and clickjacking vulnerabilities in MetaMask which were eventually fixed. However, the risk remains as the product and the tech develop, and there is no entity providing financial insurance in case the risk occurs. ConsenSys even offers a monetary bounty for users who find and report vulnerabilities. Although this is a common problem for all decentralized products, other alternative wallets can provide stronger security if that is a major concern for a user.
MetaMask Snaps will function a lot like an Apple App Store for the crypto wallet, allowing third-party developers to launch new decentralized applications (DApps) — dubbed Snaps — that expand MetaMask’s functionality.
Additionally, the dependency on the Ethereum network can result in slower transaction speeds during peak usage times. Unlike MetaMask, some competitors support multiple blockchains, offering a broader range of cryptocurrency support.
You might wonder, if MetaMask doesn’t use traditional ads and subscription models, how does the company sustain itself? As ConsenSys operates as a privately owned entity, it is not obligated to disclose its annual financial reports to the public. Yet, given the transparent nature of blockchain transactions, we can make approximations regarding their earnings.
Surprisingly, these estimates point to an annual revenue exceeding $200 million. Remarkably, as reported by TechCrunch, the company’s overall valuation surpasses $7 billion, following a successful fundraising effort that garnered over $450 million in capital as of March 2022. So, how does MetaMask make money out of over 30 million monthly active users if the service they offer is free? Let’s take a closer look by breaking down the main sources of income.
MetaMask operates on an open-source model, meaning the core functionality is freely available to users. However, it offers a gateway to various decentralized services and applications, many of which have their own revenue models. A significant portion of MetaMask’s revenue comes from swap fees. Introduced in October 2020, this feature empowers users to seamlessly compare and execute token swaps directly within the MetaMask platform.
For instance, when you use MetaMask to interact with a decentralized marketplace or a gaming dApp, the dApp developers might charge fees or take a small percentage of transactions. In return, MetaMask can form partnerships or collaborations with these dApp developers, receiving a portion of the fees generated from transactions facilitated through its platform. One such example is the integration of the MetaMask Wallet with the Unity Engine.
Typically, a service fee for these swap services ranges from 0.3% to 0.875%. This fee is seamlessly integrated into the trade quota, which also encompasses gas fees. MetaMask goes the extra mile to ensure users can access an extensive array of tokens, effectively curbing prices and gas fees. Moreover, to address slippage issues, MetaMask enables users to set their maximum threshold. Orders exceeding this threshold are automatically canceled, enhancing user control.
In September 2023, MetaMask introduced a new feature that will completely change the rules of the financial system. Previously, users could speculate with crypto assets within decentralized platforms, and cash remained the prerogative of centralized solutions – it’s time for a new alternative.
The integrated approach turns MetaMask into a fiat gateway, where investors can not only sell cryptocurrency but also convert it into fiat currencies and store it in bank accounts.
Initially available in the US, UK, and select regions of Europe, MetaMask has expressed its intentions to expand this service to other geographical areas in the future. The feature will initially support ETH on Ethereum Mainnet, with plans underway to extend its compatibility to native gas tokens on layer 2 networks.
Here are the instructions on how to utilize this innovative feature:
This eliminates custodial control over assets, expands account capabilities, and provides access to this function for users worldwide. It is safe to say that this is only the first step against traditional solutions, where banks remained leaders in the field of asset storage.
The innovation opens up a pool of benefits for MetaMask users:
The introduction of this update is significant as MetaMask continues to be the go-to tool for engaging with the decentralized ecosystem, particularly decentralized exchanges and decentralized finance (DeFi) protocols. By offering users the ability to withdraw funds directly from their self-custody wallets to their bank accounts, MetaMask empowers individuals to embark on a seamless end-to-end cryptocurrency journey, eliminating the need to rely on centralized exchanges. This development is particularly noteworthy as centralized platforms have faced mounting skepticism in recent months and years.
It is still unknown how MetaMask is going to monetize this functionality. At the moment, one thing is clear – this will be in great demand among users and will definitely bring a lot of profit to the wallet.
Today, the entire financial system is undergoing a transformation towards Web3. Centralized services, traditionally dominant in Web2, are merging with decentralized solutions to form a unified financial system. This ecosystem includes fiat currencies, central banks, exchanges, crypto assets, and exchangers, within which MetaMask is expanding its influence, not just limited to cryptocurrencies.
In addition to earning revenue through swap fees, MetaMask likely benefits financially from its specialized product, MetaMask Institutional. This tailored wallet caters specifically to the needs of trading firms and financial organizations. A recent example of such collaboration is its integration with the Qredo Network.
