The Evolution of Online Identity - Web3 Breakdowns podcast

Eric Golden hosted Dynamic's co founder Itai Turbahn in a conversation about the promise and challenge of crypto wallets, how they can foster deep interactions online, and how Dynamic is trying to build an authentication system for everyone. You can read more here, and listen below.

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Eric Golden (00:00):

This episode of Web3 Breakdowns is brought to you by kx. So what is kx? You may have seen KX on McLaren's Formula One Race car, or perhaps you have seen Manchester City kits with the KX logo. But really what is kx? KX is the increasingly powerful crypto trading platform. Today, KX has over 730 spot trading pairs, 280 derivatives and a thousand options markets. KX processes 400,000 requests per second with 99.95% uptime. KX has a platform with over 20 million traders and institutions. Visit OK kx.com to learn more.

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Speaker (00:45):

This is Web3 breakdowns. Web3 breakdowns is a series of conversations exploring innovation in the decentralized internet. Each episode we will focus on a different topic. We will cover NFT projects, crypto assets, blockchain-based protocols and businesses being built with Web3 architecture. We will talk to founders, artists, investors, and influencers to understand this emerging ecosystem. Come join us down the Rabbit Hall to find more episodes, transcripts, and a library of content to continue your learning visit join colossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts and podcast guests may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

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Eric Golden (01:39):

This is Eric and my guest today is Aai Turbot, M I t, Boston Consulting Group. Harvard AAI has had his pick of blue chip institutions in his career and throughout it all he has been passionate about crypto as co-founder and c e O of Dynamic Labs. IAI is focused on improving online identity and authentication. It paints a compelling vision where multiple wallets enable rich and in deep interactions across the internet. We talk about the current methods of logging onto a website, about the promise and challenges of crypto wallets, and how Dynamic Labs is trying to build an authentication system for everyone. Please enjoy my conversation with Itai Turban. So, when doing our background research on you to get ready for this episode, one of the things we found out that I thought was interesting is you had the title of a project manager in the Israeli Defense Force. And I don't know if this is a naive question, but how common is it to have the title project manager for the Israeli Defense Force and what does a role like that actually do?

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Itai Turbahn (02:43):

It's really interesting. I wouldn't say it's common. The way the Israeli Defense Forces works is it has a bunch of units just as you can imagine, a giant company. And I worked within Army Intelligence and within it very similar to the Silicon Valley startup. I would have customers and I would go to them, work with them and iterate on relevant products that I can't go into details of, but that would essentially be the interaction. So very similar to the title is not that common within the Israeli Defense Forces. It's probably more common within development roles within the Israeli Defense Forces, but, but that's really the day-to-day is very similar to a product manager where you go and you actually interact with folks and start building things based on user feedback.

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Eric (03:27):

Kinda stay on that line. MIT, HBS, IBM BCG Startup Juul, you have this career path that looks like someone that's just on their way to Silicon Valley Tech. So somewhere along the line and I don't know where, how did crypto enter the picture along your career progression of what the things you were working on

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Itai (03:47):

First? Mostly a fan of acronyms, so try to choose the MITs and BCGs of the world. To your point, only my co-founder and I actually started being passionate about crypto and I wouldn't say 13. And if you actually go back, if you were to record all our conversations over the last 15 years and we've known each other since MIT for a very long time, you would probably see it 80% of about crypto. And so we've been kind of passionate about obviously Bitcoin actually in 20, we thought we were late then we thought we were late to Ethereum and then we thought we were late to Solana. So we were very, very passionate about that space and my background jumped through everything from HR software to travel to refineries and consulting. But the thing that stayed consistent is a passion for this magical money on the internet that can just work. So that was really interesting to us and we've been thinking with it for a while. Yoni and I have been trying to start companies for the last 15 years and when we said okay, this is the right time, it was very clear for us that it was gonna be crypto. The question was what within crypto? But it was extremely clear to us that crypto is the thing we kinda wanna spend all our time on.

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Eric (04:54):

I'm curious, between you and over those 15 years, what was some of the main drivers of the conversation? I'm always curious for perspectives outside of the United States when you call it magic on the internet money, what was it about that that captivated you?

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Itai (05:09):

The evolution I think for what into Crypto kinda changed throughout the years. It started with the very basic concept, which is when you develop in front end, the first rule of thumb is you trust end-user And for the first time within crypto you can actually trust, verify. You can actually have some sort of verification of ownership, which we thought was incredible. As Ethereum came along, the ability for you to start building things up top of a system was mind-boggling to us. And then the third iteration Salon DJs, we were trying to apes as they came out and for us that made us realize the power of NFTs and memberships and everything there. And then the thing that really made us say, okay, this is the future is the concept of identity. It was actually the combination of all those. So the concept of, you know how Amazon has one-click checkout and it works on Amazon with a wallet, you actually have one-click checkout for the internet. It's a device that you can pay with store information with, authenticate with. And that blew our minds. So it was a progression not of one technology, but essentially a progression of different use cases that got progressively more exciting for us over the years.

