A&T Capital: Detailed Explanation of EVM Ecosystem Multi-Signature Wallet Gnosis Safe Product Features

Author: A&T Capital

01 Financing Information

On July 12, Gnosis Safe officially announced that it has raised $100 million, which will be used to unlock digital asset management, and announced a rebranding to Safe. This round of financing was led by 1kx, with participation from A&T Capital, Tiger Global, Blockchain Capital, Digital Currency Group, Greenfield One, Rockaway Blockchain Fund, ParaFi, Lightspeed, Polymorphic Capital, Superscrypt, and over 50 other strategic partners and industry experts.

02 Why Are We Investing in Safe?

1 Project Overview

Safe has gained widespread adoption due to its self-custody solution and is currently the most trusted digital asset management platform, processing over 600,000 transactions and protecting over $40 billion in digital assets. Additionally, many high-value NFTs, including 13% of all Cryptopunks, are currently protected using Safe.

2 Investment Logic Analysis

Web3 is rapidly rising, and the most important operating system (OS) component may be evolving from Smart Contract Accounts, with Gnosis Safe being the most well-known of such accounts in the Ethereum ecosystem.

Key points summary:

• As the most widely used multi-signature wallet in the EVM ecosystem, Gnosis Safe has supported more extended functionalities, such as pre-transaction checks & APPS, and looks forward to standardizing and simplifying the integration process with other projects in the future.
• Smart contract wallets are one of the core pillars for the large-scale application of blockchain, currently showcasing high-quality features such as account recovery, adjustable Gas Fee payment methods, and preset execution logic.
• We anticipate that "multi-in-one output" and "one-to-many management" can be achieved through smart contract accounts, providing users with an ultimate Web3 personal account management system.
• Reflecting on over 20 years of the internet, the emergence of new account systems often drives the evolution of new operating systems and brings changes to the core value positioning, with the operating system of the Web3 era likely evolving from smart contract accounts.
• In the realm of Web3 personal account systems, Gnosis Safe has set core standards and produced numerous modules & tools.
• We may be witnessing the emergence of hyperstructures in the Web3 era, a next-generation "Windows" supported and controlled by users & developers that will not go offline and embodies ownership.

About Gnosis Safe as a Multi-Signature Wallet Solution:

Gnosis Safe is an on-chain multi-signature wallet solution on Ethereum, launched by Gnosis in 2018. Currently, as the most OG on-chain multi-signature wallet, Safe serves over 90% of Dapps, DAOs, and institutions in the Ethereum and EVM ecosystem. In terms of the business volume handled by custodians, Safe managed assets worth $76B in 2022, surpassing the largest centralized custodian, Coinbase, during the same period.

Figure 1 Safe's dashboard

In addition to basic features such as multi-signature management and spending limits, Safe has several commendable features:

• Transaction builder: Combine multiple transactions according to your wishes and ultimately execute them as a single transaction: a. Frequently used: Simplifies dozens of operations for transferring funds to dozens of addresses every month for DAO payroll into a single operation, significantly reducing manpower; b. Interesting: Simplifies the two clicks of approve and swap when using DEX into a single click >>> The transaction builder supports business logic brought by the order of operations, allowing for creative possibilities.
• Transaction Guard: Provides pre- and post-transaction check functions for each transaction, with customizable check conditions, e.g., entering an extra 0 (exceeding transfer limits), encountering phishing addresses (TBD).
• APPS: The built-in Dapp access interface in Safe, where you can enter corresponding applications by clicking the logo, providing an overall experience similar to Web2 product levels (see Figure 3).

Figure 2 Gnosis Safe APPS interface

Figure 3 Screenshot of opening Zerion in Gnosis Safe APPS

Beyond a more convenient user experience, APPS further reflects composability, or expands the usage radius of the Gnosis Safe multi-signature wallet, for example:

• Through Zerion, it enhances users' control over their accounts and provides trading and cross-chain functionalities for Gnosis Safe users through Zerion's built-in swap and bridges features.
• Through Sablier, it enables more convenient possibilities for DAOs in terms of fund transactions, such as setting up automatic salary releases for members from the DAO treasury over the next six months.

In addition to the applications currently displayed in APPS, users can also expand their desired applications that are not listed by using the "Add custom app" button.

P.S. If you cannot find applications in the APPS interface and "Add custom App," you can use Wallet Connect to expand the range of applications accessible to Safe:

A suggestion I hope the Gnosis Safe team sees:

• Regarding the expansion of the coverage of APPS, when a project wants to achieve its first integration with Safe, it should no longer require extensive interaction with the Safe team to complete, but rather provide a standard access method similar to installing a dmg file in macOS.
• If the Safe team wants to ensure user safety while accessing more applications through APPS, could they label projects that have been officially certified by the Safe team?

About Programmable Accounts and the Core of Safe:

Programmable accounts represent the programmability of accounts, meaning programming the account to fit one's needs or endowing it with desired features, which is essentially the core of Gnosis Safe. It should actually be referred to as smart contract accounts, which add a layer of smart contracts on top of the Ethereum underlying account system.

