Wallets 3.0: How will the next generation of web3 wallets look like? - Hira Siddiqui

Transcript

[Music] Okay. So, we're going to talk about all things wallets today. Yeah. So, I want you to go with me on a thought experiment about how the next generation of wallets is going to look like. Can you guys tell me how many of you have used uh MetaMask? Okay, pretty cool. How many of you have used Ledger hardware wallets? Cool. How many of you have used Privy? Okay, so yeah. So before we go into the details

of how the different kinds of wallets are, where are we heading next, let's take a trip down the memory lane. So who has been here in the space pre205? Okay, one person. one, two, three OG people. Pretty cool. I entered the space in 2016. So, a little bit uh later than you guys did. So, right when the the the first phase of the wallets or the first generation or you can call the genesis phase was from 2014 to 2016. This was the first time that the wallets actually started having the capability to interact with smart contracts. Before that was Bitcoin. bit on Bitcoin you

could only directly interact with the blockchain but there was no concept of smart contracts on Bitcoin that's when Ethereum came and they started with the they they added this technical complexity or this key store where you where a wallet could then also interact with the smart contract but this was very very technical solution. It was just a key store file. You had to manually copy it of course like it was not something that was built for normal people and you could lose your keys um give it away all sorts of stuff. So this was the but but this is like where the technical capability actually started.

So this is what we call the genesis phase. This went on from 2014 to 2016. And then came the first improvement the browser wallet era. This is where your favorite Metam mask came into being. So there was this browser extension. You could create uh your addresses from there. And one very interesting thing that they did was that instead of private key, you could now have seed phrases. So in some way seed phrase is a little bit better, easier to read, easier to understand, easier to store. But of course this was also not targeted towards normal non-technical people because you actually had to store your seat phrases um not give it out to anybody install a Chrome extension and

there was of course a lot of friction. So then came the third phase the multi-chain and mobile. Ethereum was no longer the only player in the market. There were multiple changes that were coming out and people were thinking about would we really always use a wallet from a browser? We do so much stuff from the mobile so why not have mobile wallets and that's when the multi-chain and mobile wallet started coming into being from 2019 to 2020. And then from 2021 to 2022 this is the first point where people actually started thinking about mass adoption. Sorry am I coming in front of the slides? I'll stay on the side. So that's when people started thinking about the end users, the normal internet users, the people

who are not into crypto and therefore people started experimenting with wallet as a service and the user experience. So we're talking about social recovery, session keys, non-custodial login, login via your social accounts. And that's when wallets like ginosis safe, magic link, and web three started to come into being. And then the most recent was the account abstraction era. This was the last two years. I am pretty sure everyone of you would have heard it. So make the uh wallet programmable, allow it to have modular um functionality inserted into it. And we also started seeing the rise of embedded wallets. So I remember a few people here use Privy.

That's the classic example of embedded wallets. right now state-of-the-art in the user experience category. If I could um simplify it a little bit, the wallet 1.0 were essentially the externally owned accounts or the EOAS and wallet 2.0 is what we call the smart wallets or the smart accounts. So these are the two big categories or two two generations of wallets that have uh that have like come before us and now we but there's still a lot to be done because ask any one of your friends that are not into crypto or your mom or your

friend or somebody that's outside the crypto bubble. Ask them to use a wallet and they will still struggle. That means there's still a lot of work needs to be done. But what exactly? And what kind of improvements should we look for? So, how many of you are on crypto Twitter? Okay, I'm actually impressed. Half of the people are there and half are not. Pretty cool. I thought the entire uh room would be in there but uh people who are like following the discussions or talks or threads there's like an insane amount of discussions about we need web two like UX we need to make web 3 feel like web 2 and all of this stuff but what exactly does this mean when we say that we want to have

web two like UX what are we talking about so let's talk about the differences between web 2 and web 3 when it comes to uh the unit of interaction. So on the left hand side you can see the uh simple layers of a blockchain application. So on the lowest layer is the blockchain which is the trust layer or the data layer in a way. On top of that is the decentralized application that sits on top of the blockchain layer. And then the unit of interaction is essentially a wallet and like you start your transactions you sign your transactions from a wallet and you interact with the whole stack through using wallet as the entry point.

