The Wallet Wars: Rise of the SuperApp | Qiao Wang

Transcript

so right now you think that the the Wallets on the user experience but actually if you go a level even above which is the browsers themselves now the browser sanctions but the browsers themselves they can own the browser extensions they can own The Meta masks of the world so if they try to to build their own wallet and within their browsers and if their browsers are really successful they're gonna own all the power they're they're going to become the the the de facto aggregator of uh experiences all right everyone welcome back to another episode of Empire we've got Santi co-hosting and we have uh repeat guest or maybe for the third time I

forget if it's the second or the third time we've got ciao uh from Alliance doubt back in Action ciao welcome to the showman thanks for having me of course of course really excited about New New Year going well very well had a great uh took a break uh first break for since like a year or so so it was very refreshing what what is a what does the break look like to you well usually I go overseas with my wife on a vacation but this year was the second year I became a father father so I couldn't go out so I stayed home uh did some creative art uh trained my left brain uh for like very rarely um so it was it was a lot of fun baby babies are definitely good for the

left brain that's uh that's awesome man I see you've got a new uh video camera and mic too it's gonna be a big year for the podcast for you I I expect yeah same same setup as uh Joe Rogan uh wow look at you look at you I've always put you in the same uh same bucket as Joe Rogan show I understand that's the first person that comes to um awesome well I'm super excited about this uh about this conversation people who have listened to Empire for the last couple of weeks have heard Santi and I talk about like thoughts on the past year thoughts for the next year and um one thing that I've been bringing up a lot is like this fat wallet thesis the wallet Wars kind of on on this idea that like every couple of years there are

there's just a battle and there's a war uh for the for the for the users right in 2017 we had exchanges 2021 we had L ones and I think that the next kind of proverbial war that we see in crypto is around is around the wallets um and I think you were one of the first people to kind of put this idea in my head and you're one of the only other people who I've seen talking about what I feel like is an overlooked place in crypto which is which is wallet so I'd love to just hear you maybe if we could start high level and would love to hear your thesis for why you think that this kind of fat we'll call it the fat wallet thesis yeah is a impending yeah the uh where I um had this Insight it was it was actually a while ago it was probably

a year or two ago uh sometime after D5 summer I realized that uh metamask implemented a swap function within the browser extension itself and since then I found myself start using that swap function natively within metamask without having to go to uniswap or any other amms and the sacrifice I had to make was paying one percent or something like that something ridiculous to to metamask um but whatever it doesn't matter because crypto is a 150 Vol asset asset class right paying one percent off of that doesn't really affect the user so over time I realized holy [ __ ] wallets

are really really powerful especially by Wallace I mean specifically the consumer facing wallets uh whether it's browser extensions or mobile apps um because they own the end user relationship and that's basically the crypto version of the aggregation theory if you own the end user relationship you can build anything into your browser extension or mobile app right the case with uh the metamask was that they built swap function but we're seeing um you know other um wallets doing something similar so that's where this thesis came about before we talk into like value okro for wallets and like what these wallet Wars

would look like why don't you actually go back in time so I've used Med mass for years I also remember using like my ether wallet back in the day um I think I think that was Tay's thing um Taylor Monahan before I think she's now at metamask but would love to just hear like the history of wallets if you feel set up to talk about that and then and then that'll take us into the future I mean I can go as back as to like Mount gox which is let's go let's go yeah let's go there that sounds great the very first wallet I used was mangocx uh For Better or Worse was the centralized I mean if you want to call it even a wallet uh but this was the first place where I store it at my Bitcoin which a part of the small part of my Bitcoin

which eventually uh went to nothing uh so mangos still owes me a bunch of a bunch of BTC um by the way that liquidation process has taken like almost a decade now but anyway um but the second wallet as soon as I bought mongox or uh but BTC from non-gox and transfer most of it into a paper wallet uh PTC paper wallet so the way it works is you'll you know you open a website and you move your mouse in the as random as possible way to generate a private key and you would then disconnect your computer from the internet and then

