Coinbase just changed the game | The motley fool
- on Aug 10, 2022
Coinbase (PIECE OF MONEY 7.73%) has quietly built some of Web3’s most revolutionary products, and users may not even know they’re using them. And that’s the point.
If cryptocurrencies and Web3 are going to achieve mass adoption, the technology is going to have to fade. In other words, right now the crypto wallets, transactions, hacks and all the complexity is too much for most users to 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.
Coinbase’s response to “not your keys, not your crypto”
One of the biggest challenges in cryptocurrency is protecting assets. You can place crypto assets on an exchange, but if the exchange is hacked or goes bankrupt, you can still lose funds.
Self-custody is an option with MetaMask or the Coinbase wallet, but in this case you are responsible for all aspects of security, such as safeguarding your seed phrase and the repercussions of any transactions. Believe me, it’s a pain and limits the level of adoption.
Coinbase has fixed some of the issues 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 which allows you to have a dedicated on-chain wallet that Coinbase helps you keep safe. This is due to the way this wallet is set up, which allows the “key” to be shared between you and Coinbase. Ultimately, this means that if you lose access to your device, your dapp wallet key is still safe and Coinbase can help you recover with 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 in the future.
The MPC wallet debuted in the Coinbase app in a recent update, which means that the dApp wallet that is inside your Coinbase app will act like a regular crypto wallet. But it’s easier to use, integrated with other Coinbase products, and has simple behind-the-scenes security features that protect your crypto — but it remains technically self-guarded, reducing custody risk.
The MPC security features are excellent, but the design of the Coinbase dApp wallet also makes the blockchain you were using invisible. The wallet is currently designed for the Ethereum (CRYPTO:ETH) blockchain, but Coinbase is working on integration Solana (CRYPTO: SOIL) and others. This can eventually make the Coinbase app a one-stop-shop for all crypto activity on any blockchain.
Today, wallets are usually split 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 have to have both, which makes the whole Web3 interaction cumbersome.
Coinbase seems to simplify the process and could include NFTs from multiple blockchains in a single dApp wallet view. This is something few other companies can do, as they lack the scale and cross-functional capabilities of Coinbase. This could help create an easy-to-use multi-chain future with blockchain technology hidden in plain sight of users.
Building the future of Web3
Coinbase hides the complexity of crypto security with its dApp wallets within the Coinbase app, and potentially hides the complexity of multi-chaining. This is exactly what is needed to get more people into crypto and Web3.
It is no coincidence that this will also make it easier to keep users in the Coinbase product ecosystem. This should lead to better long-term financial results.
Wallets may not get a lot of attention in crypto, but they are very important and Coinbase may have just created the best wallet in the industry.
Travis Hoium has positions in Coinbase Global, Inc., Ethereum, and Solana. The Motley Fool holds posts and recommends Coinbase Global, Inc., Ethereum, and Solana. The Motley Fool has a disclosure policy.