If you own a non-custodial crypto wallet like Metamask, you know the headache of keeping your 16-word seed phrase safe. That is the responsibility that comes with full control over one’s digital assets.
A third-party wallet, such as one hosted by an exchange, on the other hand, stores private keys on behalf of users and provides a better user experience. The risk is the lack of transparency about how user funds are managed, which can lead to incidents like the FTX meltdown.
Some believe that a new technological change in the Ethereum ecosystem is to solve the dilemma between asset control and user experience. is at the center of the movement The ERC-4337 standard was introduced by the Ethereum FoundationA nonprofit research affiliate of Ethereum, the world’s second-largest cryptocurrency that boasts a vibrant developer community.
Jiajun Zheng, a former product manager at TikTok’s parent firm ByteDance and Chinese on-demand services giant Meituan, was among the first to take advantage of the new standard. His startup Soul Wallet Just raised $3 million in a seed funding round to offer an online, self-custodial Ethereum wallet built on top of ERC-4337.
Comparing existing crypto wallets and wallets powered by new technological upgrades is like “comparing a Nokia to an iPhone,” Zeng said in an interview with TechCrunch.
“After the FTX implosion, people are focusing on how to get a better user experience in self-hosted wallets,” Zeng observed.
At EthDenver, a major Ethereum developer conference that drew more than 30,000 attendees to the Colorado capital in early March, the new standard was generating a lot of buzz among blockchain application builders.
With ERC-4337, Ethereum plans to bring smart contract capabilities to wallets (called “account abstraction,” but let’s not get into that. Nitty-gritty). In short, developers can program smart contracts, or lines of code that execute predefined agreements, into wallets.
Being smart means eliminating some of the legacy problems of crypto wallets, such as reliance on seed phrases. Instead, smart contract-enabled wallets make it possible for users to recover their accounts through social recovery, such as using someone’s trusted contacts, another wallet or a third-party service. For those using WeChat, this is a similar account recovery process.
Developers can also code other customized functions into wallets, such as allowing users to pay gas bills using stablecoins instead of limiting payments to Ethereum.
MetaMask, a popular self-custodial Ethereum wallet, uses an old cryptographic method called EOA, or Externally Owned Accounts, where if a user loses their private keys, their funds are lost forever. Early mover Argent has incorporated some smart functions into its wallet but the features are still limited, Zeng said.
The challenge of introducing any new technical standard is scaling. Metamask has sticky users because it is compatible with many popular decentralized apps. The question is how SoulWallet and other similar startups can compete to build a significant pool of partners.
Ethereum is promoting smart contract wallets as the future of Ethereum, so dApp developers will feel encouraged to switch, reckons Zeng, an active member of the Ethereum community.
“We’re targeting the next billion crypto adopters rather than trying to win over users from the likes of Metamask,” Zeng said.
“In developing countries like South America and Africa, people are using cryptocurrencies to hedge against currency inflation, so it comes down to how crypto adoption can spread in these regions,” he continued.
“For developed countries, adoption depends on how dApps and NFTs are evolving.”
Soul Wallet is currently undergoing internal testing and is scheduled to launch in Q3 or Q4 after a series of rigorous audits, according to Zeng. The team consists of a dozen people in the US, Japan, Thailand and China.
Investors participating in its latest “Party” round include Struck Crypto, Game7DAO, NGC Ventures, Dispersion Capital, Alchemy, Anchor and Signum Capital. The financing was also backed by some notable angel investors such as David Hoffman and Ryan Sean Adams of Banks; Kristof Gazso, co-author of ERC-4337; Mark Zeller from the Aave-chan Initiative; Scott Moore from Gitcoin; Terence Tsao from Arbitrum; and Tim Beiko from the Ethereum Foundation.
Updated on March 16, 2023 with the investor list of the funding round.