print the private key out and that's how you store the BTC back in the day that's what I did that was the the paper wallet um and then 2014 uh uh ethereum came around 2016 I think that was when my youth are wallet might have been 2017 but 2016 I started using some ethereum based wallets um and the thing that that was fundamentally different from Bitcoin was that with ethereum you can now start accessing some apps okay so you cannot you can no longer use a paper wallet to access decentralized applications

so you either have to use later on metamask with a hard wallet behind um or you use my user wallet which back in the day had some built-in functions within the website so within the website that my ether wallet website they're worth a few dabs that were built in um so you could ask us that but metamask was the thing that was really the game changer because with my ether wallet you can't access any app you want because everything had to be predefined built in within the application within the website with metamask the moment you

install a browser section you can access any decentralized application as you want so metamask was really the um the game changer for me in 2017 2018 when there was um you know new decentralized applications like maker dial makerdal was the first app that I really tried and used uh using metamask with a hardware wallet behind and that has been pretty much my my own user experience since then so metamask has really owned the wallet experience for the user over the last several years what's wrong with metamask today well I mean I can talk about besides that have have aside aside from the fact that

half my transactions fail these days I feel like but that's that's precisely that's precisely my number one pain point which is the the transactions failing all the time um especially post uh 1559 for whatever reason I just started seeing uh experiencing a bunch of failed transactions um but in general um there's a couple problems outside of that maybe for other users one I notice is that for new users who are you know start to dabble into the decentralized the real decentralized world um they need protection they need like whenever they sign a transaction they they need some kind of warning to

prevent them from falling into like phishing attacks or you know outright you know scams like you know smart contracts that are you know pull requests and stuff like that right um so I think a lot of wallets are thinking about that today uh and there's a lot of startups building uh smart contract scam detection products for wallets to be integrated within wallets um but that's work in progress that's one of the biggest things I think is missing today um and the other thing is just mobile experience um uh there needs there just needs to be a really good Mobile Wallet yeah what's your like what's your vision here of where of where this goes is this

like the super app like a wallet will be a super app and then after that I want to talk about like how we actually get there in the strategies and like who's competing with metamask but maybe take us to your your end State here is this a super app that kind of looks like what we have in Latin America and in Asia um what what is this what are we building here the trend I'm seeing right now is very much going into the super app uh Vision which is similar to to WeChat for example you have one app where you can talk to people you can send transactions you can use a bunch of other apps within the super app such as you know using a uber finding like hotels and stuff like that um and again this goes back to my original observation with metamask uh

which integrated which built the swap function within the browser extension itself and we're seeing other wallets doing the same thing for example with Phantom doing something similar on on Solano um they all try to add these commonly used frequently used functions within the app itself so so to start with trading which is the most obvious use case but then later they might add like lending or some popular games or whatever um so this is the trend I'm seeing right now and I suspect that will be the envision hmm it's interesting like crypto aside I feel like this is something that U.S companies are now using as a marketing tactic is like the super app right where

you start with um like a single wedge product that is an order of magnitude better than alternate Alternatives at the time whether it's like cash app for P2P payments or like PayPal like online payments this was like more like web one uh like Robinhood commission free trading coinbase like user-friendly crypto you start with this product that's this like orders of magnitude better and then you're like oh wait where where do I go next and then you're like wait a minute uh like WeChat is the super app that sounds like a sexy thing that'll help me raise money and like I started seeing it on all the financial apps like I revolute I remember the day they changed their home page to like we're building a super app or like the PayPal CEO came out and he's like our new PayPal mission is like we're building a super app

uh it does feel like kind of this overhyped term to me so I'm curious why you think that crypto can succeed there when all the fintech apps have not been able to succeed that by the way we said just there is a spot on like the other day I was using Tick Tock I use tick tock a lot and I saw a uh Elon talking about turning Twitter into a super app and like making the exact analogy to uh to WeChat um so certainly a very overhyped um terminology um I don't think crypto will be that different from a fintech app meaning the super app that will succeed is the one that has the most

distribution uh right now that is metamask um metamask has uh somewhere between 10 and 20 million active users um I don't think anyone anyone else comes even close to that and um the reason why metamask is different from all the other apps is because if you think about the stack you have uh the browser extension which is the ultimate end user facing layer of the stack underneath you have a bunch of apps right like uniswap Ave or whatever games um whatever whatever app you want to access as a user you have to go through metamask so metamask is the one that you have to interface with all the time so

