The Future of Web3 Authentication

The world of web3 and cryptocurrency is rapidly evolving, and with it comes the need for more user-friendly and secure authentication methods. In this insightful podcast episode, Austin sits down with Itai Turbahn, co-founder of Dynamic Labs, to discuss the future of web3 wallet onboarding and user authentication. Dynamic Labs is at the forefront of building web3 authentication solutions that cater to both crypto novices and seasoned enthusiasts alike.

The Problem with Crypto Terminology

One of the first topics addressed in the conversation is the confusion surrounding crypto terminology. As Itai points out, "Crypto is terrible at naming things." This issue dates back to the early days of Bitcoin when terms like "wallet" were first introduced. In reality, a crypto wallet doesn't actually store your coins; it's merely a way to access them on the blockchain. This misunderstanding of terminology has led to numerous misconceptions about how cryptocurrency works.

The Vision of Dynamic Labs

Dynamic Labs envisions a future where every app on your phone will have a crypto component. Itai explains, "If you fast forward five years, we think that when you open your app, your phone in a couple of years, every app on your phone is going to have a crypto component to it." This could include the ability to transfer money or information seamlessly between apps using blockchain technology.

The Core Product of Dynamic

At its core, Dynamic Labs is building developer tools for identity and authentication in the web3 space. Their product serves as a user system of record, allowing developers to manage users regardless of how they interact with a website or application. This includes support for various wallet types, from traditional crypto wallets to embedded wallets for users new to the space.

Multi-Wallet User Management

One of the key features of Dynamic's system is the ability to manage multiple wallets for a single user. Itai explains, "You might want to log in with your phantom wallet, but then connect your, you know, Bitcoin wallet, your Xverse and then connect your made a mass wallet, but you are the same user, you're one user, you're not three users." This approach allows for a more seamless user experience across different blockchain networks and wallet types.

Privacy and Data Protection

When it comes to privacy and data protection, Dynamic Labs takes a strong stance. Itai emphasizes, "We're a dev tools company at the very basic level. My goal is a single goal, which is to just give software tools." The company has implemented processes to keep user data siloed and separate between different websites and applications using their service.

The Challenge of Building a Privacy-Focused Company

Building a company that resists data mining and advertising pressures is no small feat. Itai acknowledges this challenge, stating, "We really think about ourselves very similar to like an off the zero or a segment or a Twillium, right, which is how do we really stick with providing developer tools and build that as a giant business." By focusing solely on providing developer tools, Dynamic Labs aims to avoid the temptation of monetizing user data.

Use Cases for Linking Multiple Wallets

The ability to link multiple wallets to a single user account opens up a range of possibilities. For example, a user might want to keep their financial transactions separate from their gaming or social media activities. Itai explains, "We all have, we live different lives, right? And so at, to your point, we want to separate them."

Hardware Wallet Integrations

While Dynamic Labs currently focuses on software wallets and embedded solutions, they are considering integrations with hardware wallets in the future. Itai sees this as part of the user's growth journey in the crypto space, from starting with an embedded wallet to eventually using a hardware wallet for increased security.

The Importance of KYC in Web3

Know Your Customer (KYC) procedures are becoming increasingly important in the web3 space. Dynamic Labs is exploring ways to make KYC more portable and user-friendly. Itai envisions a future where "I should be able to KYC once completed a credit day, credit day, should once as well, have that assigned to my profile and then go to the energy website like a Jasmine energy and buy, by energy tokens there and then go to a maple finance and buy kind of, you know, a treasury there and go to kind of a fabric land and buy land, right?"

The Role of Passkeys in Web3 Wallets

Passkeys represent a significant innovation in authentication technology. Itai is a strong advocate for passkeys, describing them as "one time invisible password, super long invisible passwords that you generate for every website." He believes passkeys could play a crucial role in improving security and user experience in web3 wallets.

Network Support and Wallet Requirements

Different blockchain networks have varying requirements for wallets. Dynamic Labs aims to abstract away these differences for developers. Itai explains, "My value proposition to developers and the very basic plug-in is please never have to worry about this stuff ever again." The company currently supports all EVM chains, Starkware, Solana, Bitcoin, Flow, Cosmos, and Alberon, with plans to add more in the future.

Monetization Strategy

Dynamic Labs follows a traditional SaaS (Software as a Service) model for monetization. Itai states, "We make money based on monthly active users, our business model, and we say this in calls with potential customers. It's very simple. We provide a service. We get money. And everyone's kind of happy."

