On Wednesday, crypto heavyweight Coinbase announced the rollout of its smart wallets, which it is calling web3’s “iPhone moment” to onboard more than a billion users onchain, said Luke Youngblood, founder of Base-native lending application Moonwell in an interview with Unchained.
Rather than using a traditional wallet typically in the form of an application or browser extension that is reliant on passwords, third-party installations, or seed phrases to recover one’s private key, users can use smart wallets which gain security from passkeys.
A traditional wallet depends on a private key to sign, while smart wallets use passkeys that often depend on biometric identification to sign transactions, such as facial recognition or a fingerprint. The rollout of smart wallets is a move expected to simplify the onboarding experience of new users who are not crypto native.
“Onchain app developers today lose many of their many new users during the onboarding process when they leave the app to go install and fund a separate wallet,” wrote Coinbase senior director of product management Sid Coelho-Prabhu in the announcement.
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Smart wallets enable people without crypto wallets to get one quickly and jump into using an application. As part of the effort to bring more users onchain, Base is also supplying gas credits to help developers sponsor the transactions of their application’s users. Of the several ways to earn gas credits, one way a developer can get $15,000 worth of sponsored gas, according to Moonwell’s Youngblood, is putting a “Create Wallet” button on their application.
Alternatively, to gain $1,000 worth of sponsored gas a developer can release a demo of their Coinbase Smart wallet integration, according to information platform smartwallet.dev.
“When the iPhone was launched into the 2000s and the 2010s, it took off. All of a sudden, anyone could use apps without having to buy a computer,” Youngblood added, “We feel really strongly this is going to cross the chasm from DeFi and onchain finance being this niche tool only usable by wealthy people in developed countries like ours to broad mainstream adoption.”
New Login Mechanism
Passkeys were developed by Apple, Google Microsoft, and the FIDO Alliance to act as a new method of logging in.
“Passkeys are generated on your device and are not shared or stored on any server, according to a Coinbase blog post.”The public key is stored securely on Coinbase servers, while the private key is securely stored on your device, protected by your device’s native authentication method, such as biometrics (e.g., Face ID or fingerprint) or a PIN.”
The announcement comes as a different Coinbase initiative is attracting substantial mindshare among those in the crypto ecosystem, namely, its layer 2 blockchain network Base, which has crossed 10 million total users in less than one year since launch and nearly 321,000 daily users on a seven-day rolling average as of Tuesday. Despite the rapid growth, Base’s total number of users is still a fraction of Coinbase’s 110 million.
Moonwell, the fourth largest protocol on Base with a total value locked of almost $95 million, is a day-one launch partner of Coinbase’s smart wallets, meaning users who already have smart wallets can interact with Moonwell onchain without paying gas fees on Wednesday.
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Coinbase’s smart wallets is supported on a number of blockchain networks such as Base, Arbitrum, and Avalanche. While the base layer of Ethereum is also supported, it is “not preferred for use, due to gas cost,” according to a website dedicated to smart wallets.