that's why metamask is on top of these apps and then below the apps you have the layer one protocols Etc so the what makes metamask and wallets or in in user facing wallets different is that they are the the ultimate aggregator of user experience no that I think that's that's what makes the wallets different from you know what Jason mentioned earlier about uh you know Robin Hood and all these other mobile applications there's a good um I think post by Chris Dixon uh or some of the a16g folks it says it talks about like like who controls the experience now so like when you when you're a user of some of web 2 apps like you're kind of beholden

to their experience their data now the portability it lies at the wallet right you can move and pop your I like you know you don't have need to have a password you don't need to have a user login for every single app just very quickly use metamask can pop into whatever web3 app you want um you're obviously the D5 Alliance you can see a lot of startups um do you think that the game is kind of over here for wallets like like metamask as you said in the league of its own uh or do you see perhaps like a game or like an app like step in uh building their own wallet and just getting a ton of traction and like I'm

trying to think about we've all like had our like pains with a metamask but we still use it yep um and I'm curious if you think that that changes over time I I think you can change it very quickly so right now step hand has like despite the bear Market they still have 300 000 data active users uh which is an order magnitude smaller than than metamask but you can change at any point in time um Step hand has launched their own Marketplace so step and um went down the supermarketplace uh sort of vision instead of the super wallet Vision but they also have their wallet right like

the steppen app itself is a wallet is a Solana wallet um so step hand can or any consumer app similar to step n can do the super wallet if they wanted to and matter of fact uh we know that uh I think uniswap opens the a bunch of a bunch of similar uh Blue Chip decentralized applications are launching their own wallet so I'm not making this like I'm not trying to imagine or like this is not a hypothesis it's actually a trend I'm seeing right now that that the the most used apps uh in the decentralized world are launching their

own wallets hmm right so I guess the last note on the super app it does the super app kind of reminds me of like when uh media companies because I you know block works I'm in the media space when media companies are like I want to build a we're building a Bloomberg for crypto yeah I'm like oh I bet you are that's the one of the best software companies in the history of the world it's like it's like you know it's like it's easier said than done uh it's a very hard thing to replicate that but just on your note of um everyone everyone's gonna launch their own wallet Chow like what do you see from this year like let's let's start getting into these wallet Wars like do you see so coinbase came out with their own wallet I think Ledger came out or is

coming out with their own wallet you got to assume someone like the nft players start coming out their own wallets too like you gotta assume open C instead of open seat loses money on the fees or at least they're not they don't lose money but they don't capture the value on the fees when you're swapping inside of uh when you're swapping inside of metamask there like that's value that they could capture yeah so you got to assume who who else launches wallets right uh this year I feel like everyone is thinking about it everyone everyone right everyone who has like at least a million users is thinking about it if not already working on it hmm so throw out some names like openc you got to imagine rolls one out um will the D5 player well like someone

like a uniswap roll out their own wallet I think they're doing it they are right with the and they're building an app too um okay who who else do you think is approaching this in different ways like Brave comes to mind right I've actually heard really good I don't use the brave browser or like the brave wallet but a lot of people with block works too and they love it um maybe can you can you share like so metamask took this approach of like build the wallet first build this Chrome extension Brave is taking a different approach which is like own the browser and then but I think really what they're trying to do is like also kind of a super app there so can you kind of explain like Brave's approach to this yeah so again going back to the the layers of the stack

um Brave is actually part of that picture as well because at the top you have wallets then you have apps you have layer ones um so right now you think that the the Wallets on the user experience but actually if you go a level even above which is the browsers themselves now the browser extensions but the browsers themselves they can own the browser extensions they can own The Meta masks of the world so if they try to to build their own wallet and within their browsers and if their browsers are really successful they're gonna own all the power they're they're going to become the the the de facto aggregator of uh experiences

