Crypto usage is surging with millions of people joining the crypto ecosystem on a weekly basis. However, the complexity of blockchain technology can be daunting for newcomers. Beyond concerns for the safety of their assets, an often mentioned hindrance to adopting crypto and utilising crypto products (e.g. wallets) is the extreme complexity of the technology - from seed phrases to gas fees and to interacting with decentralized applications (dApps). 

This is where smart wallets come into play, serving as essential tools to facilitate a smoother onboarding experience and making the crypto ecosystem more appealing to newbies and natives alike. Leading Web3 wallets and companies have taken note of this, with many unveiling several smart wallet solutions over the past 6 months - from Solana’s Fuse Wallet to Trust Wallet SWIFT, a smart contract wallet powered by account abstraction. As we navigate yet another bull run, smart wallets could be the missing key for onboarding newbies.

Smart Wallets and Account Abstraction

Before delving into the improvements smart wallets bring to Web3, we first need to discuss the concept of account abstraction, the underlying technology of smart wallets. Account abstraction is the key to creating a superior wallet experience for users. How? Because account abstraction separates the user experience from the complexities of blockchain protocols, making it easier to build more user-friendly and secure wallet experiences with many more functionalities.

Smart wallets employ account abstraction to interact seamlessly with various blockchain networks, enabling users to not only manage multiple digital assets effortlessly but also easing the burden of understanding gas fees and transaction mechanics. With account abstraction, developers can essentially "abstract" away the complexities of gas fees and transaction management from users.

Additionally, smart wallets overcome the limitation of existing Wallets by being able to support Scheduled Payments & Subscription, pull payments, auto-lock, MFA(Multi-Factor Authentication), and more, which highly contributes to crypto’s integration with the Web2 ecosystem.

Account Abstraction and ERC-4337

After much discussion about the possibility of account abstraction, the ERC-4337 proposal was deployed on the Ethereum mainnet in March 2023. More importantly, ERC-4337 allowed for the development of user-friendly Web3 wallets and wallet solutions. An example is Trust Wallet’s Barz, an ERC-4337 compatible smart wallet solution, focused on creating smarter and more secure experiences for users. Trust Wallet first utilized Barz in its recently launched smart

wallet, Trust Wallet SWIFT. This became the first major Web3 wallet to introduce innovative features such as passkeys, gas payment with 200+ tokens, 1 step swap & bridging. SWIFT’s gas fee abstraction feature accepts gas for transactions in over 200 tokens—350% more than the current market offers.

How Smart Wallets Improve And Accelerate Onboarding

Thanks to account abstraction, smart wallets are improving the crypto onboarding experience by providing solutions to key challenges such as security, usability and accessibility. This in turn will encourage more users to confidently utilize Web3 products as their primary financial tool. Here’s how smart wallets will achieve this:

Improved Recoverability

Traditional Web3 wallets, e.g. wallets using Externally Owned Accounts (EOAs), often rely on private keys and seed phrases which can be lost or forgotten. This has been one of the major pain points which led to millions of assets being lost.

Smart contract wallets could include account recovery options such as using an iCloud or Google account, and more importantly through passkeys. Passkeys are encrypted digital keys created using fingerprint or face biometrics, and are linked to an iCloud or Google account. Passkeys are used instead of a password or 12-word secret phrase to protect and recover a wallet. They are securely saved to a user’s password manager for easy access and for easily recovering a wallet from other devices. This improved recoverability instills confidence in users, knowing that their assets are not permanently inaccessible in the event of unforeseen circumstances.

Moreover, Passkeys can be securely synced across user’s devices upon the user’s approval; this enables users to securely access their wallets across their devices.

Enhanced Security and Trust

Multi-Factor Authentication: Smart wallets can implement multi-factor authentication or multi-signature features, requiring multiple approvals for transactions. This reduces the risk of theft or unauthorized access, building stronger trust among users. In addition, smart contracts can be seamlessly integrated with automated fraud detection and checks for suspicious activities, therefore enhancing security.

No outstanding allowance with no UX compromise: For numerous Web3 applications and wallets, approval action is one of the common steps to grant access to the protocol or dApp(e.g. Uniswap, 1Inch, etc). However, for easier UX, it is a common practice to approve an unlimited amount (so users don’t need to obtain approval again).

Because of this, there has been a tremendous amount of assets that have been stolen due to outstanding allowances the smart contracts had. In Trust Wallet SWIFT, users are not required to have a separate approval process or create an outstanding allowance for UX. Users will only confirm the required amount for the transaction while the approval process gets merged into one leveraging batch-execution. Through this capability, users can experience a more secure and easy swap & bridging experience.

Simplified User Experience

Gas Abstraction: Smart contract wallets can handle gas fees in a more user-friendly way, sometimes allowing transactions without needing the user to hold a native token for gas. This can simplify the user experience significantly. An example is Trust Wallet SWIFT’s gas fee abstraction feature which accepts gas for transactions in over 200 tokens—350% more than the current market offers.

Scheduled transaction & Payment: Smart wallets also have the capability to be integrated into Web2 payment systems and support diverse forms of payment (e.g. subscriptions). For example, crypto payments could be enabled with a Visa/Mastercard with automatic withdrawal of crypto from your wallet whenever users pay with the card.

Interoperability and Cross-Platform Compatibility

Key management between multiple devices is another benefit of smart wallets. With passkeys, users are able to securely sync their keys to their devices, without having to import them each time they have a new device.

Additionally, smart contract wallets can be designed to work seamlessly across different blockchains and platforms, allowing users to interact with a wider range of DeFi services and assets without needing multiple wallets. This accessibility ensures that users can manage their assets and perform transactions on the go, which is particularly appealing to new and younger users.

There is also diverse progress regarding chain abstraction enabled through smart wallets. This means users can manage their assets and perform transactions on multiple chains much more easily, which appeals to experienced users seeking a seamless experience. The ability to access a wallet anytime, anywhere significantly improves user convenience and fosters continuous engagement with Web3 products.

Conclusion

By bridging the gap between usability and security and ultimately allowing seamless integration with Web2, smart wallets significantly lower the technological barriers into crypto and could provide the foundation for accelerating onboarding for millions. By minimizing the technical hurdles, smart wallets make it easier for both new and experienced users to confidently and securely utilize crypto assets in their daily lives.