On the right hand side is the web two architecture. So on the lowest layer you have it's very simplified but you get the idea. On the lowest side you have uh uh the database and then on top of that you have the application logic and what's the unit of interaction? Big question. Any guesses from the room? What is the unit of interaction uh in web two? How do you essentially when you go onto a platform what are you using to interact with that platform? Sorry.

Yes. Uh yeah I mean yes but it's essentially a profile. How many of you have uh profiles on different platforms like everyone has profiles right? An average person has seven profiles because we have a different profile on um every different platform. So what this web a profile was a unit of interaction in web two. So any anytime you went to a web you go to a web two platform and you want to like have a presence on that platform uh you they usually ask you to create a profile. So a profile is how you start interacting with that application. So what does a profiles do? A profile basically has three distinct functions. It helps to

identify the users within a platform, contextualize their interactions and personalize their experiences. But the profile data is always siloed inside the platform. So kind of like a walled garden. I'm going to explain a little bit more about what I mean by identification contextualization and personalization. So as much as we like to think that we are this unique individual and we are we we act and be the same way everywhere. That's not true. Human beings exist in personas. What do I mean by that? Right now as I'm standing on this stage I have my speaker persona activated but the moment I leave this conference and go to my home I will have my mom persona activated. So the

way I talk the the way my body language is maybe the language that I'm using everything would change and we as human beings interact with different people in different settings in completely different ways because we have different personas that get activated based on the external environment that we are in. when we are living online, when we are uh going to different platforms, the same behavior is manifested there as well. And that is why we act differently on LinkedIn. Our pro our choice of profile picture is different. The way we talk, the way we post, the way we interact with people, the kind of people that we uh connect with is different on different platforms. And these different

personas come in the form of different profiles that we have. So in a way profiles identify people on a platform. And then profiles also contextualize your interactions. So we're all very intelligent individuals here. But do you think that um let me give you an example. So let's say there are two people. They are both saying exactly the same thing. But one person has a blue tick on Twitter, has 45,000 followers, and the other person has no blue tick, no profile picture, and uh 26 followers. Let's say whose tweet or whose post are you going to trust more?

Most of the people um would interact more with the person whose profile has extra metadata that supports their reputation. The contextualization of our interactions, the context and reputation actually changes the trust and validity that people have in the content. So this is the second thing that profiles do. They contextualize your interactions. people can extract more meaning out of what you're saying based on the extra metadata that's around you that's surrounding your profile. And then profiles do another amazing thing and that's personalization. So we always keep saying like web 3 has so less retention

users get churned away. But we didn't have these problems in web 2. I'm not saying that web 2 was perfect or had no problems. But in a way they made platform web two had platforms that were very sticky and people were eager to return to them. Why was that happening? Because of personalization. Personalization is essentially that you understand who your user is and then you completely change their entire workflow or their experience so that that person feels understood and feels like the platform is talking to them. So even in personalization there are three categories that's curation. You show the people the kind of content they are most likely to enjoy. Then recommendation.

You show the people the kind of content that you think they would interact with. And then there's discovery. So you let people discover the content that they want to discover in the minimum number of steps possible. So that's the third biggest thing that profiles did. And personalization was one of the key factors that web two platforms were. so sticky and had higher user retention. However, of course, it was not perfect. Profiles completely silo your context or your data. Your you don't really own your data. The platform can censor you at any time. You can be your entire reputation or whatever you have built over the years. It can be

deleted the moment you I don't know even by chance um go against any of the terms of service or anything like that. And this data is also siloed to one platform. Interestingly, these are all the things that web3 can actually solve. So we talked the whole deal about what profiles are. Coming back to a wallet. Now what does a wallet has? A wallet has a synonymous address, some transactions and some assets. But wallet is a completely anonymous piece of public private key pair. It has no information about the wallet holder. So no interest preferences, no social graph, no reputation, nothing like that.

