Rainbow is a non‑custodial Ethereum wallet designed to make Web3 feel fun, simple, and secure for everyday users. It lives on mobile and as a browser extension, letting people hold ETH and ERC‑20 tokens, swap assets, track NFTs, and interact with DeFi and NFT marketplaces from one interface.
Unlike traditional custodial wallets or exchanges, Rainbow never holds users’ private keys; instead, it gives them full control over their funds while abstracting away much of the complexity of gas, addresses, and network selection. This approach solves a core problem in crypto: the steep onboarding curve for new users who want to buy ETH, manage tokens, and explore NFTs without becoming blockchain experts.
Rainbow’s mission is to be the “Ethereum wallet that lives in your pocket”, a friendly, colorful gateway to the entire Web3 ecosystem.
What Problems Rainbow Solves
Onboarding New Crypto Users
One of the biggest barriers to crypto adoption is the friction of getting started: setting up a wallet, buying ETH, understanding gas fees, and navigating multiple chains and apps. Rainbow reduces this friction by offering a clean, intuitive interface where users can:
- Create a wallet in seconds
- Buy ETH and other tokens directly with Apple Pay or a card (via third‑party providers)
- See real‑time balances and portfolio value across Ethereum and major Layer 2s
- Easily send and receive tokens with ENS names instead of raw addresses
This seamless onboarding is especially valuable for people who are new to crypto but want to participate in NFTs, DeFi, or tokenized communities without deep technical knowledge.
Managing a Multi‑Chain, Multi‑Asset Portfolio
As Ethereum has grown, users now hold assets across multiple chains (Ethereum mainnet, Arbitrum, Optimism, Base, etc.) and in many forms (tokens, NFTs, LP positions). Rainbow addresses this by:
- Supporting all major EVM chains and allowing users to add custom RPCs
- Displaying NFTs across chains in a unified gallery
- Providing cross‑chain swaps and bridge options from within the wallet
This turns Rainbow into a true “home base” for Web3, where users can see and manage their entire digital asset portfolio in one place, rather than juggling multiple wallets and dashboards.
See also: Blockchain Infrastructure and how it works
Improving Security and Usability
Rainbow also improves the security and usability of self‑custody:
- It’s non‑custodial, so users control their own keys and seed phrases
- It supports hardware wallets (Ledger, Trezor) for extra security
- It offers features like “impersonation mode” to safely explore dApps with read‑only access
- It integrates Flashbots protection to reduce the risk of sandwich attacks and MEV
By combining strong security with a polished, user‑friendly design, Rainbow makes self‑custody feel accessible to a much broader audience.
The Rainbow Business Model
Core Value Proposition
Rainbow’s business model is built on the idea that a great wallet can become a central hub for Web3 activity, and that value can be captured by facilitating and enhancing that activity rather than by holding custody of funds.
The key insight is that wallets are uniquely positioned to:
- Be the first point of contact for new users
- Sit between users and the broader DeFi/NFT ecosystem
- Aggregate data and behavior across chains and dApps
Rainbow monetizes this position not by charging for basic wallet functions, but by taking a small cut of the value that flows through its interface.
How Rainbow Monetizes
Rainbow generates revenue primarily through transaction‑based fees and partnerships, rather than subscription fees or ads.
1. Swap Fees
When users swap tokens inside Rainbow (e.g., ETH for USDC, or one ERC‑20 for another), Rainbow routes the trade to decentralized exchanges (DEXs) and earns a small fee on each swap.
This fee is typically a small percentage (for example, around 0.3–0.85%) of the swap volume. Because Rainbow aggregates liquidity from multiple DEXs and routing protocols, it can often offer users better prices while still capturing a share of the spread.
Over time, as more users trade through Rainbow, this creates a recurring revenue stream that scales with adoption and market activity.
2. Fiat On‑Ramp Commissions
Rainbow allows users to buy ETH and other tokens with fiat (e.g., via Apple Pay or card). It does this by integrating with third‑party on‑ramp providers (like MoonPay, Transak, or similar services).
For each fiat purchase, Rainbow earns a commission or revenue share from the on‑ramp partner. This is a common model in the wallet space: the wallet provides a seamless buying experience, and the on‑ramp provider handles compliance and payment processing, with both parties sharing the economics.
3. NFT and Marketplace Integrations
Rainbow also integrates with NFT marketplaces and other dApps, making it easy for users to browse, buy, and sell NFTs directly from the wallet.
In some cases, Rainbow may earn referral fees or revenue shares when users complete NFT purchases or other actions through these integrated services. This aligns Rainbow’s incentives with those of the broader ecosystem: the more value users create in NFTs and DeFi, the more Rainbow earns.
