What is “Smart Wallet” mentioned by Vitalik?

At the “Fifth Blockchain Global Summit” hosted by Wanxiang Lab, Vitalik Buterin shared his views on POS, privacy, scalability, and other issues in the closing speech “Developments in the blockchain space that excite me”. During the speech, Vitalik mentioned a concept -“Smart Wallet”.[1][2]

What is “Smart Wallet”?

First of all, the “wallet” here is neither a real “wallet”, nor a virtual account-based internet software such as Alipay, but refers to tools for managing various cryptographic currencies and using dapps in the blockchain.

In order to interact with blockchain, the traditional wallet manages the private key which is used to sign transactions. However, external risks, hackers and software vulnerabilities may lead to the disclosure of private keys and loss of assets. On the other hand, users may forget their passwords or lose the device or carrier that recorded the private key, making these assets almost impossible to retrieve.

Although paper wallets, cold wallets, Multisig, and other methods contribute much to store private keys securely, most people still prefer to rely on centralized custody services such as exchanges or centralized wallets to manage their assets , resulting in more risk exposure. So the service providers must have strong security capabilities.

Vitalik pointed out that there is a recent trend to figure it out: “Smart Wallet.”

Smart? Wallet?

What is “smart”? Once “smart contract” was put forward, it attracted high expectations of many external practitioners. But it was neither “smart” nor has legally effective as a “contract”. However, “Smart Wallet” is indeed a “wallet”, but is it “smart”?

This question is not easy to answer, but no matter what the answer is, this statement below is correct. “Smart Wallet” is a “wallet” based on a “smart contract”, in simple terms, the user’s assets are no longer completely controlled by a private key but are controlled by a smart contract. How to get access to the account’s asset? Is there a daily transfer limit? Can it be frozen and can it be recovered? … The solution to these problems doesn’t rely on the bottom layer of the blockchain but rely on the logic of smart contracts to achieve the definition of authorities. The advantage is that the risk is no longer highly concentrated while allowing users to make an appropriate error, such as accidentally leaking or losing the paper with the private key.

How to achieve this vision and who is on the track? Vitalik mentioned Argent [3], which is a “Smart Wallet” on Ethereum. It introduces the Guardian mechanism so that users can still restore their accounts when their mobile phones are lost. The guardian can be a trusted institution, a friend or a hardware wallet and these logic are implemented through a smart contract. What’s more, Argent is a wallet based on the smart contract and uses technologies such as ENS and meta-transaction to reduce difficulties for users to keep the private key and use the blockchain. For the security model of Argent, please refer to this article [4].

Now, let’s look back at what “Smart Wallet” is, trying to give a definition:

“Smart Wallet” is a wallet that interacts with a smart contract or a cluster of smart contracts. It still manages an account controlled by a smart contract by locally saving keys to replace the blockchain account system. The account can realize the division and recovery of account authority, limit transfer amount and other functions through the logic defined by the smart contract, “Smart Wallet” achieves a balance between security and usability.

Generalized Smart Wallet?

Is “Smart Wallet” the only way for the next generation’s wallet? Vitalik also pointed out another wallet, which is not based on a smart contract that is HTC Zion [5]. Zion is special in two aspects: (1) Both 12-word recovery phrase and signing transaction will be operate in trusted execution environment (TEE); (2) Break, encrypt and share your recovery phrase to your trusted contacts.

Besides, I has also followed up a wallet called Zengo for a long time, which enhances security level using threshold signatures and secret sharing [6].

In summary, any wallet that adopts new technology and an easy-to-use way to make it easier for users to manage private keys may be called “Smart Wallet” in a broad sense.

MYKEY, the Explorer on the Smart Wallet Track

MYKEY (mykey.org) is a blockchain self-sovereign identity system that can be deployed in multiple public chains and is dedicated to providing an infrastructure for blockchain mass adoption. From the perspective of digital asset management, MYKEY is a decentralized multi-chain wallet that allows blockchain developers to develop and operate applications on digital asset storage, trading, wealth management, and gaming in conjunction with KEY ID to create a diversity platform for crypto users. However, the understanding of the unique design of MYKEY requires some basic knowledge.

“How does MYKEY keep the user’s private key?”

“Why can’t private keys be exported into another wallet?”

“How can I restore my account?”

“How can I get access to my assets if MYKEY closes?”

…

The questions above are frequently asked from the users. Frankly speaking, it is not easy to answer these questions to average users. We have been exploring more expressions that average users can understand. With the expression “Smart Wallet”, we can answer more confidently: “MYKEY is a Smart Wallet.” We hope to provide an easy-to-use, secure and fault-tolerant solution to govern self-sovereign identity of users on the blockchain and solve the private key management issue of users. KEY ID protocol has achieved a balance of security and ease of use which allows users to manage their identity by themselves.

For the detailed design concept of MYKEY and KEY ID, please refer to “MYKEY: a Trustless Beauty of Balance — a Brief Introduction to the Design of KEY ID Protocol” [7].

MYKEY released the white paper in October 2018 [8], began the public beta in May 2019 and officially launched on August 20. At present, the KEY ID protocol has been deployed on two public blockchains, EOS and Ethereum. The contract code is open source and has passed the security audit and formal verification of three top security institutions (Slow Mist【https://bit.ly/2PaZjoi】, CertiK【https://bit.ly/2LIKzeg】, Beosin). We will continue to advance on the “Smart Wallet” track.

References

[1] On POS, on privacy, on expansion, on DEX… Vitalik talked about so many things in a speech. https://bit.ly/2PzXMXW

[2] Vitalik Buterin: Especially optimistic about zero-knowledge proof, and hope to use smart wallets in 2 years. https://bit.ly/2PdSYbO

[3] Argent: Why smart contract wallets are the future. https://bit.ly/2LO5bSp

[4] A new era for crypto security. https://bit.ly/36tiwrf

[5] Where is the promising land of the digital world? https://bit.ly/2rDdx8C

[6] Learn to think about the concepts of secret sharing, multi-signature and threshold signature. https://bit.ly/36nkysI

[7] MYKEY: a trustless beauty of balance — a brief introduction to the design of KEY ID protocol. https://medium.com/mykey-lab/mykey-a-trustless-beauty-of-balance-758e49e0c135

[8] MYKEY whitepaper https://bit.ly/38xhH2w