Ambire CEO: Is Web3 Wallet Better for Multi-party Computing or Smart Wallet?

On May 17th, Coinbase announced that Web3 can be directly accessed and explored in the Coinbase App, as it supports the new dapp wallet, so that users no longer need to manage mnemonic phrases. The dapp wallet is powered by Multi-Party Computation (MPC) technology. But Ambire Wallet CEO Ivo disagrees.

1. For their new web3 browser, Coinbase decided to use a multi-party computation (MPC) wallet. In explaining why, they listed several “disadvantages” of smart wallet technology – all of which are false. Which begs the question: how does MPC really stack up against smart wallets?

2. First, let’s see why MPC might be needed. Self-hosting is great, but most people aren’t ready — and probably never will. We’ve all heard horror stories about lost or stolen keys. That’s not going to attract the next billion users.

3. Because of this, Coinbase proposes a semi-custodial solution: there are two keys, one for you and one for Coinbase. It makes sense: by simulating the security model of a 2FA account, it makes hacking and key loss more difficult.

4. So, why did Coinbase choose MPC over smart wallets? MPC has some advantages: for example, it supports non-smart contract chains like Bitcoin, which might actually be reason enough for Coinbase. However, they also cite several disadvantages of smart wallets, all of which are inaccurate.

5. According to Coinbase, smart wallets: 1. cannot sign messages 2. have high gas overhead 3. are blockchain specific. None of the above is true, so let’s debunk the claims one by one:

6. (1) Smart wallets can sign messages through EIP1271. (2) The actual running gas cost of the smart wallet is very small (about 1100 gas per transaction). Deployment (30k) is more expensive, but this is only needed once.

7. (3) But most importantly, thanks to CREATE2, smart wallets can be deployed on any EVM chain at the same address, and can also be adapted to other chains that support smart contracts, matching the UX of ordinary wallets.

8. On the other hand, MPC has some major drawbacks that Coinbase might downplay: On the one hand, it requires custom cryptographic libraries to make it work with Ethereum and other EVM chains, which is undesirable from a security standpoint . As of today, these libraries are not open source

9. Smart wallets are more flexible and allow you to do many things that MPC can’t do, such as: advanced authentication: time locks, arbitrarily variable N/M multi-signatures and spending limits, which enable various transactions that do not rely on centralized entities recovery mechanisms, such as social recovery for argent wallets

10. Automation: For example, automatic harvesting of mining rewards, or automatic limit orders; batch processing of multiple items in one transaction, saving overall transaction fees and “abstracting” ERC20 approvals.

11. Unlike MPC wallets, smart wallets allow users to use any currency (such as USDT or USDC) for a fee without the huge user experience barrier of sending ETH to a new wallet;

12. Another huge advantage of smart wallets – they allow you to change your account access rules. In other words, you can start with the “semi-custodial” plan proposed by Coinbase and then transition to full self-custody without changing addresses or transferring funds.

13. Finally, smart wallets paves the way for enabling different cryptography (e.g. quantum security) in the future, again without transferring your funds to different wallets. Even Ed25519 is enabled to allow use of iOS biometrics and WebAuthn.

Overall, I’m leaning towards smart wallets – it’s a cleaner, more flexible, and more future-proof solution, no doubt. There’s still a lot of work to be done — like making most apps support EIP1271 (smart wallet signatures) — but we’ll get huge benefits for a small price.

14. After some additional discussion, a few more points were raised:

MPC provides off-chain recovery, which is cheaper and easier, but not as flexible;

MPC currently doesn’t work with Ledger/Trezor until they integrate it (correct me if I’m wrong).

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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