How Does A Crypto Wallet Make Money?
A crypto wallet makes money primarily through transaction fees, which are usually a percentage of the transaction value or a fixed fee per transaction. For instance, as of 2023, certain wallets charged an average fee of 0.5% for every transaction, while others had a fixed fee of $2.50 per transaction. Additionally, some wallets earn revenue by offering premium features, integrating with crypto exchanges, and earning interest on stored cryptocurrencies. Partnerships and affiliations with other crypto services can also provide an income stream.
The revenue model of a crypto wallet largely hinges on its type: hot or cold.
For instance:
- Cold Wallets (offline, like hardware wallets) mainly earn from device sales, firmware updates, or associated premium features.
- Hot Wallets (online wallets) can derive income from multiple channels such as transaction fees, interest, staking, exchange services, affiliate promotions, and more.
In this article, we explore the primary revenue streams for crypto wallets, main of which are:
- Transaction Fees
- Launch of a New Coin or Token
- Interest Rates
- Staking
- Exchange Services
- Affiliate Programs
- Premium Features
| Wallet | Primary The Wallet Makes Money |
| Maiar | Promote EGLD & Elrond Network |
| Nexo | Differential between crypto loans and deposits; Farming, staking, etc. |
| Valora | Affiliate Service/Promote CELO, CUSD & Celo Network |
| StormX | Transaction fees charged to merchants. |
| Trust Wallet | Affiliate Service/Transaction fees on transactions made on BSC |
| Exodus | Assets Exchange |
Table Legend: This table, based on a case study by UXBoost published on August 23rd, 2022, illustrates primary revenue channels of various crypto wallets.
Transaction Fees
Every time users send or receive cryptocurrencies using a wallet, there’s usually a transaction fee. This fee is shared between the network and the wallet provider.
For example, when using BRD Wallet, a user decides to send Bitcoin. A portion of the network fee goes directly to Bitcoin miners. On top of this, BRD may charge a small convenience fee for facilitating the transaction through its seamless interface.
This fee can either be a flat rate or vary based on the network congestion or the urgency of the transaction. Here’s a glimpse into different fee structures:
| Wallet | Fee Structure | Notes |
| BRD Wallet | Variable based on network | Fees also account for wallet services |
| Trust Wallet | Percentage of the amount | Fees lower for BSC transactions |
| Exodus | Dynamic based on urgency | Fees can rise during high network congestion |
Launch of a New Coin or Token
Wallets sometimes venture into launching their own tokens or coins, serving multiple purposes.
Crypto wallets can make money from the launch of a new coin or token in several ways:
- Listing Fees: When a new cryptocurrency is introduced, it needs to be listed on various wallets for users to store and trade. Wallet providers often charge listing fees to include these new coins or tokens in their services. This fee can vary depending on the wallet’s popularity and the coin’s demand.
- Referral Programs: Some wallets offer referral programs that reward users for bringing in new customers. Wallet owners can earn commissions or bonuses when they refer new users who subsequently use the wallet for transactions or storage. This helps drive user acquisition and usage.
- In-Wallet Trading: Wallets can enable users to trade cryptocurrencies directly within the wallet interface. They may charge a small fee for facilitating these in-wallet transactions. This convenience encourages users to stay within the wallet ecosystem for their trading needs, generating revenue for the wallet provider.
- Increased Usage: The introduction of new coins can attract more users to a wallet platform, leading to increased usage. Higher usage often translates into more transaction fees, which can be a significant source of revenue for wallet providers. These fees are typically generated from sending, receiving, or exchanging cryptocurrencies within the wallet.
Example: Binance, one of the largest exchanges, took this route. They introduced the BNB token, which has several utilities on the Binance platform, including being used for discounted trading fees.
Interest Rates
Crypto wallets offer interest rates on stored cryptocurrencies through various mechanisms, often referred to as crypto savings accounts or crypto lending platforms. Here’s how they work:
- Deposit Funds: Users deposit their cryptocurrencies, such as Bitcoin or Ethereum, into a specific wallet or platform.