The Impact on Solana

While the conversation doesn't focus exclusively on Solana, it's clear that Dynamic Labs' solutions could have a significant positive impact on the Solana ecosystem. By providing user-friendly authentication and wallet management tools, Dynamic Labs could help accelerate adoption of Solana-based applications and services.

The Challenge of Wallet Integration

Integrating with various wallets presents unique challenges. Itai compares it to the opposite problem faced by companies like Plaid: "In Web3, there's the reverse problem, which is every wallet is a startup, right? And every wallet wakes up in the morning and tries to kind of innovate and change how they do stuff and break each other's stuff a little bit, right?"

The Importance of Wallet Standards

The development of wallet standards, particularly in the Solana ecosystem, has been crucial in addressing integration challenges. Itai praises Solana's efforts, saying, "I think, by the way, Solana has been, I think, on the easiest sign to handle this with phenomenal work around the wallet standard, right, that was done in EVM land."

The Future of Web3 User Experience

Dynamic Labs is working towards a future where interacting with web3 applications is as seamless as using traditional web2 services. This includes simplifying the process of connecting wallets, managing multiple identities, and ensuring security without sacrificing user experience.

Addressing the Needs of Crypto Novices and Experts

One of the key strengths of Dynamic Labs' approach is its ability to cater to both crypto novices and experienced users. For newcomers, the platform can provide an embedded wallet experience that feels familiar and non-threatening. For experienced users, it offers the flexibility to connect and manage multiple wallets across different blockchain networks.

The Importance of User Education

While Dynamic Labs aims to simplify the user experience, there's still a need for user education in the web3 space. The company's approach allows for a gradual learning curve, where users can start with simple, abstracted experiences and gradually gain more control and understanding of the underlying technology.

The Role of Dynamic Labs in the Web3 Ecosystem

Dynamic Labs positions itself as a foundational layer in the web3 ecosystem, providing the authentication and user management tools that developers need to build innovative applications. By focusing on this critical infrastructure, the company enables other startups to innovate in areas like DeFi, NFTs, and social platforms.

The Challenge of Identity in Web3

Identity management is a crucial and complex issue in the web3 space. Dynamic Labs' approach of allowing users to link multiple wallets to a single identity while maintaining privacy between different applications offers a nuanced solution to this challenge.

The Potential for Tokenized KYC

The concept of tokenized KYC, where users can complete KYC once and carry that verification across multiple platforms, represents an exciting potential use case for blockchain technology. Dynamic Labs is exploring this area, which could significantly reduce friction in the web3 user experience.

The Role of Passkeys in Improving Security

Passkeys represent a significant advancement in authentication technology. By eliminating the need for users to remember complex passwords, passkeys could dramatically improve security while also enhancing user experience. This is particularly important in the web3 space, where the stakes of account security are often much higher due to the financial assets involved.

The Challenge of Cross-Chain Compatibility

As the blockchain ecosystem becomes increasingly diverse, with multiple chains and layer-2 solutions, the challenge of providing a seamless user experience across different networks grows. Dynamic Labs' approach of abstracting away these differences for developers could play a crucial role in enabling cross-chain applications and services.

The Importance of Privacy in Web3

Privacy is a core value of the web3 movement, and Dynamic Labs' commitment to data protection and user privacy aligns well with this ethos. By providing tools that allow users to maintain separate identities for different purposes while still offering a unified user experience, Dynamic Labs is helping to advance the cause of privacy in the digital age.

The Future of Web3 Adoption

By focusing on improving the user experience and lowering the barriers to entry, companies like Dynamic Labs are paving the way for broader adoption of web3 technologies. As the infrastructure for web3 authentication and user management improves, we can expect to see more mainstream applications incorporating blockchain technology in ways that are largely invisible to the end-user.

The Role of Developer Tools in Web3 Innovation

Dynamic Labs' focus on providing developer tools highlights the crucial role that infrastructure plays in driving innovation. By simplifying complex tasks like wallet integration and user management, Dynamic Labs enables developers to focus on building novel applications and use cases for blockchain technology.

The Potential Impact on Traditional Finance

As web3 authentication and user management solutions become more sophisticated, we may see increased integration between traditional financial services and blockchain-based systems. This could lead to new hybrid models that combine the best aspects of both worlds, potentially revolutionizing areas like cross-border payments, asset management, and lending.