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Eric (06:20):

What's the best definition of what a wallet is and what it can do because I know that our conversation's gonna branch off and all the possibilities of where wallets could go. But to start, how do you define what a wallet is?

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Itai (06:31):

Let's define in two ways. Let's talk about definition for a very short time and then dive into when I think of a wallet as in the day-to-day potential use cases. So a wallet is just a user interface on top of a private key, meaning a private public key type encryption. You share your public key and you have a private key where you can unlock things and a wallet is just a user interface on top of that. That's the very technical definition. We'll put that aside and you can unlock a bunch of cool things. What wallets actually are, in my opinion, are a hybrid of credit card plus Dropbox storage device plus what Apple Wallet or Google Wallet is today, which is the storage of information all mish-mashed into one on shared rails that let everyone build something essentially about it as all tool that lets you log into a system, it lets you pay, it lets you store information and does it in a very seamless way so that everyone has to deal with the same standards. A different way of saying it is today Apple's wallet technology is proprietary to them. Google's wallet technology is proprietary to them. A lot more innovation can happen if they were all on shared rails and everyone can build on top of it, that is what a crypto wallet really is.

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Eric (07:52):

Really cool. And so when you guys were coming up with the idea for Dynamic Labs, what problem did you decide to go after? Did you guys wanna say, originally I wanna build a wallet? How did you get into the wallet authentication business?

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Itai (08:05):

We had two hypotheses. The first one and everyone who's ever gone to Adapt probably can resonate. The first time you go into an open seat and you have a MA mask sit up and you connect that ma a mask and all your information shows up and then you go to a second site and you connect that ma a mask to the second site and the same information shows up and you can pay and you can conduct transactions is this one way door, you can't unsee it. It's this magical realization of how things should work on the internet. After you do that, you realize very, very quickly that that's the future of how you log into websites. I think at first we had email-based login and you have to reenter your information over and over again. Good step in that direction is social login meaning okay, you have a subset of information that you can share across sites with your login with Google or for us, that was the next thing that was the iteration of that. So that was realization number one and hypothesis number one, given DAG hypothesis. Our second hypothesis was, well if this holds true then it's gonna be extremely lucrative of a market for folks to build wallet because they are the future browser. There are the ways in which you interact with websites and apps. That was premise number two. Now if both of these premises hold true, if premise number one of everyone's gonna use the wallet holds true and premise number two of everyone's gonna wanna build a wallet holds True, then you need a company that essentially s that away for developers who want to support wallet based authentication. So that's where Dynamic came in. It's that realization of increasing fit of wallets as authentication payment devices on the web and increasing competition and therefore sophistication of what wallets can do mean that you need developer tools company to abstract that away. And that's what we do. We're really the one-sentence version is like what Auth0 does to abstract the way email, login and one-time passwords and web often and log with Google and Facebook. We do the same for Wal,

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Eric (10:03):

For people that maybe don't use Auth0 all the time. The way I think about it is when you log on to Open, see there's this box that pops up and it says Meta Mask. We just have their founder on Wallet Connect PTO at this point it gives you a rainbow, it shows you a bunch of wallets. Did you build that for Open or did Open build that themselves?

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Itai (10:19):

That's a great question. Open built that on their own, but Open has to deal with things on basis. Their CEO probably has a lot of competing priorities they have to deal with no CEO and I'm willing to bet a lot of money on this. No CEO wakes up in the morning and says, let me assign two of my best engineers to rebuild authentication. That's where a product like Dynamic comes in. So Open is built in on their own, but as they add new chains, and that's by the way, this is just Web3 Crypton native users, we should talk about what happens if you don't have a wallet, which is a huge problem on its own, but Open has to deal with additional change that they wanna add. Wallets are launching every day, wallets change things every day. So just over the last two months, Coinbase change how they interact with websites, with their new set of developer tools made a mask, changed how they interact with websites. And so keeping up with that is extremely difficult. If you're open to, you might have resources to build it and they build it on their own. Actually offers is exactly what you've described, which is that popup of wallets. But for everyone else, for everyone who doesn't or can't put two or three engineers to maintain and 

continuously improve the experience.

