Can Smart Wallets Pave The Way For Blockchain’s ChatGPT Moment?

How Smart Wallets are Simplifying Crypto Management

Crypto wallets are the primary tools we use for interacting with the world of blockchains. They come in all kinds of shapes and sizes, including mobile wallets, desktop wallets, browser extensions and even paper wallets, and they’re used to send, receive and store hundreds of different cryptocurrencies, engage with DeFi applications and blockchain games, store NFTs and more besides. 

The beauty of crypto wallets is tied to the beauty of crypto itself. They allow us to take full custody of our digital assets, and therefore our finances, and effectively become your own bank. When you swap fiat for crypto, you are truly in control. What’s more, crypto wallets have evolved to become far more than simple banking applications, as they also allow us to prove our identities, store digital tickets and even prove our educational credentials or show that we have attended a certain event. 

Despite the wind ranging capabilities and the promise of crypto wallets, they remain far from becoming mainstream due to their glaring lack of user-friendliness. Simply put, crypto wallets are difficult to set up and use, the user interfaces often leave a lot to be desired, and there’s the need to write down and safely store a seed phrase, or risk losing your funds forever. 

Given that blockchains are the driving force behind Web3, it has become clear that wallets need to become much more accessible. One of the biggest reasons why ChatGPT became so popular just a couple of years ago was its ease of use – you simply type your question or prompt into a text box, it couldn’t be simpler. Crypto wallets need the same level of simplicity. 

Seed Phrase Headaches

If there’s one major issue with crypto wallets, it has to be the need for a seed phrase. The seed phrase is your magic key for accessing that wallet, and if you ever lose it you’ll never be able to access your crypto funds again. Because blockchains are decentralized, there is no company or customer service rep you can contact, no way to recover your password, no way to do anything at all. If it’s gone, it’s gone, and that is a major sticking point for many consumers. 

What most people do is write down their seed phrase on a piece of paper, or perhaps store it on another device such as a computer or smartphone. But the reality is that there are very few places that can be considered 100% secure, which means there’s always a risk of theft. And if someone steals your seed phrase, they can simply download the same wallet on their own device and use that to access your funds and make them disappear forever. 

You could also lose that piece of paper, which is just as problematic. Although your funds won’t be stolen if the paper is merely lost, you won’t be able to access them either. Just ask this U.K.-based computer scientist, who is planning to spend millions of dollars on drones and other tech to scour a landfill site for his lost seed phrase, if he can ever win his decades-long legal battle to gain permission to do so. 

Messy User Experiences

Besides security, another major issue with crypto wallets is the user experience and the complicated nature of blockchain interactions. 

As an example, imagine you’d like to swap some USDT for BTC. To do this inside your wallet, you’ll first need to sign the transaction to approve it. This means paying a gas fee for that approval. Then, you’ll be required to sign a second transaction to initiate the actual swap, which involves yet another fee. Of course, you must have the native token of the blockchain your USDT is hosted on, which might be ETH or TRX or something else, otherwise you won’t be able to pay those fees. 

In addition, you must be sure you have the balance available to process your transaction. If not, you’ll be charged a small fee for carrying out a failed transaction, as validators will begin to process it before it’s canceled due to a lack of funds. 

Not only is this process expensive, but it can also be fairly daunting for many, especially new users. That’s why so many crypto traders prefer to use the centralized, custodial wallets offered by crypto exchange platforms. 

There’s another danger too, namely the risk of being hacked. Depending on the wallet, even the transaction signing process can be confusing, as users are presented with an indecipherable message. Even the most experienced crypto users can fall foul of such vulnerabilities, as the Moonbirds NFT creator Kevin Rose found out to his horror when he lost over $1 million worth of digital assets thanks to signing a malicious transaction. 

Fixing Crypto Wallets

These issues have been around for years, but the good news is that the industry is finally trying to fix them thanks to the implementation of Ethereum’s ERC-4337 standard, which enables something known as “account abstraction” and the creation of “smart wallets”. 

Smart wallets are smarter because they throw the old seed phrases into the trash can and replace them with smart contracts that enable “social recovery”, or in other words, provide a way for you to recover a lost password via email. Should you lose your seed phrase, you can get a predetermined friend or family member to sign a transaction that will enable you to re-access your funds. Alternatively, you can choose to store half of your seed phrase with the smart wallet provider and half on a specific device or cloud storage service. In doing this, you can recover your seed phrase by going through the same procedure as you would if you had forgotten a traditional password, through your email account. 

Unlike with traditional crypto wallets, you won’t need to write down or even enter any seed phrase, as the process is entirely automated. 

Smart wallets like Ambire Wallet already offer this kind of functionality, and that’s not all they do. They also enable “account abstraction”, which abstracts away the complexities of blockchain, so there’s no more need to sign each and every transaction or pay for fees with the network's native token. The process of sending funds is reduced to a single click, and fees can be paid in any token, or even pre-paid ahead of time. 

Other nifty benefits include being able to buy tokens directly within the smart wallet, and performing cross-chain transactions without having to bridge to the new network manually. 

In terms of security, smart wallets pave the way for multi-factor or two-step authentication, so after clicking to send a transaction and entering your password or using biometrics to confirm it, you’ll also need to enter a code sent to your smartphone or email, boosting security. 

Ambire Wallet even goes as far as introducing fraud detection capabilities and the ability to set up recurring crypto transactions, automated payments and more. Users can also set daily transaction limits or require additional authentication for transactions over an amount they specify, enhancing security further. 

Just What Crypto Needs

With their new smart capabilities, the functionality and experience of crypto wallets can be likened to using a modern, fiat-based payments app. You download the wallet from the app store, you fund it with fiat, and then you can go right ahead and start exploring the various possibilities that can only be found in Web3, such as DeFi, NFTs and GameFi. 

This is exactly the kind of experience that the crypto industry needs if it’s going to achieve mainstream adoption and success. 

We can see similarities with the AI industry. Few people can remember the original ChatGPT, which was a model called GPT-3 that could be accessed by anyone. In terms of performance, it was really just as good as GPT-3.5, but using it required a basic level of coding knowledge that few people possess. ChatGPT, the first consumer-oriented app based on the GPT models, was therefore revolutionary, ditching the requirement for coding skills and implementing a simple text box that anyone could use. 

The ease of use, combined with GPT-3’s capabilities, is what made ChatGPT such a big hit, and there is tons of potential for smart crypto wallets to do the same for blockchain.