Key Insights
- With $48 billion of assets stored in 4.7 million smart contract accounts, Safe is one of the go-to solutions for smart contract wallets.
- Safe witnessed an all-time high in most usage metrics in Q3’23. Safe users continued to derive value from the core wallet product, with over 376,000 monthly active accounts in Q3’23 (up 201% QoQ) across Safe’s multiple deployments.
- The overall share of transactions originating from Safe smart contract accounts reached 1.4% (up 133% QoQ), and transaction fees originating from Safes brought in 638 ETH (up 67% QoQ).
- In Q3’23, the Safe team released detailed plans for expanding its core offering beyond multi-sig wallets into a dynamic protocol — Safe{Core} Protocol — that emulates an app store. It does so by introducing a unified interface standard and enabling developers to build customized Plugins.
Primer on Safe
With $48 billion of assets stored in 4.7 million smart contract accounts, Safe is one of the go-to solutions for smart contract wallets. Previously called Gnosis Safe, Safe aims to create the standard for ownership with smart accounts.
Safe is largely used as a multi-sig wallet. It enables individuals to securely self-custody their funds and organizations to manage their treasury operations effectively.
Beyond the multi-sig wallet, Safe is designing and developing the Safe{Core} Protocol. The goal of the protocol is to take a vendor-agnostic approach to securely extend the capabilities of smart accounts. Developers can contribute to the protocol by:
- Providing alternative smart account implementations,
- Creating Modules (e.g., Plugin code) which can contain arbitrary logic,
- Developing Registries that enforce Module standards, with the aim of making them more secure.
Additionally, one of the key considerations for the Safe{Core} Protocol will be fee design and implementation. As noted in the whitepaper, Accounts, Registries, and Modules should all have the capability to charge fees in order to sustainably build a smart account ecosystem. Given that the protocol development itself is still in its early stages, the implementation may change depending on community and developer feedback.
Key Metrics
Performance Analysis
Usage
Safe is one of the go-to solutions for smart contract wallets, with over $48 billion of assets stored in over 4.7 million smart contract accounts. Safe serves as both a:
- Product (i.e., its user facing smart contract wallet), and
- Core infrastructure for other projects (e.g., Worldcoin) to leverage.
Usage of Safe can be gauged in terms of account and transaction activity.
Active Accounts
Safe had over 376,000 monthly average users in Q3’23, up 201% QoQ. Monthly average users are measured as Safe accounts with at least one outgoing transaction in a month. The number of Safe users on Optimism surged to 286,000, likely due to Worldcoin deploying the majority of Safe smart contract wallets to the OP Mainnet. Simultaneously, Polygon saw a 28% decrease in monthly average users from 108,000 in Q2’23 to 78,000 in Q3’23. While Optimism and Polygon make for nearly 97% of average monthly active users in Q3’23, the remaining 3% is split between Ethereum, Gnosis, Arbitrum, and Base.
New Accounts
The number of newly created Safe accounts in Q3’23 was approximately 954,000, down 38% QoQ from over 1.5 million in Q2’23. In terms of the corresponding chains, Optimism accounted for 708,000 accounts. This represented 74% of all Safe accounts newly-created in Q3’23, up 18% QoQ. In contrast, Polygon accounted for nearly 180,000 accounts, down 79% QoQ from 847,000 in Q2’23. This growth divergence between Optimism and Polygon can be explained by Worldcoin’s World App migrating from Polygon to Optimism’s ecosystem via OP Mainnet. Other chains make up the remaining 7%: Ethereum, Gnosis, Goerli, Base, BNB Chain, Arbitrum, Avalanche, Celo, and Fantom.
Adoption Rate
In line with the growth in active Safe users, transactions involving Safes surged 110% QoQ from 3 million in Q2’23 to almost 7 million in Q3’23. For perspective, the share of Safe transactions relative to all transactions reached 1.4% in Q3’23, up 133% QoQ from 0.6% in Q2’23. In other words, Safe is currently being adopted at a faster rate than the overall crypto space. To sustain this adoption rate, the majority of onchain activity would potentially have to migrate to scaling solutions such as Arbitrum, Base, and Optimism.
Demand for Safes
Currently, Safe does not generate any revenues from its smart contract wallet or its general suite of product offerings. However, the transaction fees originating from Safe smart contract wallets can serve as a proxy for the general value associated with Safe across its multiple deployments.
Transaction Fees
Gas spent on Safe transactions grew 67% in Q3’23 to 638 billion gwei, or 638 ETH, in line with the growth of transactions involving Safes. Since transaction costs are significantly lower on L2s, Safe has the potential to further increase both the number of active accounts and the associated transaction fees originating from them.
