The New Binance Web3 Wallet and the Issues it Raises
Just 3 days ago, the 8th of November, 2023. Binance announced its new Web3 wallet.
It's such good news, because it is good progress, and because it is great to see a huge company like Binance throwing its weight in the Web3 revolution.
The Main Features of this Wallet
Self-custody:
Its breakout feature is that it is a self-custody wallet. Which means you have full control over the wallet. Unlike the wallet address you use on the Binance exchange which is owned and controlled by Binance. This one is fully under your control (we will raise concerns about that later).
This self-custody feature is what makes it a Web3 wallet since Web3 is all about decentralization and individual ownership rather than control by a third party everyone has to depend on.
This feature is such a big deal for a centralized exchange because until now, the idea of owning your own keys and control over the wallet on a centralized exchange was non-existent.
Multi-Party Computation (MCP):
This is another interesting feature. It is some technology that allows for more than one key to be generated for a wallet. It also doesn't make use of seed phases, but keys.
On the Binance Web3 wallet, three keys are generated upon creation. One of the keys is kept and secured by Binance, while the other two keys belong to the user.
In order to access the wallet, any two of the three keys are needed. So this means having only one of the keys (like Binance does) is not supposed to allow access to this wallet.
Issues for Discussion this New Wallet Raises
Better than a Centralized Exchange Wallet, but not Better than a Personal Wallet
That's exactly what applies here. As good as this wallet is for Web3, it is still less Web3 than the normal personal wallets generated on Trust Wallet, for example. This wallet lets you use dApps, switch from Cefi to defi, etc. But you only have access to a limited number of dApps.
According to Binance:
"Users already familiar with Web3, and who are looking for more sophisticated features, may find Trust Wallet to be a more suitable offering. Trust Wallet’s native dApp browser provides unrestricted access to the full spectrum of dApps available and caters to the needs of advanced users without necessitating integration with the Binance Exchange. As such, Trust Wallet is an optimal solution for individuals who operate beyond the Binance ecosystem or prefer not to link their wallet activities with their Binance trading accounts."
Anonymity
This is a wallet under Binance, which means you have to complete KYC even before creating it. So, anonymity is non-existent here.
Probably, Binance Can Still Access your Wallet
As already explained, one needs two keys in order to access the wallet, and Binance has only one. So that's supposed to mean they can't access it without one of the keys only the user has access to. But how true is that?
I'm only raising doubts, for two reasons. The first reason is simply because trust is what is required in order to not have any doubts here, and I'm a Web 3 advocate. Web3 has nothing to do with trust. "Trustless" is a term we use frequently, and it is supposed to mean having full control of your data and resources, having decentralization, and as a result having no reason to trust a third party.
Binance engineered this Wallet, and even though it is cryptographic, one shouldn't conclude Binance has no back door or something until this has been proven beyond reasonable doubt.
As for the second reason why I have doubts: it is that I read the announcement of this wallet, the accompanying articles, and the Frequently Asked Questions (FAQ). Binance answered every question under the sun about this wallet but didn't say anything directly about whether they could access your wallet.
I know they explained at length about MCP, and about the fact that one can only access the wallet with two keys and that they have only one. But that was only said while explaining what MCP technology is all about, and not about whether they have a back door.
Things would have been less suspicious if they addressed a question directly about whether or not they could access the wallet somehow.
In closing this issue, I'd say this is not an accusation but rather the exact thing a trustless Web3 enthusiast should say.
A Path for Other Centralized Exchanges to Follow
Web3 is also a rise against "Big Tech". In the world of cryptocurrencies, centralized exchanges are the closest things we have to "Big Tech". Making Web3 wallets like these that give one full/increased control is a welcome development and a stride in the right direction furthering the gradual embrace of Web3.
Other centralized exchanges should follow suit.
The End
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It is really a great Development to see the wallet and it is definitely going to be useful to a lot of people
If they have a key, then they can access the wallet. The question is, under what circumstances will they do that?
They never said anything about the circumstances that can lead to them doing that. Also, the key they have can't open your wallet because it takes two keys. The wallet has three keys and you have two. But then, this is what they tell us 🌚.
Oh! hm. why do they have any keys at all then? Did they say? It's a good idea, kinda sorta. Binance keeps trying to do the right thing it seems.
https://twitter.com/jewellery_all/status/1723412746363097308
Security like this is very important because hackers have many ways to access our wallet.