VeradiVerdict - Issue #218
The decentralized application (dApp) ecosystem has experienced tremendous growth over the past few years, mostly as a product of growth in DeFi, NFTs, and web3 in general. Since dApps interact directly with smart contracts on a blockchain, crypto wallets are commonly used to authenticate operations within these dApps, specifically, to sign messages and transactions.
In parallel, wallets are taking their place as de-facto authentication devices, allowing customers to log in not only to these dapps, but to also interact with web2 companies such as Instagram and Twitter as a way to verify NFT ownership, with web3 social networks, as a way to access gated content and commerce, log in to communication tools and more. Wallets are quickly becoming the access keys to web3, replacing and at times supplementing email-based login and social login.
The potential value that can be captured by wallets and their standing as access keys to web3 have led to a massive influx of crypto wallet solutions in the market, with the most notable including Metamask, Trust Wallet, Phantom, Coinbase Wallet and others. Furthermore, since each blockchain may use different elliptic curves, different wallets are needed to transact with different blockchains, creating a need for even more wallets. To add to the mix, wallets combine a set of technologies - browser extensions, browsers (e.g. Brave and Opera), smart contract wallets, mobile wallets, desktop wallets, as part of apps (e.g. Coinbase MPC), hardware wallets, and a mix and match of those. It seems that the competition at the wallet space, both within chains and across them, is only accelerating.
One of the problems is that this creates significant overhead in the development of dApps and support of wallet-based login, as developers seek to integrate as many popular wallets as necessary, as well as leverage these wallets to introduce gated access, membership experiences, and others into their apps. This consistently takes away from the bandwidth of development teams, which would otherwise be better allocated to focusing on their core product. The challenge is exacerbated by the fact that wallets are inherently startups, meaning that they move fast and break things constantly, making it hard to continuously maintain these integrations.
Dynamic solves this problem by offering a simple authentication SDK and a tooling suite that allows app and dApp developers to more easily integrate wallets across chains, as well as quickly enable wallet-based identity functionality such as access lists, NFT gating, and compliance controls.
How Dynamic Works
Dynamic describes itself as an authentication and authorization tooling suite for wallet-based login. It allows developers to create a “future proof”, unified, multi-chain wallet auth flow.
Dynamic consists of three main components in its tooling suite: an SDK, a Developer Dashboard, and a set of APIs (which allow advanced customization). A developer starts by implementing the Dynamic wallet SDK into their website or app, and then visits the Dynamic dashboard to configure their implementation.
Dynamic SDK integration. Source: Dynamic
The dashboard that Dynamic offers is particularly powerful, allowing developers to configure which blockchains are enabled, enable capturing user information during sign-up, create access lists for private betas and NFT drops, and many other identity-related features. Dynamic describes it as an identity orchestration layer on top of authentication, using toggles to define settings without touching code.
As an example, one of Dynamic’s customers - Popartcats.xyz - used the authentication + NFT gating functionality to create a gated commerce drop for its customers, enabling any holders of the NFT to be redirected to a custom Shopify checkout page with a physical copy of their specific NFT. Llama, in turn, used Dynamic to create a membership-only login system for their site.
Dynamic Developer Dashboard. Source: Dynamic
This combination of SDKs and a no-code dashboard allows developers to not only have a unified multi-chain wallet integration framework, but also simplify user management and sign up flows. The SDK interacts directly with the code of the dApp front end itself, and is where the user’s wallets are actually interacting with the dApp.
Because of this SDK-dashboard structure, as new features are launched, developers can quickly “turn them on” and leverage them. As an example, Dynamic rolled out a multi-wallet feature this week, letting end-users combine multiple wallets in a dapp into a single user identity within that dapp. With the dashboard, existing developers can “turn on” the feature within their implementation of Dynamic without having to revisit the entire integration.
Dynamic is led by Itai Turbahn and Yoni Goldberg, two Israelis who met at MIT over 15 years ago.
Itai previously spent 7 years in product management leadership positions, and was previously a consultant at the Boston Consulting Group. He holds an MBA from Harvard Business School and B.Sc degrees in Electrical Engineering & Computer Science and Economics from MIT.
Yoni was VP engineering at companies such as AQR and Even Financial, and a tech lead at Gilt Groupe. He has previously completed research at Google, and holds B.Sc and M.Eng degrees in Computer Science from MIT.
Dynamic raised $7.5 million from a16z crypto, and over the last quarter has been working with alpha customers like Llama, Popartcats, Handstamp, Newton, ProofOfMerge and many others to build its first version. It’s currently in closed beta, and is planning on launching an open beta soon.
The problem space that Dynamic is tackling is not often talked about, yet remains highly impactful as development in crypto wallet infrastructure ramps up in the near future, and as sites and apps become more sophisticated on how they interact with wallets and manage their users. With multiple companies offering wallet-based identity solutions that require authentication as a first step, it seems that orchestration of these becomes critical.
- Paul Veradittakit
Pantera Capital Puerto Rico Management, LP and its affiliates (“Pantera”) makes investments in crypto assets and in blockchain-related companies. Pantera and/or its affiliates or personnel may be an investor in, or have relationships or other business arrangements related to, certain instruments, companies and/or projects discussed herein. This document does not contain any advertisement for Pantera’s investment advisory services, or any other services or products, whether provided by Pantera or otherwise. The information and opinions presented in this document are solely those of Paul Veradittakit; they do not represent, and should not be interpreted as representative of, the views of Pantera or any other individual working for Pantera, and do not represent investment, legal, tax, financial, or any other form of, advice or recommendations. Neither Pantera nor Mr. Veradittakit is acting, or purports to act, as an investment adviser or in a fiduciary capacity with respect to any recipient of this paper. Information contained in this document is believed to be reliable, but no representation is made regarding such information’s fairness, correctness, accuracy, reasonableness or completeness. There is no obligation to update this document or to otherwise notify a reader if any matter stated statement or information contained here changes or subsequently is shown to be inaccurate. Nothing contained herein constitutes any representation or warranty as to future performance of any financial instrument or company. Forward-looking statements should not be relied upon, and performance or outcomes may differ materially from what is contemplated herein. Opinions included here incorporate subjective judgments or may be based on incomplete information. This document does not constitute or contain an offer to sell or a solicitation to buy any securities or a recommendation to enter into any transaction, and no reliance should be placed on this document in making investment decisions.
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Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.
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