Exclusive Interview with Safe Co-founder: Creating Greater Value from Hundreds of Billions in Assets, the Next Opportunity for Smart Wallets

Interviewee: Lukas Schor, Co-founder of Safe

Interview and writing: Wendy, Foresight News

With Coinbase officially launching its smart wallet, the competition in the field of wallet intelligence has intensified.

Transforming all wallets into smart wallets—this is not only a shared vision of the Ethereum community, including Vitalik, but also the work goal of Lukas Schor, co-founder of Safe (formerly Gnosis Safe). Currently, smart wallets account for only 1% of the total wallets, but he believes that "within three years, all on-chain wallets will become smart wallets." This process of intelligence carries both tremendous opportunities and significant challenges.

Currently, over 8 million smart wallets on Safe hold $100 billion in crypto assets. As the guardian of these assets, Lukas Schor tells Foresight News that their next focus is not on passively safeguarding assets but on seeking to develop more proactive DeFi solutions to further appreciate these assets.

Foresight News: Safe has an ambitious goal—although in a recent interview, you mentioned that you realized this goal might not be ambitious enough—that is, by 2030, to make all Web3 wallets smart accounts. Why? How has this goal been progressing so far?

Lukas Schor: Yes, this is still our goal because we believe ownership is a human right.

According to the Universal Declaration of Human Rights, property ownership is a human right. In the digital realm, because your digital assets—whether data or financial assets—are held by intermediaries, this human right is often not fully granted to people. For example, you can only transfer assets from 9 AM to 5 PM (during business hours), or you cannot revoke access to user data, etc. These issues prevent you from freely controlling your assets, leading to ownership problems.

This is why we believe self-custody is necessary, as it is the way to achieve complete ownership of digital assets. Currently, self-custody in the crypto space is still in a very early stage; you write down 12 words on a piece of paper and hope that paper never gets lost, or else you cannot access your funds; or you hope that others do not get that paper, so they do not run away with your assets.

Especially when it comes to data or digital identity, it can cause significant harm, and in some cases, it may even be completely irrecoverable. Money can be recovered, and you can earn it back, but often, your identity cannot be restored. So we must figure out how to securely and conveniently grant ownership, which is crucial.

To achieve this, smart accounts are necessary.

Because writing information on a piece of paper is not the way to grant digital asset ownership to a billion people. We need smart accounts that allow your phone to become that piece of paper controlling your account through keys and secure storage on your phone. The phone everyone carries is essentially a hardware wallet. However, currently, phones are not being fully utilized, as the existing self-custody methods do not allow these phones to truly become on-chain crypto signers. Some people still want a trusted third party involved in the management of asset ownership, which is one of the reasons we are collaborating with the Swiss licensed bank Signum, allowing them to be your recovery agent in your wallet. This way, you can fully control your wallet, and even if you lose your keys, you can go to Signum Bank to request their help in regaining access.

The future billion users may need more assistance or a friendlier user system. We can bridge the gap between niche users who achieve self-custody and the vast future user base. In short, this is why we are confident in smart accounts.

Foresight News: So how far are we from that goal? Can you provide us with some data references?

Lukas Schor: Looking at the data from Safe—the largest smart account ecosystem—we have close to 10 million smart accounts, more accurately about 8 million, which store approximately $100 billion in assets.

Safe was initially used mainly for high-value applications, such as vaults and market makers, and now we are starting to shift more towards the general public. In the past year or so, about 5 million new users have started using smart accounts. But compared to the overall usage of on-chain self-custody, this is still just a small portion, possibly around 1%. But I believe that within three years, 100% of users will be using smart accounts.

We are at a turning point now, and you will see significant progress every month. Within six months to a year, everyone will acknowledge that we are moving in this direction, and proposals like EIP-7702 will truly drive the changes.

Smart Wallets—Opportunities and Challenges in Industry Upgrade

Foresight News: Your official website published a blog post in April mentioning the opportunities, challenges, or risks in smart account applications. However, it did not elaborate much on the risks or challenges. Can you elaborate on that?

Lukas Schor: Currently, user accounts on Ethereum are what we call "externally owned accounts," and every account on MetaMask is of this type. They are a type of account within the protocol, while smart accounts are located at the smart contract layer, giving them programmable advantages. They allow you to add recovery options or add keys on your phone, but this also makes them somewhat less standardized. Because in the protocol, every account looks exactly the same, while in smart accounts, each user's operation may be completely different. This can be a challenge because applications like DeFi cannot accommodate the different operational methods of each account.

So we need new solutions to make these features and applications work together and be effective. Additionally, there will be challenges in cross-chain interactions, as each account on every chain is a brand new smart contract, which is not a problem in itself. But if you change your account on chain A, it will not automatically change the account on chain B. So it is not that all accounts on the chain integrate into one main account, but rather that each chain has its own separate account, which is also a problem that needs to be solved.

