What is a DeFi Smart Wallet?

Currently, Stellar and Base are two chains that support smart wallet integration. Stellar smart wallets are enabled by its smart contract infrastructure, Soroban, and Base supports the Coinbase Smart Wallet.

Following the launch of the Stellar network’s smart contracts platform, Soroban in February of this year, the network moved on to its next major upgrade, protocol 21. After passing in June, protocol 21 enabled native support of secp256r1 verification in Stellar smart contracts. This new activation allows for the creation of passkey-powered smart wallets on Stellar.

Thanks to this upgrade, users can now sign transactions and access their accounts through passkeys, as opposed to the traditional private key and seed phrase methods. Passkey accessibility creates a user-friendly interface and experience, and still maintains a high level of security around digital assets.

What are passkeys?

Smart wallets are made possible by passkeys. Passkeys are fully encrypted alternatives to traditional passwords, and often linked to external accounts such as Google or ICloud. These external accounts act as the authenticators.

The encrypted authenticator accounts interact with the frontend dApp interface and represent the user’s wallet. Verification of ownership then takes place in the relying parties backend, which consists of the ID provider, and credential repository.

Repositories maintain security by storing the public key, credential IDs, and user handle. In the event of a repository leak or hack, an attacker cannot leverage the public keys without access to the authenticator via a private key.

Passkey Architecture

While protocol 21 has only been live for 2 months, a few apps are already experimenting with smart wallet integration such as SorobanByExample, and Super Peach.

These new dApps allow for users to create, access and transact through embedded wallets with the touch of a button, fully linked to a phone or table, a web browser profile such as Google chrome, or even a USB security key.

Through Soroban’s growing smart contract ecosystem, and the newly applicable smart wallets, Stellar is continuing to scale itself as a layer-one that integrates traditional finance onramps with decentralized on-chain economies.