On Wallet Connect by Pedro Gomes aka @pedrouid

Transcript

Woohoo. All right. Thanks everyone. So yeah, I'll be talking about wall connect something that I've been doing for 7 years and has grown to be quite a large project. And uh to give you a little bit of a perspective, um as I was mentioned, um I'm the founder and director of the Wall Connect Foundation. Uh since inception, we now have decentralized. uh we launched the token WCT and we have the W connect Foundation and Wallet Connect is now a distributed network and more than just a distributed network is a layer and a connectivity for all the apps and wallets not just on Ethereum but also on Sana Cosmos and any chain realistically but there's always been

this question around the wallet experience you know the more you have the actual wallet involved the more friction you have for the user but If you don't have the wallets, then you really compromise on the self-custody aspect. So basically, I want to kind of explore what would be a world where we have less wallets and you have more AI involved and what would it take for us to actually build that future. So we have to ask ourselves to start with why do we even need wallets? And in fact like we didn't have wallets in web 2.

Why do we need wallets in web 3? Why do we need wallets for an onchain experience? And I like to show this diagram because it's something that I've always shown for the last seven years of W connect which kind of creates this paradigm shift between web 2 and web 3 where an application used to talk to a server and in this server you have like a lot of microservices. Some of them are actually about authentication. You put an email, a password or a social login and the authentication allows you to access some data, take some actions and it's quite critical for any application to have a login. But then when web 3 we have the ability to connect but this connection actually doesn't live on server. It's

not like you have a wallet in the blockchain. The wallet lives outside of the blockchain and the app is talking to the wallet on the client side. So on the user device, you actually have the authentication. So you basically move this authentication piece from the server into the user's hands to provide self-custody and that's how the app is able to take actions in the blockchain. So the user is actually interacting with two applications per set. So now that we have this understanding of moving from a login to a connect and on top of that every time you take an action you have to sign. So yes, we've improved in terms of self- custody, but we added more steps. It provided more friction for

users. So every time you connect to an app, which is kind of like a login, you also have to sign every single interaction. And this is where things start to getting a little awkward, right? Because ideally in a great user experience, you have less clicks and less clicks is more. This is the mission that we should all achieve when we're trying to build a better user experience. So if you have list clicks, how can you actually approve every single transaction, right? It kind of contradicts this self custody, but it doesn't have to because wallets are evolving. And if we only have this connection happening and we remove the sign, what do we have in replacement to actually provide self-custody but still fitting our mission of less clicks? And

this is where we have to kind of understand that we have to remove the wallet from the equation. And when I say remove the wallet from the equation is that we're not essentially removing the wallet completely, but we're removing the wallet from the user experience. Every time the app wants to interact with a blockchain, we don't need to have the wallet proxy that request. So what can we do to do that? It's smart sessions. When you connect your wallets with wallet connect and even outside of wallet connect, what you're essentially creating is a session between the app and the wallet saying we're now going to initiate this connection and we're going to interact for the purposes of onchain activity. But it's not really smart because you're basically just creating

this communication layer that allows you to say the app every time it needs a request the wallet can fulfill that request and every time the wallet fulfills this request it gets submitted to the blockchain. So what if we made the session smarter and now you actually don't even need the wallet to be involved. This kind of looks a little bit more similar to the traditional authentication that we have with web 2 because we added some programmability. We made the session a little bit smarter. So how do we do that? Basically let's take an example with unis swap. You would actually connect to unis swap but in this case instead of you actually just connecting you actually setting permissions. And this is possible because at wak connect we built what we

call a policy engine. And in this example it says about $30 worth of beef for 30 days. You will have the capability for this app to take interactions within these permissions. And you might even think I've seen this before like whenever I connect with my Google login it allows you to read the email change my calendar access my Google drive. So these concept of permissions have existed before. there wasn't a financial aspect of it and this is what makes smart sessions very special because on top of that smart sessions have this requirement that the wallet also has to be smart but now it's been 2 and 1/2 years since account abraction has really taken off and we

