Coinbase is constantly providing developers with new tools to integrate digital wallets into any application.
Web3 technology more accessible with Wallet-as-a-Service
On Wednesday, Coinbase unveiled a new service that it says makes Web3 technology more accessible to both businesses and consumers. This is done through the simplification of digital wallets.
Wallet-as-a-Service consists of a suite of developer tools that allow companies to integrate custom digital wallets directly into their applications. Coinbase’s goal is to make setting up a wallet as easy as creating a username and password. This avoids the technical nature of most standalone digital wallets today.
It effectively eliminates a major hurdle to Web3 adoption. We have created a system that allows us to literally provide every person on the planet with a wallet.
—Patrick McGregor of Coinbase
Coinbase launches own Ethereum layer-2 network
Coinbase has announced that it will be launching its own Ethereum layer-2 network called Base. It was previously announced that the company was planning to do so. With this platform, Coinbase hopes to become a popular choice among developers for creating and hosting decentralized applications.
Recently, Coinbase has focused on subscriptions and services as digital asset prices have fallen, leading to less trading activity on the platform of the San Francisco-based exchange. Although it is the largest exchange in the US by volume, the company suffered a loss of $2.6 billion last year after making a profit of $3.6 billion in 2021.
McGregor, who is in charge of the company’s Web3 developer platform, has stated that the new Wallet-as-a-Service product has been in development for over a year and is designed to be “use-case agnostic.” This makes it useful for a variety of businesses whether they are involved in retail, gaming or social media.
McGregor stated that internally, Base and Wallet-as-a-Service are sometimes viewed as reflective components of a supply-and-demand dynamic. Base drives activity within a Web3 application and creating more wallets increases demand for different applications.
We are very excited about the combination of Base and Wallet-as-a-Service, as both products work independently. Despite this, there are many potential customers interested in a bundle offer that includes both Base and the exchange’s Wallet-as-a-Service product, rather than just one.
Growing adoption of Web3 technology among businesses
Prior to joining Coinbase, McGregor spent more than eight years at Google, leading teams in artificial intelligence and cloud technology. He graduated from Princeton University in 2005 with a PhD in cryptography.
McGregor and Coinbase declined to comment on specific companies that will use their Wallet-as-a-Service offering, other than Web3 natives such as Floor, Moonray, Thirdweb and Tokenproof. However, McGregor hinted that larger companies may be announced as Coinbase partners in the future.
I can confirm that we are working with several well-known companies that plan to use this product on a very large scale. This is not a science project. This is the real thing.
During the recent earnings call at the exchange, Coinbase CEO Brian Armstrong acknowledged the growing adoption of Web3 technology among companies that are new to crypto. He indicated that the company might benefit from this.
Companies such as Starbucks, Adidas, Nike, Coca-Cola and social media platforms such as Instagram, Twitter and Reddit are all integrating crypto services into their products. As a result, customers using these services will need a crypto wallet. That’s where Coinbase comes in.
-Brian Armstrong, Coinbase CEO
The Ethereum scaling network Polygon has gained popularity among companies including Reddit, Meta, Nike, Disney, and Coca-Cola when it comes to adapting their services to Web3 technology. Adidas previously had partnerships with Coinbase.
Digital Wallets for Web3 Applications
Digital Wallets are an important part of the Web3 ecosystem as they allow individuals to maintain ownership of digital tokens such as an NFT or cryptocurrency such as Bitcoin. These wallets come in different forms depending on the level of connectivity to the internet, but they all use both public and private keys.
To use Web3 applications such as an NFT marketplace such as OpenSea or a decentralized exchange such as PancakeSwap, users must link their existing digital wallets to these services to transact.
Coinbase introduced its self-custody wallet as a mobile application in 2017, one year after MetaMask released its popular software wallet. Last month, Robinhood began rolling out its Polygon-based wallet to some of its customers on iOS.
Usually, the administrator of a digital wallet is responsible for managing his private key. A private key is a string of characters that should be kept private and is used to authorize transactions, similar to the PIN code for a bank account.
Full control over private keys in a secure environment
Coinbase’s Wallet-as-a-Service takes a different approach to transaction approval. The exchange uses a form of cryptography called multi-party computation, where a wallet’s private key is distributed among multiple parties, including Coinbase.
There is no way a hacker or other malicious party can gain access to the user’s assets as there are multiple layers of security in the Coinbase environment. If Coinbase is compromised or someone’s phone gets damaged, its assets remain completely safe. At any time, with just the click of a button, the user can export their keys completely from the system. It is essential that the user has full control over the system and is able to do whatever they want at any time.
While using a digital wallet secured by multiple parties goes against some Web3 ideals of self-preservation, Coinbase’s Wallet-as-a-Service tool can ensure that people still have full control over their digital wallet through their own private keys
Coinbase has already launched two products this year to entice developers, but not every new venture from Coinbase has turned out to be a success.
The company’s NFT marketplace was much hyped after launching last spring, but now resembles a virtual ghost town. According to Dune Analytics, fewer than 90 sales have occurred on this marketplace in the past week, compared to more than 138,000 sales on OpenSea.