Here is a brief background knowledge supplement --- about smart contract accounts (if you are already familiar with EOA and Smart Contract Accounts, feel free to skip):

Currently, Ethereum supports two types of accounts (which you can also call wallets):

• Externally Owned Accounts (EOA): Accounts controlled by private keys, most wallets currently belong to this category, e.g., MetaMask.
• Smart Contract Account: Access and control are achieved through the code of smart contracts (rather than private keys), allowing for almost limitless functionality.

Another knowledge point supplement is that social recovery wallet solutions do not necessarily have to be Smart Contract Accounts; they can also be EOA with off-chain solutions (the following EOA, excluding social recovery features):

With this basic understanding, the necessity of Smart Contract Accounts is highlighted by their peers: EOA cannot support the diverse Web2-level account experience requirements of users.

EOA, as a direct representation of the underlying account logic, is part of the core network protocol. To endow EOA accounts with more possibilities would require modifications to Ethereum's underlying core protocol, which is indeed slow and difficult (you can refer to the progress of Account Abstraction and Authcall EIPs).

Here are some "special functions" that Smart Contract Accounts can currently achieve (progressively advanced from top to bottom):

• Multi-signature: Approving transactions through two or more accounts to enhance security, even allowing offline authorization to save time further.
• Amount limits: Setting transaction amount limits to avoid erroneous inputs and prevent attackers from draining the wallet in a single transaction.
• Whitelisting: Users can specify that transfers are only made to known addresses to prevent phishing incidents.
• Bundled transactions: For convenience, executing multiple calls interacting with dapps in a single "bundled" transaction.
• Emergency freeze: Locking the account to ensure fund safety in case of device loss or theft.
• Account recovery: Various account recovery features, such as social recovery, eliminating the significant risk of losing private keys & mnemonic phrases.
• Adjustable gas payment: Abstracting the payment method for gas, such as allowing third parties to pay for transaction initiators or using non-ETH tokens for payment (integrating GSN), etc.
• Preset conditions: Predefined trigger & execution logic, such as monitoring the collateral rate of Maker Vault, automatically converting part of the collateral to Dai when below a threshold for repayment, restoring the Vault to a safe level.

Here are some other interesting Smart Contract Wallets you can try:

• Argent: A well-known Smart Contract Wallet, outstanding in cross-chain bridge integration.
• Loopring Wallet: A wallet focused on the Loopring ecosystem, based on ZKP technology, with extremely low Gas Fees.
• Authereum: Previously allowed project teams to pay gas fees for their users, the team has since transitioned to Hop Exchange.
• DeFiSaver: Greatly facilitates DeFi users from the wallet perspective, such as supporting automatic collateral replenishment for Maker Vault.

Some desired smart contract functionalities to be realized:

Since Turing-complete smart contracts can theoretically achieve "any" programming result, here are some "demands" generated based on the current market situation:

• As much privacy as possible: Hiding specific address information of multi-signatures (by introducing on-chain ZKP or off-chain TEE environments?).
• Multi-in-one output: It is common for individuals to hold multiple accounts as deep users on-chain, and there is an urgent need for a collective that reflects a complete user profile across multiple accounts while maintaining the privacy of the end accounts (Sismo is delivering a product very similar).
• One-to-many management: It is also common for individuals to hold multiple accounts on-chain (perhaps the norm for future Web3 users?), necessitating a single UI entry to control all addresses while preventing the exposure of the connection between the entry and end addresses (DeFiwallet has done part of this).
• One-to-many-to-one: Perfectly combining "multi-in-one" and "one-to-many" should create the most perfect personal account management system for the Web3 era (similar to an advanced version of linktree in an anonymous state?), allowing users to enjoy the convenience brought by big data while maintaining their privacy and security, without being constrained by the cumbersome management experience of multiple independent systems.

About Web3 OS:

In the past decade of rapid internet development, these changes have been quite interesting (somewhat resembling the trend of fat protocols).

P.S. Although the things being gradually bottomed out in this trend will "gradually lose" the ability to capture traffic value, I believe that under the framework of hyperstructures, they will receive the value they deserve:

Stage 1 -- Desktop Operating Systems Capture Maximum Value

The first batch of internet products (e.g., portal websites) did not have user accounts (user identification was reflected in IP addresses), and most of the user's operating time was spent on the Windows interface (viewing the browser as an extension of the Windows interface).

In this stage, selling Windows usage rights was still the most profitable business in the market (possibly because mobile devices were not yet widespread or personal data had not been explored).

Stage 2 -- Web Applications Seize Value Heights

After the emergence of core internet products like Facebook, having an account system within applications became mainstream, and users spent more and more of their operating time within products like Facebook rather than on the Windows interface.

Selling operating systems gradually became less profitable, with Twitter/Facebook becoming the most profitable internet companies (just as mobile devices began to gain popularity), and the account systems within applications still only recorded data related to their core business.

