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    Cracking the (Gnosis) Safe

    How Safes Work

    • On Ethereum, users have private keys that allow them to control a public key. These Externally Owned Accounts (EOAs) as a single-point of failure are not ideal from a security perspective.

    • Safes are smart contracts that enable multi-signature schemes. Useful for protocols protecting millions of tokens and individuals protecting their cold storage or simply wanting to abstract away the private key problem.

    • A few best practices for self custody with safes include:

      • key rotation - keep your assets in the Safe, and switch the signer.

      • social recovery - provide a trusted friend/organization the ability to help you rotate keys or require they confirm any transfers out from your Safe.

    Safe Usage

    Safe (spun out from Gnosis & rebranded from Gnosis Safe) offers over 100 DeFi/Crypto applications and even custom-transaction building tools to make Safes easy to use across crypto.

    Screenshot of available apps on https://app.safe.global/apps
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    What is hampering adoption?

    By almost any objective measure- the ability to keep your assets and rotate or add controllers should be a no brainer.

    And yet, we don't really see Safes being adopted as more than cold-storage tools.

    • Excluding raw ETH, the USD denominated value of transfers from Safes compared to the EOA that created the Safe has never exceeded 1% at the monthly level.

    • Q1 2023 peaked at Safe Transfer Volume hitting 0.6% of their Creator EOA's transfer volume.

    This is essentially any type of DeFi usage in any way. Swaps, deposits, peer to peer transfers, repaying debt, buying NFTs, etc.

    Product Market Fit for Raw ETH?

    Raw ETH is a unique asset.

    • Required to pay for transaction fees

    • Isn't itself a smart contract token.

    • Most apps require ETH to be wrapped (Wrapped Ether, WETH) so that it can interoperate like other tokens. (WETH is included in the above chart for token transfers).

    • Only 3% of ETH circulation is Wrapped.

    It's curious that only in May 2024, has raw ETH flowed more out of Safes than out of Safe Creator's EOAs.

    Given:

    • New Safe creation has fallen over the same time period,

    • Share of token volume has also fallen over the same time period

      Are users exiting their Safes and going back to just directly using their EOAs?

    Disclaimer: Flipside AI is here to help but it can make mistakes. Always review outputs and use the upvote/downvote buttons to help us improve. This content is not financial advice.