Evolution of Blockchain Wallets

From EOA to Smart Wallets for Mass Adoption

Murathan Kağan Bayram

10/26/2024

Blockchain technology’s most prominent application, cryptocurrency, has garnered substantial recognition and adoption worldwide. To facilitate the management, storage, and transfer of these digital assets on blockchain networks, “wallets” have been developed. Originally, wallets on the Bitcoin network solely functioned to store and transfer bitcoins, existing in two primary forms: hot and cold wallets.

Hot wallets are connected to the internet and are typically found on exchanges or mobile applications, providing users with quick and frequent access to their assets. Cold wallets, on the other hand, are hardware devices only accessed as needed, ensuring greater security by remaining offline.

As technology advanced and user demands grew, the functionality and design of wallets evolved. Modern wallets no longer serve merely as token repositories; they are used as decentralized identities and as tools for managing digital assets and interacting with other users on the blockchain.

The concept of a wallet relies on public and private key structures on the blockchain, making it simpler for end-users to conduct transactions. A private key represents the confidential aspect of a wallet address, enabling its holder to access and manage their assets. It is crucial for this key to remain secure and private. In contrast, a public key functions as the visible address for a wallet, allowing anyone to send cryptocurrencies to it. Transaction records are also linked to this public key. Thus, the public key serves as a transparent address, while the private key operates as a password.

Key Generation and Security Measures

Addresses are generated using “mnemonic phrases,” typically consisting of 12 or 24 random words such as “apple, book, sun, sea, cat, tree, star, wind, cloud, flower, bird, moon.” These phrases serve as recovery mechanisms for wallets and as a “seed” to generate the private key. Another component in address creation is the Derivation Path, such as the standard path for Bitcoin: “m/44'/0'/0'/0/0.”

To date, these terms and functionalities relate to a wallet standard known as EOA (Externally Owned Account). However, with blockchain’s advancement, new “Smart Wallets” have emerged, addressing several limitations inherent in EOAs and improving user accessibility through account abstraction technology.

Smart Wallets: Redefining Blockchain Accessibility

The primary purpose of Smart Wallets is to address the limitations of EOAs, fostering wider adoption of blockchain technology by providing programmable, smart contract-based wallets. While EOAs allow only basic functions, such as the management and transfer of crypto assets, Smart Wallets extend beyond these limitations.

For instance, the Trilema Wallet eliminates the need for complex private keys or lengthy mnemonic phrases. Instead, users can access their wallets through social accounts like Google or Facebook, or by using biometric data such as Face ID or fingerprint scans. Furthermore, the programmability of Smart Wallets enables users to tailor wallets to their specific needs. One might, for instance, create “smart accounts” for particular transactions or purposes, where funds can be accessed from a primary balance. Instead of sharing lengthy public keys, users can create unique, personalized usernames to easily share their wallet addresses.

Conclusion: Simplifying Blockchain for Mass Adoption

While EOAs continue to serve the needs of current blockchain users, broader adoption—particularly among traditional internet (Web2) users—demands greater accessibility and usability. This is precisely where Smart Wallet technology shines. At Trilema Wallet, our goal is to support seamless onboarding for all internet users into the blockchain ecosystem through innovative and user-friendly features, ensuring a more inclusive blockchain experience for everyone.

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