now have more and more smart wallets and this is where smart sessions become a little bit more viable if you went back 5 years ago and tried to build smart sessions it was almost impossible and on Ethereum there's this major upgrade happening around May or June where we actually will have the ability to make every wallet swarm with the new upgrade. Therefore, making smart sessions fully compatible with every wallet out there. So, if we take this experience where you're setting permissions in this policy engine in the wallet network, what is now possible in terms of user experience? You reduce the number of clicks by eliminating the wallet popups, but you're also increasing the onchain actions because now you're not actually

designing your app in a way that you say, "Oh, let's try to reduce the number of things the user has to do because we don't want that amount of friction. But now that we actually eliminated the wallet popup, you're actually increasing it. The design space for any application that you want to develop is now unlimited because now you can actually have as many actions as possible. But what I'm really excited about is that if we have smart sessions and we eliminated wallets from the equation, we can now actually have AI being empowered into automating and doing more work on the behalf of the user. And this is all possible because as I mentioned, we have userdefined policies. We in the previous example, we said it was like $30 worth

of E for 30 days. But realistically, this could be configurable and it could be configurable as a default in your wallet where every user has a different threshold. It could be a default for every app. The amount of options that we can actually design on smart sessions is still something to be explored. So let's explore a little bit of the use cases that we can do. So one example that we built already is obviously most interactions with AI agents today happen through a chat context. And in this chat context we could think of you know just very simplistically instead of you actually having this interaction where you go to a specific DEX aggregator or specific DEX interface. You just talk to your agent and say I want to swap $100

of E for USDC. And the agent doesn't require you to approve any pop-ups. It just executes right away and you can even see the transaction link being displayed in the conversation. So now you've taken this action so lightly. Now you might think, "Wow, I might as well continue to talk to the agent and do more actions on chain because I no longer have this constant wallet popup in my face every time I want to do something." So this conversation with the AI agent doesn't have to be just swaps. It could be like DeFi positions. It could be anything you want really.

like it's completely unlimited now because the AI agent has the ability through the smart session to execute on your behalf. And if it has the ability to execute on your behalf, we might as well actually explore, for example, automation. A very popular strategy in crypto in general is dollar cost averaging. Imagine a world where this very popular feature that you find in centralized exchanges only could actually be built in into every wallet's self custom. You basically have a wallet that would be able to generate a smart session that has this interaction that says every week for example I will put a $100 and buy if at the price at that point and then it could expire after 52

times like and 52 weeks as you know is a year. So you basically already set a dollar cost average strategy on a weekly basis for a year and this is all powered by smart sessions. At this point, we're not even talking about AI anymore. This could be a simple Chrome job in a server just like triggering a transaction on a recurring basis and calling it from the most popular DAP or maybe the best dexterity you can find. But it doesn't really stop there because now you can even build games. One of the biggest problems with gaming is that you either had to have an embedded wallet that you then fragment the experience and now for every game you have a wallet or you have one wallet for all the games. But every

time you interact, you have to approve a transaction and that's just not feasible. Like either way, it's a bad user experience. You either have a thousand wallets or you have one really annoying wallet. With smart sessions, you can still have one wallet for your whole onchain experience without this constant wallet popping up. So you can even build something as simple as a pong game where every time the ball hits, you actually have an onchain action. and also trading like you know centralized exchanges have excelled at having the best user experience but that has been in the compromise of being centralized and not actually being self-custody. You can replicate a whole experience around exchanges with smart sessions that have

the best latency and the best experience because now you don't have to improve every single transaction and you can actually make very granular decisions when you're trading. And this is not just changing the experience for users. Even developers are getting a better experience because now because the application actually has some delegation that now can sign on the behalf of the wallet of the user, you can actually now get more creative with programmability. And in this case, I would like to propose that we actually start paying for services on a monthly basis through a smart session. And it could even be you paying for the Netflix subscription, $10 a month on the chain base and then

you generate a pass key or whatever key management solution you want to have and that will then actually engage on the smart session where it does a direct debit something that it has been very popular and very common for traditional banking. It shouldn't be a difference for self-custodial wallets. This is what smart session could potentially do. But this is only one presentation of some of the use cases of what I described. I think the most important thing is that smart sessions now open up a whole design space for developers to build better user experience and to completely change how we think onchain should look like. Obviously, we have removed the wallet from the equation and put AI and