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Eric (11:31):

Ok, I'm just thinking about the Web2 side or the Web3 seconds. I wanna go both ways, but it's definitely a fork in the road here. Let's go with the web two. If you think about someone who doesn't have a wallet and they wanna log on today. Yeah, you know, I think we've become more used to sign in with Google, sign in with Facebook, sign in with Twitter or sign in with Apple. What part of that breaks down or is different than the idea of signing in with a wallet.

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Itai (11:53):

They aren't necessarily competing with each other in five years. I think most of your authentication into first-order primitives is gonna be biometric or authentications. You're gonna have your phone, you're gonna have your thumbprint and that's how you authenticate into a first-order type. Logging, logging into your phone or logging into a wall. So in that sense it doesn't contradict, but First Step opens up a set of other authentication options such as logging with the wall. I'll say this a different way. Wallets do is they move from a closed authentication method to an open one. Meaning if you log in with Google, you are constrained by the type of information Google lets you store and share with a website you log into, right? You can only share your email address, maybe sign permissions or things of that sort. If you go to Facebook and log in with Facebook, you can only share your social graph and maybe a couple other things. Wallets are a generalized version of that, meaning you should be able to share your email if you wanna. You should be able to share your social list that you collect via wallets if you want. You should be able to share number, number about other things depending on your use. In one way it's an emotion, but in another way you can use one to log into the other therefore, and then interact with websites.

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Eric (13:18):

I'm gonna drill in a little bit there. Does Google or Facebook or Twitter for that matter, when you use one of those log in with this, do they make money off of that?

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Itai (13:28):

They do not Google well directly. They make money implicit. Yeah, yeah, they, yeah. Indirectly I think is right because if your Google or Apple or Twitter, your incentive is to become the identity layer for the web. And you can see this with how Apple forces everyone who sets up an app on iOS and the app store now is mandated to add login with Apple because they're trying to establish themselves rightly so, they try to become bigger and more powerful. They try to establish themselves as your identity in how you interact with the rest of sites. So they don't make money directly on it, but it turns their products into much more powerful because whoever controls your identity on the web has significant power for better or worse. And that's where wallets come in, which is say, that's fine, Google should be able to compete in that, but let's do it on shared rails so that if tomorrow you decide to move from your identity in Google into Apple or into a startup, you should be able to do it really, really quickly.

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Eric (14:33):

If you look at Web 1.0, like make a username and a log on for every password and then this maybe is a two over version of sign in with Google. I personally do it reluctantly, like I don't wanna do it, it's just laziness that I don't wanna make another username and password. Yeah. That it's just a easiness. And then I remember when the first time I saw it, there was like disclaimers, like Google's gonna share this, this and this and sometimes it was different. We're gonna share this, this, and this. And now I just blow through it. But I never really like it. Like I just feel like I'm once again just letting my data be monetized by someone else because I don't wanna create another username and password for like trading view. So I'm like, yeah, just log on with Google because I'm lazy but I don't like it. I'm

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Itai (15:11):

With, but it solves a problem for you to Google's credit, it solves an actual problem, which is no one wakes up in the morning and says, let me recreate my profile that I create on website A, on website B and reenter the same information. The challenge with that though is that again, it's a close set of information, innovation or authentication with Google can only perceive at the speed that Google sets. Meaning if Google doesn't let you store information, acts on your profile, then the website can store it. That's why I call log-in with wallets and evolution is because it's essentially saying, well Google has really great ideas about this stuff. There's a lot of innovation and a lot of security innovation by the way that they pioneered. But it's now the ability for you to move from innovation at the speed of Google to innovation at the speed of any company because you essentially have these shared rails on which identities built in this case Ethereum, but it can be any other shared rail.

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Eric (16:11):

I wanna move to the other side of it, which is my original problem with Wallace when I first got into it was I didn't realize how much I would do or get into crypto. A way to say this is you're talking about, well you could only put this much information in, but in some ways I worry about too much information and segregation of information. I don't want the same people to see my entire financial history to potentially look at my art collection or see my gaming or my social media. Like they're very different sides of me. So moving back to the web through side, yes you could store lots of things in this. How do you think about segregation of information as people develop applications and wanna move around this new world?