- Lending or Staking: The wallet or platform lends these deposited cryptocurrencies to other users or entities, typically in exchange for interest. Alternatively, in some cases, cryptocurrencies are staked within the platform’s ecosystem.
- Interest Accrual: The interest is accrued over time based on the terms of the lending or staking agreement. Interest rates can vary widely and may depend on factors like the type of cryptocurrency, the platform, and market conditions.
- Payment Frequency: Interest payments can be made at regular intervals, such as daily, weekly, or monthly.
- Platform Profit: The platform generates profit by lending the deposited cryptocurrencies at higher rates than the interest it pays to users.
- Security Measures: Reputable platforms often have security measures in place to protect users’ funds, such as insurance and robust security protocols.
- Withdrawal: Users can typically withdraw their deposited funds along with the accrued interest at any time, although there may be withdrawal fees or lock-up periods on some platforms.
Crypto wallets that offer interest on stored cryptocurrencies differ in terms of the way they offer interest and the interest percentage. For instance:
- BlockFi: Offers an interest account with returns of up to 8.6% APY on crypto holdings.
- Celsius Network: Users earn weekly compounding interest on their deposits, with rates dependent on the token.
Staking
Staking in the crypto world refers to the act of holding and locking up a cryptocurrency in a wallet to support operations such as block validation on a network. For the individual staking their tokens, this can translate to earning a form of “interest” on their holdings, leading to passive income. Many wallets that support staking earn a commission or fee from the rewards garnered by users.
Staking has gained immense traction, especially in the DeFi space, where liquidity providers often stake their tokens in liquidity pools for rewards. Wallets supporting such DeFi protocols can earn a commission or fee from the staking rewards.
A practical implementation of staking can be seen in the Exodus Wallet, where users have the option to stake their Cardano (ADA). When they do, they can earn staking rewards, with Exodus facilitating this process and extracting a minimal fee from the rewards.
Exchange Services
Many wallets extend integrated exchange services, offering a seamless exchange of one cryptocurrency for another.
Wallets with integrated exchange services act as intermediaries, allowing users to swap one cryptocurrency for another without exiting the wallet interface. Wallets earn through exchange fees, which can be either a flat fee or a percentage of the transaction value.
DeFi’s surge has also seen a rise in decentralized exchanges (DEXs). Some wallets are now integrating with DEXs, enabling users to seamlessly exchange or swap tokens within the DeFi ecosystem, thereby earning through the associated exchange fees.
A notable crypto wallet providing exchange services is the Atomic Wallet that lets users make in-app exchanges between various cryptocurrencies and charges a fee, which is part of their revenue stream.
Here is how it works with various wallets:
| Wallet | Service Description | Fee Structure |
| Atomic Wallet | Offers in-app exchanges between various cryptocurrencies. | Variable based on trade. |
| Changelly | Provides fast crypto-to-crypto exchanges integrated into the wallet. | Percentage-based fee. |
| ShapeShift | Allows for crypto swapping within the wallet without creating an account. | Dependent on the swap. |
Affiliate Programs
To expand their user base, wallets initiate affiliate or referral programs as incentives, offering existing users incentives to bring new users onboard.
Example: The Trust Wallet promotion strategy revolves around a unique referral system. Here, a user gets a specific link. When another individual registers through this link and makes a certain number of transactions, the original referrer is rewarded.
| Wallet | Affiliate Program | Program Details |
| Trust Wallet | Referral Bonus | Rewards for new users transacting on BSC |
| Coinbase | Signup Bonus for Referrers | Referrers earn when the referred user trades |
| Exodus | Referral Bonus | Earn bonus for every new user who joins through referral |
Premium Features
Some wallets offer enhanced features for a fee. These can range from heightened security measures, advanced transaction tracking, superior backup and recovery options, to ad-free experiences. Such features are tailored to cater to users who need more than the standard functionalities.
Example: Ledger Live, paired with Ledger Hardware Wallets, offers features like Coin Control for Bitcoin. This lets users choose which specific coins are utilized in transactions, an advanced functionality available for an extra charge.
Ads and Promotions
Some free wallet services display ads within their app or platform. They might also promote particular cryptocurrencies in exchange for a fee.