While it shares many functionalities with the standard MetaMask wallet, the institutional version provides access to certified custodians and ensures compliance with current tax regulations. Among its significant advantages are:
Like other custodial services such as Coinbase Custody, MetaMask likely imposes management fees on its institutional clients. However, MetaMask does not publicly disclose the fees for this service. These fees are typically calculated as a percentage of the assets under management and are generally lower than those charged by traditional financial institutions.
Numerous institutions utilize MetaMask Institutional to execute transactions within DeFi and Web3 protocols, effectively integrating it with their custodian’s platform. MetaMask Institutional is unique as the only multi-custodial Web3 wallet designed specifically for institutional use. It integrates seamlessly with a wide range of custody and self-custody solutions available in the market, meeting a diverse array of institutional-grade custody needs.
MetaMask Portfolio offers a decentralized application (dApp) that provides a convenient way to view and manage your MetaMask accounts and assets. Within the portfolio, you can engage in activities such as buying, swapping, bridging, and staking your assets.
The central feature of MetaMask Portfolio is its dashboard, which consolidates information from up to 10 accounts, allowing you to easily track your total holdings and view their value in your preferred currency. You can access the portfolio at portfolio.metamask.io. On mobile and through browser extensions, simply click the portfolio button on your wallet homepage for quick access.
As MetaMask serves as your gateway to the decentralized web across multiple Ethereum-compatible networks, your dashboard displays assets across these networks. Currently, the supported networks include:
The list of supported networks is constantly growing, enhancing the versatility and utility of MetaMask Portfolio for a wide range of users.
MetaMask diversifies its revenue sources by selling branded merchandise through its online store. In this virtual boutique, people can explore a range of products including t-shirts, hoodies, caps, mugs, and even hardware wallets. Prices for these products range from $15 to $42.
Beyond financial gain, these merchandise sales serve as a powerful branding channel for MetaMask. Users who proudly wear or use MetaMask-branded items contribute to the company’s bottom line and act as enthusiastic brand ambassadors.
ConsenSys may soon introduce a more traditional monetization method for the industry, primarily due to rumors about the launch of MetaMask’s own token. The MASK token will serve as a form of payment within the MetaMask ecosystem and play a pivotal role in governance.
With the MASK token, users can have a say in shaping the platform’s future by proposing and voting on improvements, updates, and new features. This democratization of decision-making aligns with the spirit of decentralization, where power is distributed among the community.
Beyond governance, the MASK token can also provide additional utility within the MetaMask ecosystem, ranging from incentivizing user participation in certain activities to accessing premium features and services.
Despite advanced technological solutions and a seemingly impeccable reputation, even the most promising platforms can have their shadows. MetaMask, despite its undeniable utility, has not been immune to controversy.
As the MetaMask platform gained traction and became an essential tool for crypto enthusiasts, calls for community ownership grew louder. However, the parent company, ConsenSys, found itself in the midst of a dispute over transferring control to the community.
In early 2022, ConsenSys CEO Joseph Lubin noted that the organization is not planning to transfer complete power over the platform to the community. Instead, DAO members will be allowed to fund the development of functionality for MetaMask.
This approach does raise questions about the concept of decentralization. By not completely transferring control to the community, it can be seen as contradicting the core principle of decentralization. The community has expressed mixed feelings. Some appreciated the cautious approach, while others advocated for a more hands-off, fully decentralized model.
It is unclear what exactly determines the reluctance of ConsenSys to transfer control over MetaMask. However, the company raised $450 million from ParaFi Capital, SoftBank Vision Fund 2, and Microsoft. ConsenSys stated that they intend to spend the investments not only on forming capital for staking at the consensus level but also on the development of MetaMask.
Ultimately, the success and acceptance of this approach will depend on ConsenSys’ ability to strike a balance between decentralization and maintaining quality and security, as well as maintaining community trust and involvement.
One of the most notorious chapters in MetaMask’s history was marked by unforeseen errors that led to substantial losses for users. In December 2021, scammers distributed fake MetaMask tokens. Reportedly, the attackers inserted a code with a link to a verification icon in the description and title of the token. This trick made the scammer’s token appear as a legitimate asset.
Due to flaws in the platform’s code, the display of the verification icon also erroneously showed a textual confirmation of the smart contract’s authenticity. Once the scammers collected $1 million in tokens, they closed the protocol, and it is likely that the investments had already been laundered by that time.