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Itai (16:50):

That's a great question. I think you defined something really interesting, which is we don't have an identity, we have entities and they're very different and identity at work might be different than my social identity or my gaming identity. The first I think is establishing that you're not gonna end up with a single wallet. My hypothesis is you're gonna have your gaming wallet, you're gonna have your social wallet that might be built into an Instagram and you're gonna have your financial wallet that might be built into a Robinhood. So that's segmentation number one. Wallet is technology rather than a single app on your phone called everything in your phone becomes a versus. You have AEM number item share and how information gets transferred. And I think we all agree while today share more than it should. By the way, similar to how Facebook platform, when Facebook platform started, you can pretty much get everything and now they scaled it back. So in a very similar way I think it's an evolution of the wallet space going forward. It's gonna be a problem that's gonna be solved today and I think your concern is valid and I think to get to mainstream adoption, it has to be resolved as to what we share. I'll give maybe one example where wallets can actually have extreme power and sharing plus privacy. One of the examples is the example of KYC. Know your customer of what is the difference essentially between today when you apply to a bank you have to upload your ID and you have to give all your information and they check or a bank has regulations but let's call it FinTech company of some sort that you apply to and have to re-upload your ID and have to give all your information. But what that company really needs is not all your information just needs proof that you are who you say specifically things around zero-knowledge proof and things around. So bound NFTs which are NFTs that sit on your wallet and give assertions essentially allow you to move from a point where you share everything to just sharing the, just saying I'm over a certain age, I hold over this amount of wealth versus giving that entire information that your original question, I'll summarize my extremely long answer, essentially we're not where we should be while it's shared too much today, it's gonna be an evolution that's gonna be tackled across multiple parts. And if you fast forward five years, I really hope that we're in a position where while it's shared a lot less while doing a lot more.

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Eric (19:20):

Yeah, the point about the K Y C one's fascinating cuz you can imagine a lot of companies that just had their money in SVB have spent the past 10 days attempting to open up bank accounts. And the thing that I think about with crypto that I think is underappreciated because when this wallet topic comes up and their real world importance of data, people seem to just go to extremes. Both the people who are excited and the skeptics, they just split and run and start talking crazy. There's this point to me of crypto where people get locked up in like the immutability and the decentralization, which are wildly important. But one of the things that people I think lose sight of in the real world of how businesses works is that there's a tremendous amount of redundancy and replication of data in an unnecessary way that's expensive. So I'm not saying I know how to solve this or what you would do because it involves centralized and decentralized and you've mentioned this before of this K Y C thing, but it is kind of crazy that the same person is just entering the same information over and over and it's being stored multiple times over and over because what that really leads to is more expensive fees for everybody to do the same process in a redundant fashion.

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Itai (20:22):

It's a hundred percent that as an example of you have to refill the entire bank application over and over again. The examples are even simpler. You apply to a job and when you apply to a job they're gonna say, okay, prove to me that you went to this college and you're gonna say here's my degree. And they're gonna say, we don't really trust you. Let us call your college and ask them whether you really graduate. It's weird, right? Because there should be a way for the college to just say, here's a signed degree that you can show everyone and they can check to see whether it's really from us, whoever you went, that redundancy, that additional call that they have to make, that entire process that happens every time we apply to a job, to a loan, to any one of those is remarkable to me. If you fast forward 10 years, there is no way in my mind that folks call up your college and say, well does this person really go there and not trust you because you have no certified way of proving things Today it's mind boggling to me that that happens. It is an artifact that's gonna go away very, very quickly and we can call it NFTs if people to your point have reservations about the speculation, et cetera. But really what we're saying is you should be able to have certified verified documents that you can show people and they can know and trust that they're real.

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Eric (21:44):

All right, this is gonna be a third rail, it's gonna upset a lot of people, but I'll give you one of my favorite ones because I think it's been massacred online. One of the third rails in NFTs that people do is real estate and PA McCormack who I think might be one of the kindest good most goodhearted people at one point did this and I won't even go into it, but anytime this comes up it gets crazy. But here's mine. In the United States in particular, when you buy a house, there's a title and the title is to who owns the house. This is language that goes back to the 18 hundreds. There's a thing called the title industry. This is again where I can't stand when the world's split and people say everything's gonna go on chain and then other people go, that's the dumbest thing, I'm gonna trade my house like a bored ape. Title insurance is a 28 billion industry, how it's up today growing at 10% per year. I wanna find someone who's actually bought a house where the title was misconstrued. There's a whole industry and my point here is the banks because of this law, require you to have another company ensure that the thing you're buying is actually owned, that there's no encumbrances on the home, there's no other liens. And to me it's an example of antiquated technology of trying to prove something exists that everybody just needs to confirm this is the current status of the game. And people say, that's so silly. And then I'm like, there's a 28 billion industry with tens of thousands of people checking on this. And so to me it seems like an obvious place where why is everyone doing the same thing?