it's all about bargaining power across across the several layers like apple for example has a lot of power against all the NFC apps that are in the app store right like they force them to to pay 100 to apple apple has a lot of power if Apple wanted to launch a wallet it's game over right but I don't think they will um but the player that sort of sits between the App Store between Apple and the wallets uh is the is the browsers which is brave for example how um what do you think about like the approach that Salon is taking with their phone um to you know talk about Apple um and we had them on talking about hey it's not only like they're building a

mobile stack that could integrate with ethereum and other chains so do you see that as as a credible kind of contender um could have like blow past like metamask and the scale that they have today yeah I mean on paper the uh uh the thesis behind the Solana phone is amazing uh it has two parts one is fighting against the pot with the the centralization power of App Store and the other one is um allowing the users to natively store private Keys within the phone right so both um reasons are very compelling now whether or not they're gonna become a real threat to to to to Apple all balls

down to execution and I have no visibility into how much time they're actually spending on on this stuff so it does feel like so maybe let's extend out the wallets I keep hearing you say this term which is like wallets are the point of distribution like Whoever has the distribution wins Whoever has the uh relationship with the user wins if you extend that out you could see a world where instead of building new products so like previously you used to people who like built new software products maybe built them for like the desktop or something like that and then what happened is the the iPhone came out and you you launched directly into hundreds of thousands and then millions of users by just launching on the App Store yeah so I do you think that we'll see a world

either this year or next year where like you start to see a lot of startups that are just building for the wallet and they launch inside of metamask I I think it's it's very hard to say but my my hunch is it's very hard if you start by building a wallet because you're not going to be very differentiated from metamask or other existing incumbent wallets um if you want to win against metamask you have to be 10x better but how you're going to become 10x better like I I've spoken with a number of wallet products uh that are building like the in phase in user facing wallets I just haven't come across anything that makes me think okay this is really

really compelling Phantom was the only compelling one that I've come across over the past year because it coincided with the rise of Solana um it makes sense to me but I haven't seen anything else so point being if you start by building a wallet I think it's going to be very hard to compete with incumbents but if you start by building something that can be immediately useful it can be any application it could be a game it could be um I don't know a social network or whatever right Thinking Out Loud if the whatever that you're building is immediately useful that will create the distribution that you need to eventually become a wallet and that's exactly what the what I mentioned earlier about unit

Swap and openc they didn't start as wallets they start by building something different and immediately useful then eventually turn it into a wallet I I think okay so that makes sense to me I think maybe more where I was going though with going with there was um when you have distribution and you have the relationship with the user over the last couple of years we've seen that the natural extension of that is to turn go from a product to a platform so like Salesforce and Slack are probably good examples of this slack owns the relationship with like millions of employees all around the world what they did is they then turned that into they opened up the API they turned that into just went from a SAS product into a platform now there are companies that

they don't even law they don't build for non-slack they're like we're building on top of the slack platform like troops AI is a good example troops like help sales teams get more powerful they just got acquired they got acquired for like 50 to 100 million I think and that was like a slack native application so could we see tools and companies that are like were like maybe metamask could we see metamask open up their Dev kits and like build much more extensive Dev kits and then companies just go in and build there they recently did um I can't remember I think it's called metamask uh snippet or I can't remember the name but they open up their SDK um and I'm already seeing a couple of

products building uh four metamask sorry if the name is uh sorry if I can remember the name but um the the there's projects building for example what I mentioned earlier about this scam detection oh this is cool oh I didn't I didn't even see this oh bring your features and apis to metamask with snaps oh this is really cool they did this a couple months ago I believe maybe earlier um but uh basically it allows third-party developers to build special functionalities features within the browser extension itself um who do you think is able to compete with metamask here like do you think do you like the brave approach do you like the

um someone we haven't brought up is Argent as well like do you like the Argent approach do you like Phantoms approach like I guess do you like any of those folks or do you think like what yeah maybe I'll start there with that question I don't have a strong opinion on this um I I personally find Mad Max really dominant because like that that just come from my personal experience like which Santiago mentioned earlier despite all the flaws of metamask we all still continue to use it um that the switching costs is way too high like the switching cost is basically you you as a user become familiar with with the user experience and you sort of trust the brand that's pretty much it yeah but it's still very high switching cost um where I think

