The Future of Web3: How Cryptocurrencies and Smart Wallets are Changing the Game

By Ivo Georgiev, CEO of Ambire Wallet

The emergence of Web3 is bringing about a fundamental shift in the way we interact with each other and the internet, providing users with more control over their digital assets and identities. These technologies are paving the way for a new decentralized internet that is more secure, transparent, and user-centric.

By now, most people have heard about cryptocurrencies: digital assets that you can store yourself, without relying on centralized actors such as banks or governments. Cryptocurrencies offer faster payments and, in most cases, lower fees and increased privacy over traditional fiat currencies.

However, cryptocurrencies are not easy to use, and there's a lot of room for error. We're all aware of people who've lost their cryptocurrency to hacks, scams and user error. Too often, this comes down to the fact that most cryptocurrency wallets are notoriously confusing and hard to use. Given how essential crypto wallets are as a means of securing crypto assets and interacting with a growing ecosystem of decentralized applications, the importance of getting their UX right cannot be overstated.

The Rise of Smart Wallets

This is all finally changing with a new generation of “smart wallets.” These next-gen crypto wallets are powered by a technology called account abstraction, which eliminates complicated seed phrases and makes Web3 onboarding much easier.

Smart wallet technology has been in development since late 2018. However, progress was recently supercharged thanks to a new Ethereum standard called ERC-4337, co-written by Yoav Weiss, security researcher at the Ethereum Foundation, and Vitalik Buterin, the co-founder of Ethereum.

With smart wallets, accounts can be programmable, which brings about significant security advancements such as multi-factor authentication, use of secure enclaves, on-chain fraud prevention, smart spending limits and more. As a result, Web3 is finally catching up to fintech giants like Revolut and Robinhood in terms of UX, but with significant privacy and self-sovereignty benefits.

Let’s dive into why Web3, as we know it today, is so hard to use – and how smart wallets solve each of these issues.

The Need for Easy Onramps

First off, self-custodial Web3 wallets are really hard to get started with: onboarding takes significantly longer than what you’re used to, and domain-specific knowledge is often necessary – much like the early days of personal computers before Microsoft and Apple. This is why many newcomers in the space prefer to start with centralized exchanges like Binance and the now defunct FTX, even though history has repeatedly shown how risky centralized exchanges can be. 

Because smart wallets make onboarding as easy as modern fintech apps like Revolut and Robinhood (minus time-consuming KYC processes) and have built-in currency swapping features, there is less reason to rely on risky centralized exchanges. And since smart wallets are self-custodial, they are extremely valuable in the age of mass insolvencies like FTX and SVB, where depositors who assumed their money was safe with others were ultimately left with nothing.

The Presence of Scammers

Second, the Web3 world is full of scams and hacks. This risk is exacerbated by the fact that most Web3 wallets are nearly incomprehensible. For example, new users can’t possibly know that they can lose all their NFTs just by signing a simple message. Unfortunately, many have fallen victim to this so-called blind signing vulnerability, where popular wallets prompt you to do something without providing the full context of what your action entails.

Smart wallets mitigate this risk via a mechanism called transaction simulations, which helps users visualize exactly what will happen after they authorize a particular action. This prevents common cryptocurrency scams like phishing attacks, and on top of that smart wallets’ multi-factor authentication feature also protects users from malware.

The Challenges with Self-Custody

Finally, the essence of self-custody in itself is a confusing concept in its current form, with unintuitive concepts such as seed phrases and paper wallets. As a result, self-custody has remained a double-edged sword: you are empowered by being your own bank, but you bear more responsibility as well, since losing your account login credentials means losing your funds forever.

Smart wallets address this by implementing account recovery mechanisms such as social recovery, where you grant your closest friends or family the ability to recover your account following a specific secure procedure.

Smart Wallets Offer the Best of Both Worlds

Smart wallets and account abstraction allow the merging of two worlds: the self-custody of Web3 wallets, and the user experience and ease of use of modern fintech, and finally makes cryptocurrency and Web3 approachable for everyone.

There have been a number of Web3 smart wallets gaining traction lately: Safe, which recently closed a series A, is currently securing over $39 billion of assets, and is mainly focused on corporate/DAO use cases. Argent recently raised $40M in Series B funding to grow their retail-focused mobile wallet. Somewhere between those two sits Ambire, which is a cross-platform wallet focused on crypto natives, offering a unique self-custodial email/password authentication mechanism (disclosure: the author of this article is the CEO of Ambire).

Regardless of how sophisticated the web3 ecosystem becomes, blockchain will not truly take off until ordinary users can safely, seamlessly, and confidently store and transfer their assets without fear of malicious interference and their own human error.

About the author

Ivo Georgiev is a recognized expert in web3 and crypto, with extensive experience in blockchain development. As the CEO of Ambire Wallet, he leads a team of skilled developers and designers in building innovative products for the blockchain space.

Prior to founding Ambire Wallet, Ivo co-founded a media center with over 25 million users and AdEx, the first open-source decentralized ad platform. During this time, he developed a deep understanding of blockchain technology and became an active participant in the crypto community. He has since leveraged his knowledge and expertise to create cutting-edge blockchain solutions that meet the needs of businesses and individuals alike.

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

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