A further way to gauge the potential value of Safe accounts is to consider assets under management. As of end of Q3’23, there were approximately $48 billion of ERC-20 assets stored in Safes on: Ethereum ($26B), Optimism ($9B), BNB Chain ($7B), Avalanche ($5B), Arbitrum ($0.9B), Polygon ($0.3B), Gnosis ($0.05B), and Celo ($0.01B).
Qualitative Analysis
Releases
Safe{Core} Protocol
In an effort to expand its core offering beyond multi-sig wallets, the Safe team released a whitepaper detailing the plans for shifting from a single product into a dynamic protocol — Safe{Core} Protocol. In its initial design, the Safe{Core} Protocol emulates an app store by introducing a unified interface standard and enabling developers to build Modules (e.g. Plugins, Hooks, Function handlers, Signature Verifiers). That is, Plugins can be regarded as individual apps that are approved based on the standards set by a Registry. Additionally, a Manager aims to facilitate interactions between Accounts, Registries, and Modules.
This initial design sets up Safe{Core} Protocol to function more as a platform rather than a standalone product: Module developers can distribute their features via Safe{Core} Protocol to smart contract account users. Using the custom Plugins provided by this framework, developers can spin up user accounts that come equipped with the application-approved set of Plugins.
The initial whitepaper establishes the goal of introducing fee-mechanisms to the Safe{Core} Protocol. While the whitepaper and any fee mechanisms are still nascent and in discussion, some potential approaches include:
- Subscriptions or Usage Fees: Plugin developers may charge a subscription fee or charge per usage of some resource (e.g., compute), similar to a traditional SaaS business model.
- Activation Fees: Developers may charge a one-time activation fee to users.
- Security Fees: Users need guarantees around the security of Plugins their accounts interact with, so security attesters or maintainers (likely associated with registry maintenance) may charge a fee for their services.
Safe not only needs to develop a path to monetization, but it also needs to determine how to best incorporate the SAFE token into the protocol as well. There are related discussions underway, with the community pitching several approaches.
Deployments on: zkSync Era, Polygon zkEVM, Base
Safe has successfully deployed on zkSync Era, Polygon zkEVM, and Base. Project teams can now use the Safe{CORE} Account Abstraction SDK and Safe{Wallet} to manage their onchain treasuries.
Standard for Onchain Audits: ERC-7512
The Safe team has shared an ERC that aims to create a standard for the “on-chain representation of audit reports that can be parsed by contracts to extract relevant information about the audits.” ERC-7512 intends to create an onchain reputation system for auditors to establish greater trust within the blockchain ecosystem.
Governance
Safe Grants Program
The Safe team has announced the approval of the Wave 1 Grantees of the Safe Grants Program (SGP). The SGP receives funding and administrative support from the Safe Ecosystem Foundation to grow a community of contributors to Safe through $1 million in grants in two waves. The approximate distribution of the SGP budget is as follows:
- Build Grants: 40%
- Growth Grants: 30%
- Research Grants: 20%
- Governance Grants: 10%
SafeDAO Treasury: Governance Framework (SEP-7)
This proposal introduces a formal governance framework to define and outline the key stakeholders involved in the governance of SafeDAO, to establish a dynamic governance approach, and to describe the governance process.
The Foundation Council aims to act as the highest governing body of the Safe Ecosystem Foundation (SEF). SEF is a Swiss Foundation that acts as a legal wrapper for the SafeDAO treasury and administers governance procedures. The Council is primarily responsible for implementing the Foundation’s purpose of developing and promoting technologies within the Safe Ecosystem, public education about the ecosystem, and managing related assets.
The proposal outlines the following domains under the governance of SafeDAO:
- Constitution.
- Governance framework.
- Resource allocation framework.
- Treasury assets and IP rights.
- Safe Grants Program.
- SEF governance signaling.
- Unpausing of the SAFE token transferability.
- Safe{Core} Protocol.
A full list of Safe events and governance decisions can be accessed via Messari Intel.
Closing Summary
Safe witnessed an all-time high in most usage metrics in Q3’23. Safe users continued to derive value from the core wallet product, with over 376,000 monthly active accounts in Q3’23 (up 201% QoQ) across Safe’s multiple deployments. In addition, the overall share of transactions originating from Safe smart contract accounts ticked up to 1.4%, an all-time high for the metric. This metric in particular will continue to serve as a key proxy to determine Safe’s overall market share in the smart contract account space.
With the announcement of Safe{Core} Protocol, Safe is positioned to set unified standards for the interoperability of smart contract accounts and associated Plugins. However, other standards and frameworks are emerging, which creates a slew of standards all vying for adoption. Over the coming quarters, Safe will look to continue expanding its footprint by further developing the Safe{Core} Protocol, attracting developers to build products on top of it, and determining an approach to monetization and SAFE token utility.
