Lightspeed Newsletter: Fuse aims to become the SVM’s choice smart wallet

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Howdy!

I bought some MOTHER while working on today’s edition, and then the memecoin immediately spiked 20% on news that Iggy Azalea was at the New York Stock Exchange this morning.

Maybe I should quit newsletter writing and start day trading crypto. But until then:

Fuse aims to become the SVM’s choice smart wallet

In this current market cycle, there appears to be a race to offer so-called smart wallets that abstract away from seed phrases and private keys and let users do things like sign up with email.

This morning, Circle announced its programmable wallets had become available on Solana. Earlier this week, Squads launched a beta version of its Fuse smart wallet. Last week, Coinbase debuted a smart wallet of its own. And late last month, Phantom acquired wallet app Bitski while saying the move would allow for email sign-ins.  

That’s a lot of new products in a short amount of time, so I decided to grab the Blockworks company card and give a couple of them a try.

I had mixed results while playing around with Squads’ Fuse smart wallet. I signed up for the wallet with my email address and iCloud 2-Factor Authentication — which was partly facilitated through the private key infrastructure firm Turnkey. The app automatically uses Face ID to let me sign in, similarly to how many banking apps work. 

Once logged in, the black-and-white color palette and minimalist approach to price charts really played into the smart wallet concept: There are like six buttons to press, and most are pretty straightforward. (As a note, the app has a DeFi tab which has yet to go live.)

I sent some SOL to Fuse from Coinbase and tried buying a few cents’ worth of Iggy Azalea’s MOTHER memecoin. The swap failed three times before I increased my slippage and got the transaction to land. Having to deal with slippage wasn’t the most user-friendly of experiences, and I think Fuse has a couple other kinks to work through — swaps can only be priced in crypto, rather than in fiat, and I found the price charts somewhat unintuitive to explore.

Having finished demoing Fuse, I signed up for Coinbase’s smart wallet. The onboarding process was similar from the user side. I bought MOTHER with the legacy Coinbase wallet, and the transaction landed. Solana memecoins are not currently available on the smart wallet. (I also tried texting a non-crypto friend a link for $1 in USDC, a new Coinbase smart wallet feature, but she was hit with a “Page not found” message). 

One other difference of note: Fuse offers Solana staking, which my version of Coinbase Wallet did not. 

But comparisons may be a moot point because for now, Fuse and Coinbase Wallet run on different networks.

Smart wallet technology is currently more developed on the Ethereum Virtual Machine (EVM) than on the Solana Virtual Machine (SVM), Itai Turbahn, CEO of wallet authentication startup Dynamic Labs, told me. Coinbase’s smart wallet is EVM-based, and it “might take years” before it’s ready to launch on Solana, Turbahn said.

“I’m assuming Fuse is probably thinking more about Phantom than Coinbase given the hurdle to [doing] a Coinbase Smart Wallet [on] Solana,” Turbahn said.

Earlier this week, Squads co-founder Stepan Simkin told me he doesn’t see either Phantom or Coinbase as competitors because the app’s security makes it more of an asset vault than a connector to use with other apps.

Whether this is accurate or wishful thinking, it seems clear that there’s money to be made in simplified crypto wallets, and the race to build a premier smart wallet for the SVM is on.

— Jack Kubinec

Zero In

Businesses respond to incentives, and the incentive to build a wallet service on Solana right now seems pretty clear.

Blockworks Research data shows Solana’s unique active wallet addresses have skyrocketed in recent months. The number of wallets transacting in May was more than ten times the number from September 2023. 

In the above chart, the lighter shade of purple denotes new wallet addresses that signed their first-ever transaction, and in the past three months, the number of new addresses has also taken off. The competition to soak up this ballooning demand will be one of the more interesting stories to watch for the rest of 2024. 

— Jack Kubinec

The Pulse

Ethereum vs. Solana: one of the greatest rivalries of our age! In this corner, we have Ethereum — the established giant with a vast ecosystem, proven security, and a robust developer community. And competing for the title is the fresh-faced comeback kid Solana, boasting high-speed transactions, lower fees, and a vibrant, party-like atmosphere. There can only be one! At least that’s what the growing furor seems to believe. Recently, this debate has grown louder, with various contributors weighing in.

One notable thread came from Dan Hughes of Radix, who critiqued Solana founder Anatoly Yakovenko for his supposedly flawed understanding of economic security and the honest majority assumption. Yakovenko meanwhile argued that Solana’s design ensures security even if a supermajority controls a significant stake, provided that full nodes execute all blocks and verify the network’s integrity. Hughes stressed that the honest majority assumption is fundamental to all blockchain consensus models. He pointed out that a compromised majority could lead to severe security breaches, such as double spend attacks, which Solana’s approach might not adequately address.

The community’s response varied. @mattpiz highlighted the importance of discussing both positive and negative incentives in maintaining network security. @SasuRobert praised the quality of the debate and called for more exploration of sharded networks and their benefits. Meanwhile, @theBullishBit questioned the practicality of relying on full nodes to prevent double spend attacks.

This all highlights a broader issue: in-fighting. Different chains have always had their unique value propositions, and there’s nothing wrong with debating them. But in recent months, there seems to have been an orchestrated push to use exclusionary tactics as a branding device to artificially create an in-group out-group mentality between competing networks. This doesn’t help anyone. You don’t need to tear down one chain to boost another. Blockchain is a collective effort. We’re all on the same side. Web3 certainly DOES have enemies out there, but you’re not going to find them by looking in the mirror.

— Jeffrey Albus

One Good DM

A message from Garrett Harper, head of business development at Squads Labs:

Updated June 12, 2024 at 6 pm ET: An earlier version of this newsletter incorrectly labeled a legacy Coinbase wallet transaction as having been completed using the smart wallet.

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