See also: Decentralized Application Explained
4. Data and Analytics (Indirect Monetization)
While Rainbow does not sell user data, it can use aggregated, anonymized usage data to improve its product and inform partnerships. For example:
- Understanding which chains, tokens, and dApps are most popular
- Optimizing swap routing and gas estimation
- Informing the design of new features (e.g., new NFT galleries, Layer 2 support)
This data‑driven approach helps Rainbow stay competitive and can indirectly support monetization by increasing user engagement and transaction volume.
5. Future: Token and Ecosystem Incentives
Rainbow has announced plans around a native token (RNBW) and a rewards program (Rainbow Points).
The idea is to:
- Reward active users (e.g., those who swap, bridge, or interact with dApps) with points
- Allow points to be converted into ETH or other rewards
- Eventually tie the token to governance, staking, or other utility within the Rainbow ecosystem
This creates a flywheel: more activity, more rewards, more engagement, more revenue from fees and partnerships.
Who Uses Rainbow
Individual Crypto Users
Rainbow’s primary customers are individual crypto users who want a simple, secure way to manage their Ethereum and Layer 2 assets.
This includes:
- Newcomers who are buying ETH for the first time and exploring NFTs or DeFi
- NFT collectors who want a clean, multi‑chain NFT gallery and easy trading
- DeFi users who want to swap tokens, provide liquidity, and interact with yield‑generating protocols
- Multi‑chain users who hold assets across Ethereum, Arbitrum, Optimism, Base, and other EVM chains
For these users, Rainbow’s value lies in its simplicity, security, and ability to unify their Web3 experience.
Developers and dApp Builders
Rainbow is also used by developers and dApp builders, both as a user wallet and as a tool for integrating wallet connectivity.
Rainbow Kit, a React library developed by the Rainbow team, makes it easy for dApps to add wallet connection (supporting Rainbow and many other wallets) with a clean, customizable UI.
For developers, this means:
- Faster integration of wallet support
- A better onboarding experience for their users
- Access to a large, engaged user base
Rainbow benefits from this ecosystem by increasing the number of dApps that work well with its wallet, which in turn attracts more users and more transaction volume.
Institutions and Power Users
While Rainbow is designed for everyday users, it also appeals to institutions and power users who value:
- Strong security (non‑custodial, hardware wallet support)
- Multi‑chain and multi‑asset portfolio management
- Advanced features like cross‑chain swaps and MEV protection
These users often generate higher transaction volumes, which increases Rainbow’s fee revenue and strengthens its position as a serious, professional-grade wallet.
Benefits and Challenges
Benefits of the Rainbow Model
For Users
- A simple, intuitive interface that lowers the barrier to entry
- Full control over funds (non‑custodial)
- Support for multiple chains and NFTs in one place
- Better prices and protection on swaps (via aggregation and Flashbots)
For the Ecosystem
- Increased liquidity and trading volume routed through DEXs
- More users onboarding into DeFi and NFTs
- A standardized, high‑quality wallet experience that dApps can rely on
For Rainbow
- A scalable, usage‑based revenue model (fees grow with volume)
- Strong network effects: more users, more dApp integrations, more users
- A clear path to tokenization and ecosystem incentives (RNBW, Rainbow Points)
Challenges and Risks
Regulatory Uncertainty
As a wallet that facilitates swaps and fiat on‑ramps, Rainbow operates in a complex regulatory environment. Different jurisdictions have different rules around money transmission, securities, and KYC/AML, which can limit where and how it can offer certain features.
Competition
The wallet space is highly competitive, with many alternatives (MetaMask, Trust Wallet, Phantom, etc.). Rainbow must continuously innovate on design, security, and features to maintain its position.
User Education
Even with a simple interface, many users still struggle with core concepts like gas, slippage, and MEV. Rainbow must invest in education and UX to reduce support costs and prevent user errors.
Token Economics
If Rainbow launches a token (RNBW), it will face the classic challenge of creating sustainable token utility and demand. Poorly designed tokenomics can lead to short‑term speculation and long‑term value erosion.
See also: What is Tokenomics?
Conclusion: The Future of Rainbow Business Models
The Rainbow business model shows how a modern Web3 wallet can create value by being a neutral, user‑centric gateway to the entire ecosystem. Instead of capturing value by holding custody of funds, it captures value by enabling and enhancing user activity, swaps, on‑ramps, NFT trading, and dApp interactions.
This model is powerful because it aligns the wallet’s incentives with those of its users and the broader ecosystem: the more value users create in Web3, the more the wallet earns.
An innovative thought for the future: as wallets become more intelligent, we may see “agent‑assisted” wallets that use AI to optimize trades, manage risk, and even automate parts of a user’s portfolio. In that world, the wallet’s business model could evolve further, capturing value not just from transactions, but from the intelligence and automation it provides.
