Smart Wallet: New Paradigm for Blockchain Account System

Overview of Smart Wallet Development


Smart Wallet is a path to mainstream for the cryptocurrency. Using a smart contract as an account to interact with blockchain in place of using the private key, Smart Wallet makes it easier to use DeFi and various dapps on blockchain for average users. Smart wallets are rapidly emerging on Ethereum since 2017, namely Gnosis Multisig, Gnosis Safe, Argent, Monolith, MYKEY, Dharma, Dapper, and Authereum. Nearly 100,000 accounts are created by these smart wallet operators, holding more than billions of dollars. There's an obvious trend that more Smart Wallets are designed for consumers, which drives the change in the pattern of blockchain account.

The Development of Smart Wallet on Ethereum

What is Smart Wallet?

Smart Wallet is the user interface and its underlying smart contract-based blockchain account. With well-designed account logic, Smart Wallet brings exciting features.

Stage 0: Crypto Entry before Smart Wallet

People use crypto wallets to interact with underlying blockchain. It's a key management tool, a blockchain browser, and a dapp store where to view and use blockchain applications, such as transfer, staking, lending, etc. Currently, people use the custodial wallet or non-custodial wallet. The essential difference between them is who has the full control of the account, or precisely the private key.

The custodial wallet offers a traditional internet account rather than a blockchain account. User need to trust the custodian. In contrast, a non-custodial wallet gives back full control to the user, but meanwhile the user can’t enjoy the feature as same as internet products, such as account recovery, transfer limit, whitelist, and so on.

That’s why we need Smart Wallet. With a proximity to the experience of Internet products, Smart Wallet is the potential path to realize such tasks using the smart contract.

Stage 1: MultiSig, Smart Wallet for Enterprise

Smart Wallet is not a new concept since Multisig Wallet is Smart Wallet indeed. Date back to 2015, Gavin Wood made the first implementation[1] of the MultiSig wallet. Since then, Gnosis, BitGo, Mist, DS Group, Parity made their implementation.

The goal of MultiSig wallets is to enhance security by a smart contract. The assets are owned by the smart contract, requiring multiple parties predefined to agree on transactions before execution. MultiSig wallets can avoid single failure risk of private key leaks. 

Gnosis Multisig, the most widely adopted MultiSig Wallet, has nearly 4,000 users and has stable growth. Most of them are accounts for crypto funds, companies, exchanges, and foundations. Few individual users use MultiSig wallet unless he/she is a hardcore user or has much money.

Stage 2: Gasless, Smart Wallet for Customer

Smart Wallets for the customer are emerging rapidly in 2019. According to DuneAnalytics, the Smart Wallets for customers are launching one after another. Argent, Monolith, MYKEY, Dapper, Gnosis Safe, Dhamar, and Authereum all go live in 2019. The number of users gained in 2019 is nearly 44,000, while in the first five months of 2020, the number of new users achieves 47,000, showing the sound momentum of growth.

The trend of user growth of Smart Wallets can be seen in the figure below.

The difference between the two generations' Smart Wallets

The biggest difference between the 2nd-generation & the 1st-generation Smart Wallet is that all 2nd-generation Smart Wallets adopts meta-transaction to lower barriers for normal people, or we can say the Smart Wallets for customers is a gasless wallet, so the user doesn't need to care about the transaction fee. There's a relayer collecting user's signed transaction and send it to the blockchain. The relayer service is usually provided by the Smart Wallet's operator; however, it's a trustless and permissionless service, which means the relayer can't forge or tamper with the transaction, and everyone can deploy own relayer without authorization.

The other difference is reflected in account recovery, transfer limit, transaction batch, etc.

Brief Comparative Analysis of Mainstream Smart Wallets


What does the Smart Wallet look like? They're quite different because they're designed for different demands. Here's the brief view of the selected Smart Wallets.


Every Smart Wallet listed here is a well-designed product with features. Each product needs to be described in detail to fully understand its functionality. However, some features are common: account recovery and gas abstraction.

Account Recovery

Most of the Smart Wallets(except for Monolith, but in the latest blog, they have a plan to upgrade the protocol to realize recovery function. ) support account recovery, which means you can reset your account through other means. This is quite different from traditional crypto wallets. And most of them provide official recovery service, assist the user in recovering the account after authenticating the user by email or bioinformatics.

[In addition from Brice’s comment, who’s working for Monolith]
Since day one Monolith provides account recovery, through the seed phrase only the user knows. We do not have a recovery service yet (like Argent's Guardians).
However, since the seed is known to the user, one can at any time take full control over their wallet without needing Monolith app/services using MetaMask and Etherscan:

Gas Abstraction

All the Smart Wallets here use gas abstraction to enable the wallet gasless. And most of them provide limited free use. Outside of the free scene, they use a different way of charging users, such as service fee account, the ticket for transactions, or charge by cost per transaction.


Most of the Smart Wallets are being invested by investment institutions, while two of them raise funds through ICO. The total amount of financing reach $100M, but it should be noted the fundraising are is not entirely for the wallet.


All the smart contracts of the Smart Wallet are audited, and most of them have a bug bounty program. However, the initiatives can increase security, but they cannot fully guarantee it. Here's the information. What's more, security is very complicated and needs expertise to understand. Next, I'll write a feature article to analyze the security of Smart Wallets.

Challenge for Smart Wallets

Security Issue

Compared to normal wallets, smart contract introduces new risks to Smart Wallets. To prevent from being hacked, the smart contract should be well audited as far as possible. Besides, the admin key risk still exists while the admin key is intended to upgrade the contract or terminate an emergency. Referring to defiwatch's ( )attempt, an analysis like smartwalletwatch is necessary to make users aware of the risks.

Pricing Model

Smart Wallets use meta-transaction to enable gasless transaction while the transaction fee is paid by the relayer. However, the relayer needs to charge the user for sustainable development. It's important to design a sustainable pricing model to lower barriers of using blockchain, such as allowing deposit through fiat.


Smart Wallets face many compatibility issues, such as compatibility with new token standards, compatibility with web portals, compatibility with off-chain signatures. Fortunately, new protocols like WalletConnect & EIP-1271 enhance compatibility, but there're still many UX issues.

Next Step of Smart Wallet Trends

#1 Smart Wallet Weekly. I'll publish the latest weekly progress of Smart Wallets, including the growth figures, new features, and new cooperation.

#2 Analysis of Smart Wallet. I'll publish the in-depth analysis report of the selected Smart Wallets.

#3 Smart Wallet Connect. Talking about the rich possibilities of the apps by connecting with Smart Wallets.

About Smart Wallet Trend

Smart Wallet Trend is a newsletter where you can find news, insights and fresh ideas about Smart Wallets.

My name is Yao Xiang, currently a researcher of MYKEY Lab.

Feel free to contact me via comment or send 📧email to me directly.