In one notable instance, an investor, in an attempt to buy fake tokens quickly, sent over $340,000 in ETH to the scammers. Despite constant errors with transfers to the contract address, the victim proceeded with the transaction, as evidenced by a published screenshot of the transactions.
Later, in April 2023, MetaMask developer Taylor Monahan reported that since December 2022, an attacker had withdrawn more than 5,000 ETH and an unknown number of tokens from 11 different blockchains due to a bug. Monahan noted that no one on the team understands how the exploit works, making it impossible to determine the exact extent of the damage. The investigation revealed that the attacker targeted addresses created between 2014 and 2022. These incidents have cast a cloud of uncertainty over the platform’s reliability, prompting users to question the robustness of its underlying technology.
The period between August 2021 and February 2023 was not without its challenges when unauthorized individuals gained access to a third-party service provider used by ConsenSys customers, leading to a user data leak within the MetaMask platform. This incident impacted users who submitted a MetaMask support ticket between August 1, 2021, and February 10, 2023.
ConsenSys quickly announced that the MetaMask crypto wallet, one of its flagship products, had experienced a data breach. Importantly, the breach targeted a third-party service provider, not the application itself. ConsenSys estimated that approximately 7,000 individuals worldwide were affected by this breach.
This revelation raised concerns about the platform’s security measures and its ability to protect sensitive user information. The incident highlighted potential vulnerabilities and underscored the need for rigorous security audits in the rapidly evolving cryptocurrency landscape.
In a twist of fate, in November 2022, ConsenSys published details about its privacy policy, sparking concerns about user privacy. Allegations arose that MetaMask and ConsenSys were monitoring user activities and potentially collecting data without explicit consent.
The MetaMask browser extension wallet utilizes a node called Infura, owned by ConsenSys. Infura collects Internet Protocol (IP) addresses and wallet addresses of users who connect their MetaMask wallet to it. Not only does Infura gather information about all the wallets within a MetaMask account by linking them together, but it also collects IP addresses that can be used to locate individuals.
The ambiguity of this privacy policy led users to question the extent to which their digital activities were being tracked and analyzed. The responsibility of the company in these practices is debatable. As the crypto world becomes increasingly less anonymous, significant financial gains, Big Data, high-quality marketing, in-depth market analysis, and strategic business planning become imperative. Similarly, Google provides value to users largely through data collection about themselves, to the extent that most people do not perceive any disadvantages in it.
As mentioned earlier, MetaMask was created by the American company ConsenSys. The company was founded by Joseph Lubin in 2014 and since then has received more than $750 million in investments from various funds, including SoftBank, Microsoft, JPMorgan, Bank of America, HSBC, and many others.
On March 15, 2022, ConsenSys raised $450 million in a Series D funding round led by ParaFi Capital, reaching a valuation of $7 billion. This round featured participation from new investors, including Temasek, SoftBank Vision Fund 2, Microsoft, Anthos Capital, Sound Ventures, and C Ventures, in addition to several existing investors.
Joseph Lubin announced that the funds raised in this round would primarily be allocated to expanding MetaMask and the recently launched Infura NFT service. Additionally, a portion of the investment will be dedicated to the development and strengthening of the company’s flagship project, the ConsenSys ecosystem.
Currently, the developers are actively working on scaling solutions to address Ethereum’s scalability issues, aiming to enhance transaction speeds and reduce fees. Their commitment to security is unwavering, with ongoing efforts to make the platform more secure than ever and fortify the wallet against potential threats.
Furthermore, MetaMask is poised to expand its support beyond Ethereum, enabling users to seamlessly interact with multiple blockchain networks. This development will solidify MetaMask’s position as a universal gateway to the world of cryptocurrencies, connecting users with the broader blockchain ecosystem.
The evolution of digital wallets, as exemplified by MetaMask, has reshaped how we interact with digital assets, offering unparalleled convenience and security. This journey began with early command-line interfaces and progressed to user-friendly browser extensions, democratizing access to the decentralized world of cryptocurrencies.
MetaMask’s success is a testament to its ability to balance accessibility and security while continually evolving to meet the needs of its users. With innovations like fiat gateways and institutional solutions, MetaMask is poised to remain a cornerstone in the ever-expanding cryptocurrency ecosystem, providing individuals and institutions alike with the tools they need to navigate this exciting digital frontier.
By exploring various revenue streams, from swap fees to institutional services, MetaMask has found a way to sustain its growth and continue delivering value to its users. This ability to adapt and innovate is what sets MetaMask apart and ensures its place at the forefront of the digital wallet landscape.