Coinbase's smart crypto wallet depends on the cloud
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Coinbase has just leveled up the user experience for cryptocurrency with a new kind of cryptocurrency wallet that will be much easier to use.
The big picture: Its reliance on cloud services to allow users to transfer it between devices will test true cryptocurrency believers, who have traditionally valued the ability to trust no one but themselves.
Coinbase's new smart wallet uses passkeys. This is a way of using machines to generate cryptographic keys off things like face IDs or fingerprints, stuff that our mobile devices have gotten us all really comfortable using.
- Not only is it quite secure, but it's really fast.
- The wallet is also going to readily enable cool new functions. Like maybe music NFTs will finally be useable. Imagine.
- And its built so that app makers can cover your gas (or fees) for transactions, if they so choose. Free transactions are always nice.
Plus, of course, it integrates with your Coinbase account.
Friction point: Coinbase Wallet really only works with cloud-based backup. This means you are relying on a trusted environment to make sure you have some kind of backup for your wallet if, for example, you lose your phone.
Between the lines: There's no option to output a recovery pass phrase that you can write down or otherwise do-it-yourself.
- And while I was able to create a wallet with a Yubikey on a Mac, I couldn't use that key to recreate the wallet on a second device.
Zoom out: This might not be a disaster, but it's not ideal in a space where trustlessness is a key value.
- On the other hand: Getting started in cryptocurrency can be a real pain point.
What they're saying: "I agree that smart wallets are not necessarily the right solution for every crypto use case," Sara Houston from Coinbase's communications team told Axios. "Many of our customers have more than one wallet for different use cases, which we welcome and encourage."
- "Smart wallets allow people who are new [to] crypto to jump in immediately."
💠Our thought bubble: Coinbase is moving the ball forward on user experience with this new wallet by making it easier to on-board new users.
- However, please, if you have valuable assets or significant amounts of cryptocurrency, move those out to a more trustless wallet, such as a hardware wallet or a good multi-party wallet.
The bottom line: Think of the new Coinbase Wallet like you would a real wallet.
- It's for your spending money. It's not for your retirement savings.