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Itai (23:06):

I'm with you, I went through this process. The first time you buy a house you have to realize what is this title insurance and all of a sudden shows up as a line item and why is it so expensive and why do I need this? And by the way, you get a piece of paper and you really hope that they updated in your local jurisdiction because that's what really matters and your piece of paper means nothing. And it is crazy to me. Everything we're saying is you should be able to get your deed and have it verified and put it in your Dropbox for bus or Google Drive or iCloud and know that that is the source of truth. And as that you own it, you own that digital piece of paper and no one else can own that digital piece of paper. The entire title industry is really based on everything you're saying, which is just we cannot trust these pieces of paper without verifying them in the center. And because we cannot trust them so much, you actually have to buy insurance on that lack of trust, which is wild and it's an artifact that's gonna go away. Again, if you fast forward 10 years, 15 years, 20 years, you're not gonna do this manually. And we can ignore the name blockchain technology for making sure it actually properly works. But the fundamental experience of signing up with a title company is wild to me.

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Eric (24:24):

And the further point is that it's the bank that holds this to give you your mortgage in the first place. It's not like a bear certificate where you're just walking around with it. But getting back to that cuz there does seem to be evolution. Just going back to the wallet in general, when you think about the use cases, so we're talking about that, we haven't solved it yet, but privacy and segmentation will be a big deal. But the current state to me is it feels like we get lots of pitches from people here. The wallet is the key, the wallet is the gateway. First of all, I love your definition. I'm not even sure wallet's the right word anymore cuz when people think of a wallet, they have one wallet. So even the notion of having multiple wallets, we might need some better naming like a lot of this stuff, but it feels like we're in a wallet war, which I think people have compared to the browser wars. So you had Mosaic and Netscape and Internet Explorer and you had this battle and now most people use Chrome. So if we have wallet wars and meta master, whoever wins and dominates, does dynamic labs need to exist anymore once the wallet wars are settled?

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Itai (25:21):

I think there are two ways to look at wallets. One is winner-take-all, you have one or two wallets and at that point might need to focus on additional things order. I think we need to, but that's longer conversation. To your actual point though, there's a second way to look at wallets and someone way smarter than me said this and I'm paraphrasing here, which is wallets can also be like credit cards where you actually don't have one, you have five or six sometimes and you have your credit card that you use for travel and it optimizes for that type of expense. And you have your credit card that you use at Costco and you have your credit card that you use for restaurants. And very similar to the conversation we had about the identities, they are different identities of you. So in a lot of ways I think that the future is not necessarily the, there's a winner take all like the browser market but rather a future in which every app on your phone becomes a wallet and has slightly different interactions that are related to that app. Robinhood becomes a Robinhood wallet and your becomes a steam wallet and their use cases are very, very different and they go into the beauty of the wallet is very deep authentication. So they can do a lot of interesting things that happen after authentication when interacting with sites or apps. I much more believe in that hypothesis versus the winner take all hypothesis. You're starting to see that happen with a lot of MPC companies coming up and trying Coinbase wallet service and folks obviously doing this, the enterprise of turning everything on your phone as a wallet and or the is out there. There's a lot of argument that your next wild is actually an app already on your phone, it's just gonna turn into a wallet as well. Going forward. I'm very much on hypothesis of multiple wallets for multiple use cases.

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Eric (27:13):

This might be the wrong framing, but it feels a little bit like the bundling unbundling of television where we used to just pay a single subscription fee and now we pay $59 a month things and you go from one and you're like, I hate this to the other. When you say every app becoming a wallet, to me it feels like although that's tremendously powerful, highly customizable, how much is the user in your mind gonna be abstracted from all of that? Because yes, it could be really cool that my Robin has a wallet, but just managing, I have a lot of wallets and it's hard to keep track of them right now and obviously technology's a lot more nascent. How does that not become the burden on the end customer where they're like, I just don't want to do this

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Itai (27:54):

First. I do think there might be all-in-one wallet's very similar to what you see in different markets that have super apps and those wallets can do multiple things. But again, if you fast forward five years, I think the interaction for most users is they're gonna go to FinTech website and rather than log with Google, it's gonna detect their Robinhood wallet. They're gonna click that, they're just gonna say interact with your Robinhood wallet. It's gonna look a little bit like a Google login, but the interaction all of a sudden will become much deeper. So you'll be able to start transferring money from your Robinhood to that website and so on. So for a lot of folks it's just gonna be invisible. They're gonna see the login with Google being replaced with a lot of logins that let them do a lot more things. If that deeper interaction, the website's gonna say, Hey, do you wanna store this information on your Robinhood wallet or your Robinhood account? But you're not gonna necessarily know, might not be called a wallet, you might not necessarily know you're interacting with wallet, you might not necessarily even know you're interacting with crypto. You're just gonna have this better experience of what I call deep authentication, which is a much nicer interaction, kinda a multi interaction between websites and your apps. Same with gaming. Yeah. You'll be able to say, okay, I go to day one and I see it and so on.

