What's the real business model behind closed-source wallets

[The Cryptovator]

How do wallet developers make their money? I'm not referring to the open-source bitcoin only wallets which their funding is from donations and personal help. I'm referring to the rate at which almost all centralized exchanges out there now have their own personal wallet, which they claim is none custodians but its close source, so I'm asking how they are really making money from owning these wallets. To the best of my knowledge, transaction fee don't go to wallet owners, or are their earning solely dependent on the staking as most of them are multiple chain wallet and support staking together with bridging

The rapid growth of new wallets, especially how centralized exchanges are owning there, have left a lot of unanswered questions in my head.

No one does anything without benefits, so developers have some way to make money from their wallet. Centralised exchanges want to maintain their dominance. That's one of their benefits; also, they have financial benefits as well. It's true they aren't earning from the transaction from their wallet, but there are many ways to earn; I will describe them shortly.

Even if you ask this question, you may get some answers. A closed-source wallet even could place banners on its wallet. They could feature anything like dApps or other crypto elements. You can swap from there, and they could earn commission from there as well. They also partner with many aggregators and offer fiat-crypto swaps, from which they also earn. So I want to say they definitely have some benefits behind launching their wallets.

[Nathrixxx]

If there are not hidden agendas behind it, I don't see why they can be open source, so let's say there are a lot of advantages that the closest wallet do benefit from this, ad some have already suggested, some are trading with the fund with them, while some can generate their own income from other valuable products that the offer to crypto communities like hardware wallet and so many others, for sure they won't let you know they are aim because they know already that it is not ideal for them to do so and that is why they are making it a closed source.

[pawanjain]

How do wallet developers make their money? I'm not referring to the open-source bitcoin only wallets which their funding is from donations and personal help. I'm referring to the rate at which almost all centralized exchanges out there now have their own personal wallet, which they claim is none custodians but its close source, so I'm asking how they are really making money from owning these wallets. To the best of my knowledge, transaction fee don't go to wallet owners, or are their earning solely dependent on the staking as most of them are multiple chain wallet and support staking together with bridging

The rapid growth of new wallets, especially how centralized exchanges are owning there, have left a lot of unanswered questions in my head.

There are literally so many ways that closed source wallets can earn money.
The first and foremost way to is just to earn money from their own or parent company.
Then there are ads that the wallet can integrate to their platform, besides that there are partner promotions and sponsors as well.
They can earn through swaps, listing fees etc...

[Filicius]

They also collect your data which is very valuable today.

- Jay -

This, and direct advertising, is the first thing I would have thought of, but it makes sense that, with a large user base, a percentage of the fee for swaps would take the cake in terms of revenue (apart from hidden fees they may charge in some cases).

If it were only for the commissions, and they were low, to reward developers' work, I wouldn't mind using closed-source wallets, but the issue of data generates more distrust in me.

[Kavelj22]

There are literally so many ways that closed source wallets can earn money.
The first and foremost way to is just to earn money from their own or parent company.
Then there are ads that the wallet can integrate to their platform, besides that there are partner promotions and sponsors as well.
They can earn through swaps, listing fees etc...

I wouldn't agree with your point about running ads in private wallets can be a notable source of income for wallet creators. This model is not that profitable with private wallets especially if ads are targeting only a specific niche. Who the genuine will keep use a wallet with popup ads every minute? They will surely go find a better alternative.

As for affiliate links, it seems logic. Most of the private centralized wallets have a swap function integrated. With millions of users, this will generate a lot of money by just redirecting them to the best option to complete a successful swap. Some big companies already lunching their own private wallets like blockchain com wallet and coinbase wallet and trustwallet for binance.

[satscraper]

I am assuming their business model is significantly covered by data collection.  Your information costs a lot more than you probably think.  Considering what OmegaStarScream said, if you have a million people whose collected information you can sell for even as little as 50 cents per person, you already have half a million Dollars in revenue.

I agree with this, and I would recommend running any wallet ^{whose code you cannot read} first in an isolated environment before using it, and ^{preferably being connected to testnet} monitor its outbound connections ^{for example, with Wireshark} checking if traffic spikes when you generate a new address, sign a transaction, view your balance, etc.. which could indicate address or amount leakage. Additionally, you might want to check for unexpected destinations (i.e., anything beyond the blockchain node or API the wallet claims to use).

[pawanjain]

There are literally so many ways that closed source wallets can earn money.
The first and foremost way to is just to earn money from their own or parent company.
Then there are ads that the wallet can integrate to their platform, besides that there are partner promotions and sponsors as well.
They can earn through swaps, listing fees etc...

I wouldn't agree with your point about running ads in private wallets can be a notable source of income for wallet creators. This model is not that profitable with private wallets especially if ads are targeting only a specific niche. Who the genuine will keep use a wallet with popup ads every minute? They will surely go find a better alternative.

As for affiliate links, it seems logic. Most of the private centralized wallets have a swap function integrated. With millions of users, this will generate a lot of money by just redirecting them to the best option to complete a successful swap. Some big companies already lunching their own private wallets like blockchain com wallet and coinbase wallet and trustwallet for binance.

Yeah that's correct. Revenue form ads in a crypto wallet is not a major source of income.
Its like peanuts. The real business revolves around the other things which I and many others have mentioned.

[PrivacyG]

I agree with this, and I would recommend running any wallet ^{whose code you cannot read} first in an isolated environment before using it, and ^{preferably being connected to testnet} monitor its outbound connections ^{for example, with Wireshark} checking if traffic spikes when you generate a new address, sign a transaction, view your balance, etc.. which could indicate address or amount leakage. Additionally, you might want to check for unexpected destinations (i.e., anything beyond the blockchain node or API the wallet claims to use).

But then what is the point of running a closed source wallet in the first place.  It is supposed to offer relief, not stress.  If it has to be this complicated then simply not use closed source ones, right?

[satscraper]

I agree with this, and I would recommend running any wallet ^{whose code you cannot read} first in an isolated environment before using it, and ^{preferably being connected to testnet} monitor its outbound connections ^{for example, with Wireshark} checking if traffic spikes when you generate a new address, sign a transaction, view your balance, etc.. which could indicate address or amount leakage. Additionally, you might want to check for unexpected destinations (i.e., anything beyond the blockchain node or API the wallet claims to use).

But then what is the point of running a closed source wallet in the first place.  It is supposed to offer relief, not stress.  If it has to be this complicated then simply not use closed source ones, right?

Well, I didn't mention exactly that they are closed source. I said wallets whose code you cannot read.

The codebase of almost all, if not all, open source wallets is not fully transparent because of a lack of integrity, which means they integrate 3r^dparty libraries that cannot be scrutinized.

To put it simply, open source wallets may siphon data just as closed source ones do.