Blobs and Magic Spend: A Recipe for Smart Wallet Growth

Key Insights

• Smart contract wallets, or smart wallets, while being regarded as the most secure wallet option, have struggled to find mainstream adoption, partly due to high usage costs and friction points within the funding workflow.
• The recent Ethereum upgrade, Dencun, implemented EIP-4844. This EIP significantly reduces transaction costs on L2s, which directly addresses the issue of high usage costs associated with smart wallets.
• Coinbase’s new Smart Wallet product is integrated with another new feature from Coinbase called Magic Spend. This feature allows Coinbase users to spend their funds onchain via the Smart Wallet in a “just in time” manner, removing the friction of initial wallet funding and top-ups.
• The Smart Wallet and Magic Spend combination enables Coinbase’s millions of monthly active users to now become onchain participants, and also simultaneously creates a large incentive for applications to integrate with Coinbase’s Wallet SDK.

Smart contract wallets, or smart wallets, have long been touted as the crypto ecosystem's premier, end-game wallet solution. Simply put, the push from externally owned account (EOA) wallets (e.g., MetaMask) to smart wallets is analogous to the movement from basic mobile phones to smartphones.

The Safe{Wallet} (formerly known as Gnosis Safe) and Argent are two of the oldest examples of smart wallets. To bootstrap their products, Safe and Argent had to develop and maintain a unique set of infrastructure that powers their wallet solutions. The scratch-built infrastructure was required since, unlike EOA wallets, smart wallets require a special entity (e.g., a relayer or bundler) to post transactions onchain. These teams managed their own relayers, creating a trusted and permissioned entity that was responsible for posting user transactions onchain.