might be an opportunity for other wallets to to disrupt metamask is account abstraction which by the way like the the things that that disrupt the in common is always new technologies that enable New Opportunities and account abstraction might be one of those so it levels that the playing field for everyone um by allowing people to build um to let wallets to interact with smart contracts natively and and do things like you know bundle transactions uh letting the smart contract handle things uh for the user instead of letting the user sign every single transaction right like stuff like that

uh it's a possibility but it's not a very strong opinion for me it's it's interesting you say that it does feel like crypto is this unique thing where whenever there's a big new update like a new uh implementation on ethereum or something you you kind of hit reset on the on the competitive landscape which gives new up-and-comers a chance at the incumbents do you um can you actually just explain account abstraction for a second because I also think like maybe a sub prediction here would be that like the term smart contract wallets will end up being a major buzzword yeah um this year so can you just give an overview of account uh account abstraction I don't have a ton of

expertise or deep understanding into it uh also it's something it's a term I keep hearing um yeah and my understanding is like it just makes there are a couple things it does which is like let's say you're lping into uniswap like when I when you do that there's probably one two three there's like four clicks you have to do four transactions you have to approve and one thing this would do is like something like pre-approvals or something like that where like that gets bundled into one transaction yeah that's one example yeah um basically on ethereum there's two types of account there is um that the EOS and there's the smart contract accounts um before account abstraction uh only the EO is basically EOS are our accounts you and I like as

retail users individual users control like our private keys or whatever um only only that the user can sign transactions but with account abstraction the smart contracts can do that as well and by the way this is a very imprecise definition I'm just describing that at the very high level and as a result of that the wallet itself can become a set of smart contrasts that sign transactions on behalf of the user so that the user doesn't have to sign every single transaction which you mentioned like earlier like with the unisub or whatever it takes four uh transactions to sign right so that will greatly improve um the user experience for wallet users if I were building a wallet today which

I have blockworks is not building a wallet um but if we were building a wallet or if I was building a wallet we um I think probably the two ways to compete would actually be verticalization and geography yeah and what I mean by that is like um it's interesting when you travel to other countries because just like UI ux decisions like whenever I go to a different country I'm like oh this is this is a horrible design like this is this is awful but it's awful to me the American who lives in New York and grew up in San Francisco to the person in I spent six months in Hungary like the UI ux decisions they make in Hungary are very different um and actually I heard you had you had a thesis on this which was like in

America we grew up with abundance so therefore we like design experiences that are very clean and like we I was going to say modern but that's our version of modern like very clean and minimalist whereas a version of like in Hungary they didn't grow up with as much abundance so maybe they like things that are a little more what yeah to me feels like like cluttered yeah um but but I think like yeah it ties back to the earlier discussion about super app like this is precise this is one of the best arguments against the superapthesis which is that the WeChat user experience is very much tailored for for Chinese people uh the way we've had experience is very cluttered extremely cluttered you have a bunch of things within the

same app um are you going to see the same thing in America maybe not because the two user segments are are different they have different user preferences yeah right even even like WhatsApp for me I like I don't like the WhatsApp UI ux but like the Americans are not the core core base of WhatsApp um but but just like on this oh go ahead salty well I'm just curious like thinking about so you're an investor and you know your reference aggregation Theory and the decision always comes down to like where's I feel like over the last year people have had various over modernization of where value accrual happens in crypto is very hotly debated

topic um and I'm curious if you like when you think about wallets and the wallet game like metamask you know there's this dude analytic dashboard for instance I think they did like this sort of strategy that perhaps is not easily irreplicable because they were free for such a long time it's kind of subsidized by consensus and then they kind of like layered in this ability to swap and people like oh this is great you know new product they already have the distribution base uh and people probably are not realizing that they're getting ripped off in the fees and you know uh coinbase had this similar kind of moat I guess that it was just kind of the only place where you