And while this was good in the start, it's also one of the reasons why web3 platforms are not able to retain users in the way that web platforms do. One of the other problems that web wallets introduce more than profiles because now we are doing this comparison between web two and web 3 unit of interaction is that wallets introduce unimaginable friction. We still have to every time somebody uh onboards a web three the first time even if you ask them to like you know you can create a wallet through your email or Gmail they still have to figure out gas they still have to figure out bridging they still have to figure out okay I'm on Salana right now or I'm on Cosmos or I'm on avalanche or I'm on

Ethereum there is still zero context cold starts and yeah it's still quite a lot of friction so we started thinking about a mental model about how the next generation of wallets could look like and what can we actually learn from web two? What parts are something that should be reintroduced? What parts are something that that are better left behind? And we thought that um why not instead of terminology is a powerful thing, why not create profile as an abstraction over wallets and chains. If you guys since most of the people here use meta mask they are also now introducing the concept of profiles

within meta mask. So you can have your profile which has your preferences and you can use that to move between different devices and stuff. So if you really look deeper into the into the wallet space there is slowly this concept of profiles that is being introduced because profile itself is a powerful concept. So my theory is that more and more we will move towards profiles and wallets and chains would be something that would be abstracted away abstracted behind the profiles and these profiles can also include data about the user like their reputation like their social graph like their interests or preferences but in a way that would put users in control. So

not like web two but in a more uh so like preserving the user sovereignty because web 3 is interoperable by nature we can actually improve the whole profile infrastructure in a very different way. We can actually create things create profiles or create these data packets that user can take from one platform to another one ecosystem to another. we can actually create this this movable context from ecosystem to ecosystem. So forget about that. Okay, I need to figure out the which ecosystem I'm on. Am I on Solana?

Am I on Ethereum? Am I on Avalanche? Maybe we could just have profiles. We could maybe we could just have these personas that okay, this is my music profile. I'm going to go into a platform that has a list of very nice music. I'm going to log into that platform with my music profile. I don't have to care about gas. I don't have to care about blockchain. I don't have to care about what wallet is being created behind or not. I just go there with my context. I allow this application to extract my musical uh interests from my profile and I let it show me the best music possible. Why can't we do it just like that? Technically, it is actually possible and there are some people who

are doing it as well. The next big arena in the wallet UX is intentdriven user experience. So what is intent driven? So we are moving more and more towards intention economy of the internet. So the internet is being changed in a way because of the advent of AI that users can just say what they what their intention is what they want and everything gets handled in the background. So, an example could be that a user goes to a platform and says, "Okay, this digital art looks cool.

Maybe they don't even know what an NFD is, but this digital art looks cool. Let's buy this." And then behind the scenes, the wallet or the profile or the personal AI agent, whatever it is, it basically checks, okay, to buy this, I need to do this, this this this. So, I need to first check if there is a token, what which token is required. I need to check whether in my associated wallet is there a token. Do I need to swap? Do I need to bridge? Do I need to buy more tokens? Do I have the permissions to do it? And then if I don't have the permissions to do it, then I request for permissions and do all of these steps that are right now manual do it as a program. And then the user just the user just gets this notification. Okay, it's

spot. So this is also a new frontier of web3 UX. this intrudriven user experience and I believe that this would also be the wallets would also experiment more and more with this architectures as well. So we have come up with this name you're free to use this name or anything else but we say that this wallet 3.0 would be called as smart profiles. So what is a smart profile? A very generic highlevel um definition could be that it's a modular intent-driven interoperable account that knows who you are, understands what you want and handles all the executions behind the scenes. So you don't have to worry about seed

