Coinbase (COIN 1.63%) has quietly been building some of the most revolutionary products in Web3, and users may not even know they're using them. And that's the point.
If cryptocurrencies and Web3 are going to reach mass adoption, the technology is going to have to fade into the background. In other words, right now crypto wallets, transactions, hacks, and all of the complexity are too much for most users to even pretend to be interested in. But if someone can simplify interactions with Web3, it could open up the market to hundreds of millions of users. Some of that innovation is already here -- and for Coinbase, it all starts with crypto wallets.
NASDAQ: COIN
Key Data Points
Coinbase's answer to "not your keys, not your crypto"
One of the biggest challenges in cryptocurrency is keeping assets safe. You can put crypto assets on an exchange, but if the exchange gets hacked or goes bankrupt you can still lose funds.
Self-custody is an option with MetaMask or the Coinbase Wallet, but in that case, you're in charge of all aspects of security, like saving your seed phrase and the repercussions from any transactions. Trust me, this is a pain, and limits the level of adoption.
Coinbase has solved some of the problems with a "semi-custodial" wallet, where Coinbase has some of the "keys" that will unlock your wallet and you have some on your device. Here's how the company explained the technology in a blog post:
This innovative dapp wallet experience is powered by Multi-Party Computation (MPC) technology that enables you to have a dedicated on-chain wallet that Coinbase helps you keep secured. This is due to the way this wallet is set up, which allows the 'key' to be split between you and Coinbase. Ultimately, this means if you lose access to your device, the key to your dapp wallet is still safe and Coinbase can assist in recovery through our live support.
It's worth noting that MPC-powered wallets are known as dApp wallets at Coinbase, so that's what I'll call them going forward.
The MPC wallet made its debut in the Coinbase App in a recent update, meaning the dApp wallet that sits in your Coinbase App will act just like a regular crypto wallet. But it's easier to use, integrated with Coinbase's other products, and has simple security features behind the scenes that keep your crypto safe -- but it is still technically self-custody, reducing custodial risk.
Going multi-chain
The MPC security features are great, but the Coinbase dApp wallet's design also makes it invisible what blockchain you were using. The wallet is currently built for the Ethereum (ETH 1.07%) blockchain, but Coinbase is working on integrating Solana (SOL 0.46%) and others. This may eventually make the Coinbase app a one-stop spot for all activities in crypto on any blockchain.
Today, wallets are usually bifurcated between different blockchains. For example, MetaMask is the leader on Ethereum, while Phantom is the leader on Solana, but there are dozens of other wallets. But the two blockchains don't talk to each other, so users need to have both, making the entire Web3 interaction cumbersome.
Coinbase looks like it's simplifying the process, and could include NFTs from multiple blockchains in a single view on the dApp wallet. This is something few other companies can do, because they don't have the scale and cross-functional capabilities of Coinbase. This could help create a multi-chain future that's easy to use with blockchain technology hidden from users' view.
Building the future of Web3
Coinbase is hiding the complexity of crypto security with its dApp wallets in the Coinbase App, and potentially hiding the complexity of going multi-chain. This is exactly what's needed to onboard more people to crypto and Web3.
Not coincidentally, this will also make it easier to get users to stay within the Coinbase ecosystem of products. That should lead to better financial results long-term.
Wallets may not get a lot of attention in crypto, but they're a very big deal, and Coinbase may have just built the best wallet in the industry.