Vitalik Buterin proposed a solution called Keystore Rollup. We are also working with the Scroll team to implement a solution that synchronizes and integrates multiple chain accounts into one account.

These are challenges, but I believe they are all solvable and should be beneficial in the long run. Because in the Ethereum ecosystem, core developers, Vitalik, researchers, and everyone understands that this is the way forward. Every account needs to become a smart account. The question is how we achieve this goal, which is the focus of people's discussions.

Foresight News: Regarding the shift of every user to smart accounts, the Ethereum community overall aligns with your goal, at least from Vitalik's perspective, but he has also mentioned potential issues this transition might raise, one of which is privacy: "Compared to a 20-byte address, (using smart accounts) simple operations like payments require providing more information." What do you think is the ultimate solution to this issue?

Lukas Schor: I think it is still too early to say (the ultimate solution). Unfortunately, user privacy is often considered only after the fact, and venture capital investment in this area is severely lacking, even users themselves do not pay enough attention, usually waiting until it is too late.

But I believe it is important to have privacy solutions on Ethereum. Some of these methods will come from L2 and L3, integrating privacy in some way, where users may ultimately only interact with L2, application chains, and L3. Then they will use zero-knowledge proofs to resolve these interactions on L1, providing a certain degree of cryptographic protection.

Another interesting aspect of smart account development is that a group of people is researching invisible addresses. Invisible addresses are an idea that transforms Ethereum into a model similar to Bitcoin's UTXO model (UTXO, which stands for Unspent Transaction Output), where each transaction actually occurs on a new account. Therefore, every incoming transaction has a new account, meaning your incoming transactions are not associated with all previous transactions, but then the question arises: how do you actually manage these hundreds or thousands of accounts? Smart accounts will be the solution to this issue. For example, FluidKey is a project dedicated to this, abstracting it from the user so they only need to care about one account they control, like a master account, from which they can control these invisible addresses.

Foresight News: In the Ethereum community ecosystem, there is also a phenomenon known as the "Vitalik points the way" issue. Once Vitalik endorses the transformation of all wallets into smart accounts as a clear goal, many competitors will emerge in this field. Looking at the present and the near future, which project do you think will be Safe's biggest competitor, and how will you compete?

Lukas Schor: This might be one of the hardest questions I get asked repeatedly, and I still do not have a good answer.

The question is, what do we want to achieve? We want every account to be a smart account and solve the problems associated with it. We want to fully leverage the opportunities that smart accounts bring—this is our motivation.

We believe that within three years, every account will become a smart account. This intrinsic belief guides us to explore a different path.

However, people still often ask, "Are Trust Wallet and MetaMask your competitors?" But we prefer to be partners because their future development in the smart account space will need our help, and we hope to provide support and integrate with them. For example, one day when you register on MetaMask, it should be secure at the underlying level. However, in the long run, Safe will solve the smart account issues, focusing more on the opportunities that smart accounts bring, especially in DeFi and cross-chain interoperability.

Therefore, I believe that in the next three to five years, Safe will be more like an interoperability abstraction layer for Web3. You could also say it is somewhat like an operating system. I think there will be over a hundred projects developing in this direction. Some projects may not yet have clear intentions or solutions, but they all share a similar vision, just with different directions. Because this abstraction layer, this operating system will incorporate an intent-based architecture. Now, projects like Uniswap and Connext are also doing something similar in some way, all involving smart accounts. Later, Biconomy, ZeroDev, and MetaMask may also get involved in this area.

Cross-chain interoperability is also part of it because you need to abstract the network from users and developers.

Ultimately, we hope to contribute our knowledge and ecosystem to this key part of the goal. It is still unclear which problems we will solve ourselves, which we will collaborate with others to solve, and how things will develop in the future, so it is really hard to say who the real competitors are because the situation could be completely different in five years.

Foresight News: One of the main purposes of introducing smart contract wallets is to optimize the overall onboarding experience for Web3. To what extent do you think this can help attract more Web2 users? Are there any specific examples that can help us better understand this?

Lukas Schor: Yes, part of it is definitely the user onboarding process. We are already simplifying this process, such as allowing users to create an on-chain account using just their Google login. You do not have to set up a new wallet or anything else; you just need to log in with your existing Google account and then connect it to a self-custody wallet through user technology. There can also be other ways, such as making your email address an on-chain account, or your Twitter ID an on-chain account, truly merging Web2 and Web3, even including your DNS records.

This way, your website is also associated with an on-chain account, and your phone and other devices can verify identity through keys, using zero-knowledge proofs for on-chain transactions, and having an on-chain account. Additionally, we need to guide people out of custodial solutions so they can truly utilize DeFi and interact with Web3.