phrases, cast management, chain switching or anything like that. So in a way it's like identity, data, wallets, personal AI agents all together into one package that makes users lives easier. By the way, the company uh that I am working on the the tech that we're working on is also uh creating something similar. We call these as smart profiles. Like I said, intersection of identity, data and wallets. And what we offer is for the users extremely easy login. So users can login with a web two style login completely abstracted wallets completely abstracted chains but then users can also onboard with their entire context. So they can bring their

onchain and off-chain data with them whenever they go to an application on any ecosystem. this profile that they create is completely interoperable, can be used anywhere and we have uh a personal AI agent that gets that's attached to the user's wallet and is trained on the user's context and it can help user uh with the intentions or the wishes of the user. It can personalize their experience. It can do things on user's behalf based on the permissions that they're allowed. And all of this is available as a very simple 5minut SDK integration. So if you guys are interested, we can talk about it after the after the talk. Thank you.

Thank you so much. Yep. Yeah. Thank you for interesting talk. I would like to ask where is the key stored in your solution? Is it locally in a browser or is it your servers? because to to have the wallet non-custodial the key should be it's an MPCTSS network so it's MPCTSS network so it's a decentralized MPCTSS network in the background so the key so for example if the user uh the user's key is sharded into n parts and these n parts are divided between n servers and there's an authentication method so for example if the user decided to create their wallet

through their email let's say or their pass keys for example then This acts as the authentication method and only when somebody can prove correct ownership of this authentication method can this MPCTSS network allow for the signing of a private key. So it's decentralized, it's self-custodial user without the user's um correct access token, the signing cannot take place and yet it's so user doesn't store at all any keys in his local storage. It's completely the server. Okay. Yeah. So in in some sense it's might be vulnerable if if uh these nodes collute together to reconstruct the key, right? So that's with the so with in the MPCDSS network. So there are

like not it's not like one server it's it's like it's a distributed how many? So right now we're using the lit we we have a native integration with lit protocol and they have 21 servers right now. Okay. Well okay thank you. Hi, I have privacy concerns here. Uh that profiles are bad enough because they have too much information and now these super profiles are super bad in this respect if I yeah I'm not sure I'm see this I I was expecting this question. So you're right in a way. So in the sense that you think about

profiles as being bad because they understand who you are. So there there's this balance of privacy and personalization and this is a discussion that or or a topic that we have thinking about very deeply for the past 3 years. So the problem is that if you go with a completely zero context then you even you would not enjoy the experience that you get on a platform. So what's a better alternative? A better alternative is that no centralized party has your data and even if you want to disclose your data to an external party, you do it with a selective disclosure way. So this party only gets so for example I gave the example of music platform. So if you go to an application that's a

music store and you can only allow this application to know what your musical interests are without your name, without your uh I don't know other identity handles without anything else. So this application would just know okay this is a 0x something address and they are interested in jazz music. So let's recommend them jazz. The problem happens in web two because the per the the data gathering that they're doing about you is very very detailed and it they kind of follow you everywhere and you never really know where your data is being sold. You never really know that if an ad that you're seeing in one tab whether that ad is coming because you shared

your data with a completely different website. So you have no consent. you have no idea where your data is going and coming from. That's the problem with this hyper um uh like hyperpersonalization in a way. So we are trying of course there is of course this application would then know what your interests are but we believe that this is a good balance of privacy and personalization which is we are trying to strike. So this is an experiment of course but this is our thought process behind it. for the MPC part. Yeah. Do you use the same private key for contacting or communicating services? Because in the past I was in a project I was using

child key derivation. Mhm. So only MPC servers they only have the the master key and for every service they generate a child key together with the proof of knowledge and based on that they communicate with different services. So they cannot link completely. So it's correlation resistance. Yeah. So um do you do you use the same private key basically otherwise it's going to be very dangerous to use to be honest. Yeah you're you're right about this. So correlation resistance is also something that's super important. But we use one key per ecosystem. So we have several keys that are uh created from the from the one master key. But we do not have a

different key for any every application because otherwise we would not be able to let the user share the context between applications which is something that we would want that that we want. So there is some level of correlation resistance but it's not a new key for every new interaction and that's by design. [Music]