Stage 3 -- Traffic Entry Applications Settle as Underlying Infrastructure, New Applications Built on Top

In recent years, a similar trend has emerged in both the East and West: Google Chrome Extensions have gradually become popular, and WeChat has introduced Mini Programs.

Developing applications on top of applications represents a significant and thorough migration of the OS compared to the previous situation of developing applications on computer OS.

In this stage, both Google Chrome and WeChat accounts are recording business data beyond their core businesses.

WeChat has gone a step further, allowing the flow of funds to extend into Mini Programs through WeChat accounts (the strength of payment companies like Square/PayPal likely stems from the fact that Google Chrome addons have not been dominated by the flow of funds from Google accounts).

Stage Web3 -- A Path in the Unknown

Considering that the blockchain system and the existing internet product system are two separate systems at the underlying network level, if Web3 applications are largely built on the blockchain, referencing the successive changes in account systems & OS that occurred during the internet era, the Web3 era will inevitably face a new round of potential adjustments to account systems & OS. Either the Web2 era's system will be forward-compatible with the Web3 system (still primarily based on the Web2 system), or the Web3 system will force the Web2 system to upgrade. For now, we assume that the future will follow the second path (historically & theoretically: technology always moves forward). That is, Web3 will have a new account system and OS, and the possible evolutionary path is that the current blockchain account system will gradually evolve into the Web3 OS.

For Web3, which emphasizes ownership, permission management is a continuous focus. In terms of user-facing aspects, it is Account, and an Account that meets Web3 characteristics (e.g., ownership/funded management) will possess the strongest universality and continuity.

Combining the aforementioned differences between EOA and Smart Contract Accounts, it should be agreed that Smart Contract Accounts are the path that may evolve into the Web3 OS.

Preparations Gnosis Safe is Making for Web3 OS

Let’s take another look at the Gnosis Safe APPS interface; do some logos on the interface resemble the current smartphone desktop?

Gnosis Safe has already done a lot of groundwork for the evolution of Web3 OS, such as defining the core development framework for smart contracts and providing guidelines and extension forms to match:

• Core Contract: To create a stable system that allows all newly created entities to interact, a community-accepted account standard is essential, which is the core part of Safe ------------ defining the smart contract account standard.
• Extension: Various high-quality features are achieved by introducing new contract modules, and Safe has accumulated some foundational & highly valuable modules, such as permission modules, prediction modules, etc.
• Registries: Registration lists are essential for every system, recording which applications can be supported and which assets can be recognized.

Based on these accumulations, Safe has begun to output capabilities externally as a middleware beyond being a multi-signature account application:

• Safe Interface: The layer closest to the consumer, allowing users to interact with applications like AAVE directly in the Safe APPS interface using smart contract accounts.
• Safe Infra: A series of services that facilitate developers to create more front-end and applications conveniently within the broad standards of Safe.
• Safe Protocol: The underlying components that Safe is capable of, including Core Contracts, various modules in Extensions, and registration lists, allowing developers to start developing smart contract accounts from the ground up.

To promote such an important foundational layer of an OS, sufficient influence and allies are always needed, and the aforementioned ecosystem partners and Safe's AUM as a multi-signature wallet provide the most solid foundation.

Projects Built on the Gnosis Safe Open Source Framework:

Here are a few I have tried:

• Multis. By leveraging Gnosis Safe's multi-signature functionality and high security, Multis provides a multi-in-one financial management tool for crypto-native organizations.
• Zodiac. Based on Gnosis Safe's core contracts and open module standards, Zodiac offers a collection of DAO tools.
• Radicle. Relying on smart contracts instead of administrators, Radicle Orgs allows developers to define rules and permissions around codebases in a trust-minimized manner.

In the current market, most projects based on Gnosis Safe are focused on financial-related businesses, while there is more room for innovation in access management and business processes. (If you have ideas, please be sure to find me on Twitter!)

If you are interested in a summary of Safe ecosystem projects, you can find it on the social platform of Safe co-founder Lukas.

In Conclusion:

Whether it's smart contract accounts or Web3 OS, they both align well with the definition of Hyperstructure:

Unstoppable, Free, Valuable, Permissionless, Positive sum, Credibly neutral

This naturally reminds me of a passage in Hyperstructure:

We've never had the tools to create a software-based infrastructure that can work as designed for generations without degradation or falling to the tragedy of the commons to sustain itself. And we're at a once-in-a-generation moment where we are the ones lucky enough to have the privilege to build the first.

For us, witnessing the birth of a new generation of operating systems up close is truly a joyful thing; and being able to contribute to it even a little is even better.

Reference:

https://vitalik.ca/general/2021/01/11/recovery.html

https://jacob.energy/hyperstructures.html

https://blog.makerdao.com/what-are-smart-contract-wallets-and-how-can-they-benefit-defi-users/

https://eips.ethereum.org/EIPS/eip-3074

https://eips.ethereum.org/EIPS/eip-2938