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Eric (29:15):

Yeah, I think it just clicked for me as you were saying that because before on the K Y C thing, I was like, I don't know if how I'd think about this, but lemme play it back to you. Hypothetically, I log onto a bank and I wanna open up a new bank account and just like I might have trusted a password manager or maybe I've already trusted Fidelity to do this for me, I've trusted a company, I've given them all my K Y C information, they've then delivered back to me a sole bound token that says the token cannot be moved. Hypothetically I would log onto that website or even better someone who wasn't as interested in crypto logs onto a website. The website would notice the wallet, it could say this exists and therefore the person just went right through K Y C, not because they skipped it but because a prior approval had worked. So we don't have to do it five times in a row.

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Itai (30:01):

That's exactly right. That person should never need to know about verifiable credentials and digs. They should never need to know if they're using so tokens, they should never need to know about which chain they're on. It's just gonna be a better experience for them because it lets them skip a step that they had before. In a similar way, by the way that you go to a website and you log in with Google and you don't need to know it's oi. No one is like, oh, let's go through an oof flow. Maybe 10 years ago they explained that to you but right now just log in with Google and it's a better experience for you. To your point, you're still reluctant about it but it's a better experience for you in a similar way. It's just gonna work. You're gonna go to game A and you're gonna take your things and move them to game B and it's just intuitively gonna work for you. So that's gonna be an interaction bit and you're not necessarily gonna wanna know it's a wallet, nor should you care. You should just care. That's a deeper nicer interaction.

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Eric (30:56):

So say it back to you, dynamics basically sitting in the middle of this entire mess where chains can go their way and change authority. Wallet providers can go their way and then third-party developers that want to build the next official K Y C for the banking sector or the plaid of, you know connectivity can say I can build that and I can use dynamic.

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Itai (31:16):

That's exactly right. So unlike regular authentication where you log in and you're done with wallets, you can do a lot more things after you log. You can access based on membership, you can start doing gated commerce, you can start doing access, you can store information that we talked about with decentralized identifiers and verifiable credentials. So dynamic tackles not just authentication but everything that happens afterward. Communication is an example. You need a much deeper set of tools between a website and a wallet than you would have until now because you can do a lot more things between a website and wallet. So that's where we sit. And the reason we're very passionate about what we do is we call it what we do. The reverse platform just plaid has to deal with a lot of banks that move a little bit slower and have very different types of technology and they have to deal with lot of challenges. We deal with the reverse, which is hundreds of startups moving extremely quickly, breaking things on a day-to-day basis and developers have to deal with it. It's a complete opposite set of problems to deal with. That's the value proposition dynamic brings to the tables distracting the oscillation of noise that developers have to deal with in this space. So that's what we see.

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Eric (32:30):

I love the analogy of the reverse plaid problem. That's a really interesting way to say it. I'm curious, as a CEO, you have a multi-chain thesis. How do you deal with prioritization? So now you have thousands of startups moving at a breakneck speed breaking stuff all the time, big companies changing stuff and there's probably not much notification like hey, we're gonna do this and you are responsible for making sure that when people wake up because that co didn't want to think about this problem, they've sent it to you. That's right. How do you think about prioritizing working on Ethereum versus Solana versus Rainbow versus meta mass or the Coinbase wall? Like how do you think about where to spend your scarce resources?

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Itai (33:10):

It's a tough problem solve, I don't know if we have an answer, we have a strategy, but ask me in two years whether that was the right prioritization trend. We're very customer obsessed. We're fortunate that our customers are very variable. We wake up in the morning and we get a lot of asks. The good thing though is that a lot of them are repeated asks and so we can very quickly say, well these five folks ask for the same thing at the same time. Let's prioritize it for short-term things. It's easier for us to prioritize because we actually hear from customers very, very vocal. The midterm prioritization is a combination of customers but also fundamental beliefs that we have. We have a belief around the future of needing to solve challenges for folks without wallets. We have a belief around multi-chain and innovation that happens in places like Cosmos or happen in places like Solana, not just vm. So we have those fundamental leaves, we have beliefs around wallets becoming more sophisticated on chain with things like account abstraction. Those are kinda bets that we're making, not necessarily cause we're hearing from customers, but rather that is our thesis about the market. So it's a combination short term of lots of customer asks and longer-term a very strong thesis about the market. That might be wrong, but it's an educated belief I would call it that we have.

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Eric (34:33):

Can you dive into those, like what are the top three things that your largest, most consistent themes across wall creation that people are asking for not to give away your secret sauce. I'm always curious at the common themes like we've talked about some of them, but what are the top three asks?