Currently, this area is not active enough, as a large number of users holding cryptocurrencies keep their assets idle in centralized exchanges like Coinbase, when in fact these people need better ways to use their crypto. In this regard, smart accounts will also be an interesting bridge, as they can allow you to obtain cryptocurrencies from custodians—like Signum or Coinbase—and then have an associated on-chain identity, functioning like a smart wallet that can link back to your custodial account.

You only need to operate with that wallet, log into an application, and mint an NFT. But at this moment, you have already withdrawn assets from a custodial account or exchange, and you can either keep the assets in the wallet or move them back to custody. Currently, there is about $100 billion in DeFi, but there are more assets just sitting idle, unused, because people do not want to self-custody. I think this is very risky. But users do not know how to do it because the technical difficulty is too high.

These challenges can be addressed through smart accounts. The stock market is worth $100 trillion, and if we want to reach a trading scale of $1 trillion or $10 trillion, we need safer and more convenient solutions.

Foresight News: What about the infrastructure? I mean, what kind of changes will this smart upgrade bring to the existing infrastructure? What challenges will it create?

Lukas Schor: It may require an upgrade to Ethereum itself, like the EIP-7702 proposal. Every current user account can become a smart account, which will be a significant upgrade for Ethereum by the end of this year.

I feel that in the current market, there are not many new users entering; rather, existing users are trying various new things. Therefore, we need to provide better upgrade paths for existing users. The EIP-7702 proposal can do this, as it will fully open the door to smart accounts for all current users.

Additionally, there are clearly many other infrastructures, developer tools, and libraries that also need to adapt to this new paradigm. But the real timing is when users start formally using smart accounts; all other things will gradually fall into place over time.

How to Further Appreciate $100 Billion in Assets?

Foresight News: Safe currently manages around $100 billion in assets, which is a significant amount. What will be your focus in the upcoming expansion?

Lukas Schor: I believe that for Safe, the biggest change we want to see next is that we do not want Safe to just be a place to store a large amount of assets, which would be relatively passive. We want Safe to also become a place where these assets are actively used.

Therefore, our focus will shift from TVL and asset storage to facilitating DeFi interactions and appreciating assets. We can make DeFi safer and more convenient by leveraging smart accounts because we feel that smart accounts have many advantages that can make DeFi easier to use and provide better security mechanisms. For example, smart accounts can allow you to place assets into different DeFi protocols. In the event of a hack, they can also provide better security mechanisms to automatically withdraw your assets, so you do not have to worry about losing your assets all night. Smart accounts can also provide a better user experience by solving cross-chain interoperability, allowing you to interact with DeFi at the base layer and other layers with one click or perform operations with certain other infrastructures.

So we will focus more on facilitating more proactive interactions rather than just custody.

Foresight News: In the wallet space, what do you think the next big thing is? Where are the biggest opportunities? In some previous interviews, you seemed to mention that keystore would have significant opportunities.

Lukas Schor: I think most wallets are currently considering how to become something like an all-chain wallet; they are thinking about how to onboard a user and let them interact with applications without worrying about gas fees. Because chains like Polygon, which use non-Ethereum assets as gas fees, require users to prepare corresponding assets in advance.

Therefore, cross-chain interoperability will become part of the ultimate goal for smart wallets. Projects like Avocado Wallet are doing this, and many projects are trying different approaches.

I am not sure if keystore (key storage) is a business opportunity, but it is a huge challenge that needs to be addressed. It may be more like a public goods solution, with several projects researching and collaborating to solve this issue, but it will not become a profitable opportunity.

Foresight News: Finally, I want to talk about regulation. This year, there has been a lot of discussion about regulation and compliance in the crypto space, with many leading projects facing pressure, including MetaMask behind Consensys and even Ethereum itself facing varying degrees of regulatory pressure. As the largest smart account wallet provider currently, how do you view these regulations? Do you feel the pressure?

Lukas Schor: We mainly provide infrastructure for smart wallets and are generally not too affected by local regulations.

Interestingly, regulatory issues are also related to the privacy issues you mentioned earlier. Because compliance and privacy protection will be two huge challenges, and these two are actually almost independent or can conflict with each other. If we want to enhance privacy, the difficulty of compliance may increase. Because obscuring information means deliberately hiding information usually required for compliance. I am not sure if I have much insight on this issue, but I believe some companies that are more affected are addressing these types of problems.

To encourage regulators to view cryptocurrencies more positively and support the crypto industry, we need to provide valuable and meaningful use cases for society.

I believe this industry has done a poor job in the past few months, overly focusing on illegal activities such as meme coins and speculation, leading to the deepest impression of cryptocurrencies being that it resembles a casino rather than a tool that truly improves people's lives. This is also why regulators hold a skeptical attitude and set boundaries.