Intro
Given the open-source nature of the industry, anyone building a blockchain-enabled product can leverage existing code in order to deliver use cases within their application, as long as they comply with the licensing terms.
This newsletter aims to cover the most relevant web3 product releases so that entrepreneurs and builders are aware that, in many cases, they don't necessarily need to build every single feature from the scratch, potentially saving valuable development budget.
Additionally, some of the products & tools I cover are built by top notch teams, with a proven track-record and in most cases are already audited, which means another potential saving opportunity as audits don't come cheap!
Let's get into it.
Coinbase Wallet(s)
Coinbase wallets, available as both extension and mobile versions, gained significant popularity in 2023, especially following the launch of Base, Coinbase's Layer 2 solution, in August. Although Metamask remains the leading web3 wallet, a growing number of wallet providers with superior UI and UX are gradually eroding Metamask's market share.
A crowded space indeed.
Coinbase wallet quickly became popular with support for native Bitcoin and Solana out-of-the-box, send money via link, gasless trading, gasless USDC sends, messaging, trending NFT mints, messaging and much more.
Besides CB mobile and extension wallets, there is also Coinbase Prime web3 MPC wallet, giving institutional clients access to crypto, NFTs, dapps, and DeFi, all from a wallet that’s fully integrated into Coinbase Prime. This paid-product is not aimed for retail and competes with the likes of Fireblocks, Anchorage Digital and Copper.co, among others.
By now, it's widely recognised that Coinbase is a major player in the wallet market for both retail and institutional users. However, there's more to the story.
On March 1st, Coinbase announced the Coinbase Smart Wallet, which officially launched last week. But what exactly is a "smart wallet"?
Let's do a quick recap.
ERC-4337, Account Abstraction & Smart Wallets
In March 2023, I was lucky enough to attend ETHDenver where Yoav Weiss announced the activation of the ERC-4337 standard through a smart contract called EntryPoint, which implements the concept of account abstraction and is compatible with all EVM networks.
Account abstraction is a method of setting up a blockchain network in which users’ assets are stored exclusively in smart contracts, and not in EOAs (External Owned Accounts, such as Metamask). When using this approach, a crypto wallet turns into a unique smart contract that can be programmed for various purposes.
Therefore, a Smart Wallet is an advanced type of cryptocurrency wallet that integrates additional security features, user-friendly interfaces, and enhanced functionalities compared to traditional wallets such as:
Enhanced Security: Smart wallets often include multi-factor authentication, biometric verification, and hardware security modules to protect users' private keys and assets.
Simplified User Experience: They provide a more intuitive and streamlined setup process, eliminating the need for users to manage seed phrases or complex configurations. This makes it easier for non-technical users to get started with cryptocurrencies.
Cross-Platform Accessibility: Smart wallets are designed to work seamlessly across different devices and platforms, such as mobile phones, tablets, and desktops. They can also integrate with various operating systems, including iOS, Android, and Windows.
Automated Features: They may include automated transaction processing, such as automatic gas fee calculation and transaction optimisation, to improve efficiency and reduce costs.
Backup and Recovery: Smart wallets provide secure backup options, such as cloud storage integration or hardware backups, ensuring that users can recover their assets in case of device loss or failure.
User-Centric Design: The design focuses on making the wallet accessible to everyday users, often with a simple interface that hides the underlying complexity of blockchain technology.
Enter Coinbase Smart Wallet
Without further ado, let's create a CB Smart Wallet and see what makes it different:
https://wallet.coinbase.com/smart-wallet User Onboarding via Passkey
The two-click interface to create a wallet, eliminating the need for seed phrases and complex setup steps, means a simplified UX. This makes it accessible for everyday users, not just crypto enthusiasts.
Once you click on "Create Smart Wallet", you will be presented with this pop-up:
Before you go ahead, what does this mean ?
Cross-Device Functionality and Enhanced Security
The wallet is designed to work seamlessly across different devices, including Windows, iOS, iPhone, and Android, ensuring that users can access their wallets and assets from multiple platforms with secure backups like iCloud or Yubico's Yubikey.
It leverages existing hardware security features like Windows Hello, iPhone's Secure Enclave, and equivalent Android systems, providing a secure way to store and access the wallet and supports secure backups, ensuring that users can recover their wallets easily in case of device loss or failure.
Once you create a passkey, that's it, that's the second step. No need to write down a seed-phrase on a paper and set up a password. Your wallet is ready.
Fund wallet
You can fund the wallet by sending tokens from another wallets or CEXs, but another massive innovation is that users can "Magic Spend" by connecting to their Coinbase CEX account and draw directly from their ETH balance (available on Base only, for now). Forget about withdrawing or bridging tokens.
In my opinion, Magic Spend is a game-changer feature. This feature will reduce friction and complexity, making it easier for users to engage with decentralised applications.
Users that have never withdrawn tokens from their CEX account will suddenly be onchain.
Mass Adoption Potential
By simplifying the process and making it more user-friendly, Coinbase aims to attract a broader audience, including those who are not deeply involved in crypto, thus promoting mass adoption. The wallet's design and functionality are geared towards users who do not want to deal with technical aspects of crypto, making it comparable to using everyday internet services.
By the end of 2023 Coinbase (the exchange) had 150 million verified users out of which 8 million transact at least once per month:
There's over $300 billion worth of assets sitting at Coinbase, awaiting to be moved onchain via its Smart Wallet.
Adoption and why your app should support CB Smart Wallet from day 1
At the time of writing, the wallet is 1 week old and hasn't been integrated in every single web3 dApp. The average user will probably head to Uniswap and while trying to connect the wallet will hit a wall.
When choosing "Coinbase Wallet", only CB mobile and browser extension are available:
But there's teams that have already integrated CB Smart Wallet, such as Matcha, one of my favourite DEX aggregators:
Other apps that have already integrated CB Smart Wallet are:
By the time you read this, many other apps will have already integrated CB Smart Wallet (either via their wallet auth provider or by themselves, if they have a custom one). In a couple of months time the apps that don't do so will be "leaving users on the table".
Simplified gasless experiences
Developers can a paymaster to create sponsorship policies for their app and apply for free gas credits (up to $15k) as part of the Base Gasless Campaign through the Coinbase Developer Platform (CDP).
This presents an incredible opportunity, especially for teams developing apps aimed at users who are not yet on-chain as these users won't need any ETH to cover gas fees.
Considering the current average transaction fee of $0.01 on Optimism networks (such as Base), $15,000 worth of gas credits translates to approximately 1,500,000 sponsored transactions.
Is that enough to kick-start your app?
Outro
I hope you enjoyed the Issue #6 of the Web3 Watch newsletter and I would appreciate feedback both in terms of content and also suggestions regarding open-source projects that will supercharge apps that haven't even been built yet, as long as they are legit of course!