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Itai (34:48):

I'll try to say it more at the industry level versus specific dynamic secret sauce. I don't think it's a secret that one of the challenges the industry is trying to solve as a whole is the question of what happens if you don't have a wall? And there's a lot of innovation in that space anywhere from really cool companies that have been around like Magic and Web3 to companies like Lit or the fns that have different approaches to Coinbase's new wallet as a service to what I would bet are additional solutions coming in. So one set of challenges that we're trying to solve and we actually just launch features around this is how do I make it so that someone who wants to start with doing things and interacting with wallets can do it in a way that abstracts the way as much as humanly possible. So that's kinda prioritization number one that we is really about, we call it the sign-in versus signup problem, which is ok if you have a wallet you can sign in and it's a great experience. We're trying to look at the signup problem. Second prioritization that we have is about of things there and how you start abstracting that from folks more and more. And the third one that we really care about is what happens after authentication. One thing we announced recently is the concept of NFT and token and how do you think about gated communities or gated memberships or things of that sort. That's a place where we're gonna spend a lot of our time cause we think it's a magical part of what makes Wallets wallet and what differentiates them from just assign devices or payment devices is the deeper interaction. You're gonna see us spend our time there and think to how you really allow developers to create these magical experiences. We're not the only ones. Shopify is a good example, just launch some really cool features around gated commerce. These are all things that the industry as a whole is looking at.

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Eric (36:42):

Do you spend much time with Web 2.0 companies or do you spend all of your time exclusively with the Web3 s that are testing the new frontier?

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Itai (36:53):

We're starting to see drops of web two companies. I think it's still early days for some of them. If you fast 3, 4, 5 years, not to overuse the term probably used seven times. But if you fast forward five, you should be able to log into a notion or a Coda or a linear with your wallet. And just like you would establish a project around joint email addresses, you should be able to establish a project around joint NFTs that are memberships. I think we're gonna see it. I think most of it is not there yet. So a lot of my interaction is Web3 companies a little bit with web two companies. It's a matter of,

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Eric (37:33):

I'm curious what your thoughts are on economic models because when I think about Google or Facebook, when we first started using them to what they became as they were finding a product market fit, one of the things that I think pushed people out of the tech utopian is realizing that their economic model, because they weren't charging you a direct fee to come use their service with selling your data, and people at first didn't mind then maybe not everyone but didn't realize it maybe didn't mind and then they became kind of adverse to it. Not exactly loving it, but also thinking there's no way to opt out of this that I'm going to use Google, so this is just the price I have to pay, that my data can be mined and then sold to advertisers. And I'm curious if the move to wallets is really an adverse war against that in the sense of you gotta pay for what you're using somehow, whether you like it or not. So people don't like paying money, they much like free things, but they, a lot of people maybe didn't understand the trade-offs of your data being monetized. Some people might not care, some people might care. And when I think about wallet usage of these rails and those limiting factors, one side of me thinks that if I'm Google or Facebook, I would be maybe openly like I'm working on that, but I might be against it out of fear that it boxes out my main monetization source.

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Itai (38:49):

You mentioned a word that I think is critical, which is the rails. I think Google, let's not kill ourselves, is gonna have a key part of our day-to-day interaction on identity for a very long time. Not necessarily because they own the data, but because they have great products that they're building that really engage customers and do a good job. But the key word here is shared with, which is important part in my opinion, is the ability for other companies to start competing on creating identity-related experiences with different business models. I have no doubt that in a couple years Google has a wallet. They already have a wallet, but let's call it crypto wallet that many folks use and is free in the same business model remains. I also have no doubt that you're gonna have competing companies that are able to offer really attractive experiences that are paid experiences that let you bring your identity from Google with one click to them and create those experiences. And you can see it's not just by the way on wallets, it's the same with social networks. You see this with companies like Forecaster, et cetera, that say, well let's create shared rails in the middle and then everyone can build really different experiences on top of those and each one can monetize differently and create kinda unique experiences and things of that sort while the core is shared and is a public good, that's a little bit the difference. So I think the business models for me, I doubt Google pivots out of their ad-based business model, but I really hope that they're additional experiences that create really cool things for customers.