automation in the middle of it. But realistically, it's still self-custom. You still have this triangle between blockchain app and wallet, but the session the delegated signing capabilities to the AI can now actually completely get out of the way. So yes, wallet connect will have more and more wallets. It's a little bit of a clickbait to say less wallets, more AI. In fact, I believe there will be more and more wallets coming into the space, but we will have less wallets popping up in our experience. will actually have the blockchain or the application or the AI work for you because right now it kind of feels like we don't have this

balance between choice control and composibility because we kind of always have to take a compromise and to achieve this truly self-custody onchain experience we need to have all three of them but I don't want wallets to feel like we're working for them you know wallet connect is really about redefining the wallet experience every year to really improve it. And instead of you working to be on chain, let's reduce the friction and make onchain do the work for you. This is why onchain is so impressive because it provides you with choice, control, and composibility. And it even works for you to provide the best experience and a more improved financial rails for the

world. Thank you. Do we have any questions? Any questions for Pedro from all the connect? Yep. One moment. Um, thanks Petro for the talk. Uh, so I was listening very carefully and all. So, uh, you mentioned that AI agents will be in place of the wallets, right? So how do you handle the hallucination problem there?

I think they're two separate problems and one of the reasons I really like this diagram and I just pulled this slide from before is that by having this concept of smart sessions embedded into the wall connect network. Wall connect network is not necessarily a now AI network. It's not like we're pivoting. We're still focused on key management. We're still focused on security. We're still focused on performance. We're just adding a new primitive here which is the policy engine. The wallets are delegating a policy to the session. How this policy is actually being used, it's completely up to the app developer to explore, right? The app developer will

choose whatever models, whatever strategy, whatever automation they want. So if there is AI agents hallucinating and doing bad things, as long it doesn't go above and beyond of what the policy has defined and the Walt always has control to change the policy, revoke the policy or just completely kill this whole session, then it will be fine. You know, because at the end of the day, the job of the wallet is not to build functionality and features. It's to provide security and reliability. So the wallet will provide the control over the session for the user to feel comfortable to provide permissions to the app. And this just kind of opens up a whole design space where app developers don't

have to build wallets because all they need is a permission to be set for their AI or their favorite like application design and then that's up to everyone to build a use case on top. Okay. And for the user policies, can they be modified at any point of time or yes is it only at the start? Yes. So uh basically the same way today it's actually quite similar to how it works today. Today when you connect with wallet connect the wallet is able to list all the active sessions. But previously the active session on wallet connect only said you're exposing accounts A B and C on chains 1 2 3. That was that simple. It was very simplistic.

there was no policy engine. Now it will actually say that you're actually connected with these accounts with these chains and with these policies. So the same way you can actually go today and change add a new account or remove a chain in the wallet connect session in a wallet connect smart session on top of that you can also change the policy and you can say I want to be like less spending policy or I want to add more tokens so that it can actually spend other tokens or I want to reduce the duration of the session or you just don't feel comfortable with something that happened because there was a news of a hack and you just say kill session just kill the whole Okay, sounds good. I'm yet to try, but yeah, looks very good. Thanks.

Any other questions? I mean, I might have a question. I mean, is there any way of kind of like uh or have you guys thought about how to maybe integrate with account abstraction or delegation or any of that kind of stuff? Yeah. Uh I mean, theoretically, uh smart sessions today only work with smart wallets. So, it's any wallet that is account abstraction compatible. But what I'm really excited about 2025 is this massive upgrade on Ethereum, which will introduce the 7702. And 7702 allows you to actually set some contract code to a normal wallet, essentially making them almost like a smart wallet, but not

100%. But just enough for actually to activate the smart session. So, if you actually have a normal wallet or an account abstraction wallet with this specific contract code or module for smart sessions, then you're actually able to have all of the advantage of the smart session. That's very cool. Uh, any other questions? We still have a few more minutes left. No. All right, let's have a round of applause for Pedro. Thank you very much. Thank you very much.