Here’s How Crypto Wallets Can Expand Beyond Web3

The digital wallet landscape has undergone a significant transformation with the advent of cryptocurrencies, evolving into what we now commonly refer to as crypto wallets or Web3 wallets. Since these digital storages keep their owner’s personal wealth, the role of a seed phrase becomes crucial. 

Seed phrases, also known as mnemonic phrases, are a critical component of cryptographic security, preserving access to the account in case all other means of login fail. Seed phrases are typically 12 to 24 words generated during wallet creation.

While seed phrases are a powerful tool for security, their complexity can be intimidating. The need to remember and securely store a seed phrase adds a new layer of responsibility for users. Moreover, the potential consequences of losing or forgetting a seed phrase can be devastating, often leading to irreversible loss of access to one’s digital assets.

Chainalysis estimates that around 20 percent of the existing Bitcoin supply is held in lost or inaccessible wallets.

The crypto ecosystem has explored various solutions and best practices for seed phrase storage and recovery in response to these challenges. Physical storage solutions, like tamper-evident bags, safe deposit boxes, and metal seed storage devices, emerged to protect against environmental damage and unauthorized access. Some users chose hybrid storage solutions, like splitting the seed phrase across different locations or using multi-sig wallets, which require multiple keys for access. Smart contracts have also been suggested to enhance seed phrase security, introducing mechanisms like multi-signature protocols, time locks, and decentralized backup solutions.

If a user has all seed phrase words but doesn’t know the correct order, tools can brute force them to rearrange it. Some recovery tools can help order the words correctly, especially when the user knows some part of the seed phrase.

These methods are developed for protecting seed phrases, and the pressure to safeguard this phrase can overwhelm many. But they also show that the seed phrases are not as unbreakable as thought. On the other hand, they fall far from getting the everyday user —who struggles to keep their simple social logins in check— onboarded to the world of Web3.

Abstraction of the seed phrases

The next generation of digital wallet solutions is moving beyond seed phrases to address potential challenges, opening doors to more straightforward and safer ways for digital assets. Digital asset storage without seed phrases has the potential to simplify the user experience while maintaining security to ensure that both newcomers and crypto-savvy users can manage their assets with ease and confidence.

Newly emerging Web3 wallets work hard to bridge the intimidating financial dynamics of Web3 with the familiar, user-friendly apps and screens of Web2, making wallet management as simple as logging in to Google or Apple services. One such solution is Core, a Web3 wallet with a novel approach to wallet creation. Users can generate and manage their wallets similar to Web2 methods without sacrificing security or custody.

Designed to integrate with the Avalanche ecosystem, Core is not restricted to any specific blockchain. This universality means that users can employ Core-generated seeds across various blockchains, from Bitcoin to Ethereum Virtual Machines (EVMs), without the typical complications of managing multiple contracts or navigating cross-chain issues.

What sets Core's Seed Abstraction apart is its ease of use across multiple blockchain networks. In contrast to ERC-4337 (account abstraction), which limits wallet users to EVM chains and is subject to various restrictions, Core offers a more versatile solution by enabling users to conduct transactions across multiple environments, including Bitcoin, Avalanche's C, X, P-Chains, and any EVM.

Non-custodial signing service

Available as a mobile app and browser extension, Core Wallet integrates Cubist’s CubeSigner, a non-custodial signing service, to provide secure social logins and manage keys within a protected hardware environment. This system ensures that keys are generated and transactions are signed remotely within CubeSigner’s secure hardware, safeguarding users' private keys.

Users need their login details and a physical authentication device to access a Core account. This multi-factor authentication approach significantly reduces the risks of phishing and unauthorized access. CubeSigner also incorporates additional security measures, such as extra steps and waiting periods in its key exporting protocol, to protect against attacks like SIM swapping.

Ava Labs Head of Consumer Products Akash Gupta explains that Core is designed to unify the fundamental principles of Web3 by offering a seamless, frictionless, and seedless onboarding process.

Marked by innovations like seed abstraction, the evolution of crypto wallets brings them closer to the everyday user. As the technology matures over time, crypto wallets can become as ubiquitous and user-friendly as traditional banking apps, eliminating barriers to entry for newcomers. This shift towards intuitive, secure platforms promises not only to expand the user base of cryptocurrencies but also to foster a more inclusive digital economy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.