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Eric (40:29):

Yeah, Google's not going anywhere, but the thing that it made me think about was, I liked your previous example of multiple identities and trying to overlay that over credit cards instead of just a wallet. But when I think about an identity, I think about, I've read about you, I've listened to podcasts is our first time meeting and I'm getting a picture of your identity, but if I had your Google search history, I would have a very strong view of your identity, maybe better than you know yourself, which kind of freaks people out. If I saw your Facebook social graph, the value of that is so immense. And one part I think about that I just find fascinating is like someone puts like incognito mode or something on and they think like, okay, now I'm a free citizen in the world. I can just roam around. Is the notion of controlling your data somehow. Like one of my crazy ideas of just this idea of wallet or credit cards or identity is when I search on Google, I'm searching against an algorithm which is trying to find me the most common answer. So if you ask something like, Hey, what's the best make to make banana bread? It's gonna come up with some website that has the highest hit rate in traffic and it's a good way to solve that problem. If I wanted to ask a deeper question, and maybe we'll see this with like the chat G B T AI stuff, but I would almost be curious if my friends owned their own search history, if I could enter their tokens. So I have a group of friends like when Covid is happening and you're trying to get truth and there's a lot of noise, it would be so fascinating to search the Google algorithm, but not over the whole world and not over everyone who lives in Boston, but the specific people I respect and what the search history was, cuz it would be a very different answer than the people in Texas, than the people in Boston. So I think that there's really interesting ways that the data could be divvied up. I'm just skeptical that anyone's ever gonna let their hands free of what I think might be the most valuable asset in the world.

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Itai (42:16):

I think that's fair. And I think no one's gonna give it up. It comes back to incentives. One of the additional cool things about crypto is you tie money into the internet, which creates a set of incentives, some of them good, some of the bad, but creates a set of incentives that for the first time in a very long time let's you skip over the cold start problem. A lot of the arguments always start with, imagine a world where we had these shared rails, et cetera, and they skip over well, their incentives and Google owns your data and so on. The cool thing about crypto is that you're essentially bringing in built-in incentives to create communities with money and things going around that let you create those utopian lands, not because they're better and you can convince everyone to move to them, but because you've structured really cool incentives to build that social graph or to build that social search or anything of that sort. That's my argument for why it might work. This time is not a, it's better, but my argument's like, well, you can actually create incentives that actually make it work.

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Eric (43:18):

I love the optimism and I love the space for me because of the experimentation, because I think that before I got deep into the crypto and Web3 and NFTs in this whole space, it was a very dystopian world, specifically around data. People lied to themselves and didn't wanna admit that these are fully monopolies that grew out of an unregulated environment that led to straight-up monopoly. And that's what happens in capitalism is at the end of it you get monopoly and the only thing they can hypothetically break it up is the government, whether it's US steel, US oil, or Google, you get to the status that's untouchable. And so really smart people would say they were gonna start a company, but all they were gonna do is get bought by Google or by any of them. We're picking on Google, but all of them in this bucket are just gonna hire them and take the smart people away and then they're gonna do the non-compete and they're gonna do it again. And so the cycle of life of a tech startup comes and goes, but no one is ever going to challenge or disrupt or break some of these. And there's all sorts, like in finance, there's regulated monopolies that you can only do certain aspects. So I find the most optimistic thing, these crazy moonshot ideas and the attempt to disrupt and break it. And I think the point about wallets and identity, which is so fascinating to me, is that I think as people grow up there becomes more of a realization that my identity is stored already in multiple places. That people a perspective of it. The reason why people are so obsessed with wallets, why there's so much creation is because harnessing that power of how people are able to identify themselves as they move around the internet is such a crucial thing. And I think what you guys are doing is so cool because it's not like you have all the answers and it's fun to debate it with you, but someone's gonna try something that's gonna get to a place that might open up new economic models, new ways to interact that we haven't experienced yet. And I think that's just really cool.

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Itai (44:58):

I appreciate that. There's the Facebook movie from a while back. They have a court there which is, it's like fashion, it's never done and identity in the same way. It's like fashion. There's always gonna be iterations on innovation and identity and I think this is a really cool iteration on that.

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Eric (45:13):

Yeah, I think that's a good place to end it. We end these conversations. The same question, what are you most excited to build over the next six months and what are you most excited to build over the next six years?

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Itai (45:24):

Over the next six months? Most of our time is gonna be just heads down, making sure that customers are happy and comes back to the three points we talked about, which is the experience of an end user who doesn't have a wallet onboarding and having a remarkable experience with how they interact and how they get introduced into the world of wallets. Things on experience you can do with wallets like gating and memberships. If you fast forward six years, I'm really excited about the concept of multiplayer mode online. There's so much cool innovation you can create with wallets that if we get over the cold star problem, you can do a set of remarkable things. It's anywhere from taking the Amazon one-click checkout or Shopify's attempt at one-click checkout, both of which are local maxima solutions to problems. And generalizing that so that anywhere on the web you can one, have a checkout, don't fill information, it's already there and it's trusted. The experiences of taking stuff from game A and moving to game B the next six years, I'm excited about can you build all these cool multiplayer experiences online with your identity versus email passwords your identity.

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Eric (46:38):

That sounds a lot of fun. Thank you, Itai, appreciate the time today.

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Itai (46:41):

Thank you. I really appreciate it.