could trade and develop a really good reputation in the US and they charge you a lot at least retail um I guess what I'm trying to get at in this question is yeah I guess what I'm trying to get at is you know my understanding is metamask routes the trade to some of these protocols a lot of it just goes to uniswap some of it uses the Xerox API these other apps are also benefiting so I guess the very precise question is would you rather invest in a new wallet we'd rather kind of like take a Long View on the protocol like D5 protocol itself that is going to benefit from all other wallets that are going to Route like Argent will route to curve will route to uniswell um there's more of an open-ended

question on on modernization value accrual I don't I don't really place a lot of emphasis on whether the value will accrue to wallets or within the app itself I think it's just something that's so hard to predict that's outside of our control like this this is not something where I'm even the the my best prediction would be like maybe 50 like I I can't beat the 50 so there's no way for me to predict where the the value occurs um so it's not really a factor that I look into hmm maybe let me

how will value accrue though like so I mean I mean we've been having a lot of conversations on Mev on the podcast recently yeah and so like how do you think like maybe when you look at wallets like how will wallets think about Mev like could they here's some examples they could take Mev and share that with users as like an incentive to use the wallet or maybe to go like feel like Fearless you could have a Fearless wallet if you offset the cost with Mev that the wallet accrues like how do you think about maybe not who accrues the most value but how do you accrue value in a wallet so exactly MV makes the whole discussion even more complex um and I don't have a strong opinion like if you look at the whole supply

chain of Mev you start with wallets um and then um you have the Searchers and then the builders and then finally the validators so a couple years ago uh before and around the time flashbots um came about uh most the the action happens towards happens towards the end of that chain right around the builders uh and and the validators but in more recent uh months we're seeing projects and wallets wanting to move the Mev towards the wallet and more towards the in the end user the wallets want end

user to capture some of the Mev and so it feels like a moving Target it feels like something that that evolves quite a bit over time and I don't I don't really understand what forces are driving these changes yet um so I can't make a long-term prediction is but I am seeing a trend where Mev is moving towards the wallet hmm yeah I think that I I think so as well I think yeah I agree I there's a business model that crypto people do not like that I think is going to come to wallets as well which is ADS um I think we'll see a model where something that people don't like use it like doing is paying fees especially

when gas prices are really high right and um I think you could see a world where like in the next bull market two things happen Gatsby's like fees transaction fees go like Skyrocket but also companies are flushed with cash and racing to acquire users so let's say I'm coinbase I'm like I need to I've got a billion bucks to go spend on users I'm gonna pay like almost overpay pay a boatload of money to go uh advertise inside of the metamask wallet and metamask can use that ad Revenue to offset fees which then helps them get more users it's kind of a win-win across the board there was a company in our last cohort who built exactly this at now crypto native ad Network and the reason why it's crypto native is because uh mainly two reasons one is uh this ad

network will look at the on-chain activities of the users in order to push them relevant information uh so this is something that was now powerful before uh before before crypto and the other thing that's crypto native is because is that the user themselves can get paid for watching the ads so this is some this is something that's similar to uh the Brave the original vision of Brave right um but uh because the user has a native wallet they can get paid for watching the ads uh natively and quickly and by the way the company is called uh slice plug we love the plug um speaking of incentives Chad what do

you think about tokens um while it's launching tokens why should they launch tokens because they want to incentivize people to come to use their product okay um I'm not by the way I'm not saying they should I just have a feeling that we're going to see a bunch of wallets launch tokens or airdrop or whatever you want to call it at one point coinbase like teased with this and I never did uh not a mask yeah I remember that too isn't it isn't there a phantom airdrop on the way no I think most crypto startups have

realized that um launching tokens too early using tokens to incentivize user growth too early pre-product Market fit is not a good idea um I have many Founders who who told me this recently and by the way I think it's a positive uh movement um now I think the mature wallets like metamask uh you couldn't make sense for them to launch a token if it serves a some interesting purpose other than just incentivizing users if the if the token is designed in such a way that that accrues value from whatever like from like let's say uh the

fees generated from their swap function I guess it could make make sense but where we are today like this is not really related to wallets but more of a macro thing which is that um the regulatory scrutiny is probably at its highest uh in the history of crypto right now it doesn't seem like a smart time to be launching tokens I think that's right yeah um how do wallets monetize today like how does Santa you just telegram to me this um this metamask Revenue thing like metamask does spit off a boatload of cash flow um how what is the business model of wallets today I think it's the swap