The Importance of Flexibility in Web3 Solutions

One of the key strengths of Dynamic Labs' approach is its flexibility. By supporting a wide range of wallet types and blockchain networks, and allowing developers to customize the user experience, Dynamic Labs is well-positioned to adapt to the rapidly evolving web3 landscape.

The Challenge of Regulatory Compliance

As web3 technologies become more mainstream, regulatory compliance will become an increasingly important consideration. Dynamic Labs' work on portable KYC solutions could play a crucial role in helping web3 applications navigate complex regulatory requirements while maintaining a user-friendly experience.

The Potential for Web3 in Everyday Applications

Dynamic Labs' vision of a future where every app has a crypto component highlights the potential for web3 technologies to become an integral part of our digital lives. This could lead to new models of ownership, data control, and value exchange that fundamentally reshape our relationship with technology.

The Role of User Choice in Web3

By providing tools that support a range of authentication methods and wallet types, Dynamic Labs empowers users to choose the level of complexity and control they're comfortable with. This aligns well with the web3 ethos of user empowerment and self-sovereignty.

The Importance of Interoperability in Web3

Dynamic Labs' support for multiple blockchain networks and wallet types underscores the importance of interoperability in the web3 ecosystem. As the space continues to evolve, solutions that can bridge different networks and standards will likely play a crucial role in driving adoption and innovation.

Facts + Figures

• Dynamic Labs envisions every app having a crypto component within five years
• The company provides a user system of record for managing users across different wallet types and blockchain networks
• Dynamic Labs supports all EVM chains, Starkware, Solana, Bitcoin, Flow, Cosmos, and Alberon
• The company follows a SaaS model, charging based on monthly active users
• Dynamic Labs prioritizes user privacy, keeping data siloed between different applications using their service
• The company is exploring tokenized KYC solutions to improve user experience across multiple platforms
• Passkeys are seen as a significant innovation in authentication technology, potentially improving security and user experience in web3
• Dynamic Labs supports both embedded wallets for crypto novices and multi-wallet management for experienced users
• The company is considering future integrations with hardware wallets
• Solana's wallet standard is praised for making wallet integration easier compared to other ecosystems

Questions Answered

What is Dynamic Labs building?

Dynamic Labs is building developer tools for identity and authentication in the web3 space. Their core product is a user system of record that allows developers to manage users across different wallet types and blockchain networks. This includes support for traditional crypto wallets, embedded wallets for new users, and the ability to link multiple wallets to a single user account.

How does Dynamic Labs handle user privacy?

Dynamic Labs takes a strong stance on user privacy and data protection. They keep user data siloed and separate between different websites and applications using their service. The company focuses solely on providing developer tools and avoids monetizing user data. They also give users the ability to maintain separate identities for different purposes while still offering a unified user experience.

What blockchain networks does Dynamic Labs support?

Dynamic Labs currently supports all EVM chains, Starkware, Solana, Bitcoin, Flow, Cosmos, and Alberon. They aim to abstract away the differences between various blockchain networks for developers, making it easier to build applications that work across multiple chains. The company plans to add support for more networks in the future as the ecosystem continues to evolve.

How does Dynamic Labs monetize its services?

Dynamic Labs follows a traditional Software as a Service (SaaS) model for monetization. They charge based on monthly active users, providing their service to developers and companies building web3 applications. This straightforward approach allows them to focus on improving their product and supporting their customers without relying on data monetization or other potentially problematic revenue streams.

What role do passkeys play in Dynamic Labs' vision for web3 authentication?

Passkeys are seen as a significant innovation in authentication technology by Dynamic Labs. They describe passkeys as "one time invisible password, super long invisible passwords that you generate for every website." The company believes passkeys could play a crucial role in improving security and user experience in web3 wallets, potentially replacing traditional password-based authentication methods.

How does Dynamic Labs cater to both crypto novices and experienced users?

Dynamic Labs' platform is designed to accommodate users at different levels of crypto experience. For newcomers, they offer embedded wallet solutions that feel familiar and non-threatening. For experienced users, they provide the ability to connect and manage multiple wallets across different blockchain networks. This flexible approach allows users to gradually increase their engagement with web3 technologies as they become more comfortable.

What is tokenized KYC, and how is Dynamic Labs approaching it?

Tokenized KYC refers to the concept of completing Know Your Customer verification once and being able to use that verification across multiple platforms. Dynamic Labs is exploring this area as a way to reduce friction in the web3 user experience. This could potentially allow users to complete KYC once and then use that verification to access various services across different blockchain networks and applications.