function I can't think of anything else so the sorry the the basically they would charge a a fee from the the swap function how much how much money are they making Santi oh I think I I was trying to improve that but like last year like volumes have come down considerably in swap sizes have come down considerably but I think they crank like 200 million of Revenue or something yeah like in 2021 like it was it was just like uh they quickly became one of the most profitable businesses in crypto um daily daily revenue like they're spitting off they're doing a hundred and thirty three thousand

yeah like 210 000 in daily revenue there 133.91 you run rate that say they're doing 100K you know cumulative Revenue 350. yeah they're gonna do like 36 million of Revenue which by the way goes straight to the bottom line right they have no overhead is my understanding it's just like a great business the other way of seeing wallets like origin for instance well that I think they monetize I'm not sure is kind of through this fee sharing construct which they might have like these kind of B2B deals with protocols where they might be incentivized to

route a particular order yeah um and you see this in traditional Finance Finance too but for the most part I think the very simple one is you know they might quote you um well depends so the SWAT fee can come in different ways one is they might quote you something and they might say look we're going to guarantee you X price if we then deliver a lower price we're going to take that um and pocket the difference that's a more riskier business model um than just saying we're gonna just gonna charge you whatever one percent at whatever the market price is which I think is what metamask is doing they don't take any risk on the execution

right other wallets I've seen have tried to compete by saying hey we're going to guarantee you best price execution and if we are able to give you a price lower than what we're quoting you then we'll share some of that or pocket that um which is I think what like one inch the aggregator um has been doing historically yeah I just started playing around with the core wallet here let's see if I can find it Avalanche like core wallet and they just use pair swap like Traders uh yeah like powered by pair swap so I think there's all these

deals that like there's offshoots of Revenue um they'll flow back into these partnership deals uh funny enough I'm sharing my screen still because someone just texted me this uh a link to this this is a this is a new wallet I've never heard of this it's called it's called it's called family I guess and it's just like like they're clearly trying to compete on just like looking at this video super clean user experience and mobile right so I think we're just gonna see so many of these this year I mean like there have been so many of these actually I used rainbow I like rainbow a lot I don't know if you guys have used rainbow

um mobile yeah it's a it's the best mobile ex Mobile wallet in my mind it's very good for like nfts yeah yeah it's uh I think uh maybe we can like the things that are perhaps the the biggest areas of opportunity in the wild space I think so I'm curious to get your perspective is like key generation and management which look I think the value proposition of expecting users to write down 24 words and store them securely is of a different era you know and Argent social recovery is really neat I think

I remember looking at argent's uh series a round which was led by Paradigm and I was using Argent at the time I was super excited that round I think was priced at like uh I don't know I think like 50 million or something um I think on a relative basis I mean I don't I think they've done super well I really like their product but I think if you look you would probably [Music] it wouldn't have been your best investment because I don't think they've gotten like the traction that you would have thought given all the really cool features that they have um it's just sort of this idea that like crypto is such a small user base that

it's hard to like it's hard to like you're kind of competing for a very small pie and it seems like Madame Oscar kind of dominates the crypto nerds that are really comfortable like using it and so you're just sort of waiting for that mainstream moment where a game comes a lifestyle appcons and millions of people and say oh wow like this metamask thing is really difficult I'm just gonna go use origin but you're still gonna go have to acquire those users so goes back to the initial question of like maybe you're better off like just backing the best app whether it's a step in like or a game like that is gonna capture the user attention because right now it's really tough like I think like

Dharma I don't you guys remember Dharma yeah like they had they were acquired like by openc right and so they kind of shut down the wild space What I'm trying to get out of all this is but the Wall Street has been very difficult historically to invest as an investable kind of category look look at this look at these two tweets okay just tying into what you just said it's on to this is I just typed in wallet Wars crypto this is Spencer noon in 2018. the two biggest battles in crypto yeah protocol Wars the wallet Wars this is four years ago uh four and a half years ago Rick Burton 2019. there are over a thousand crypto Wallets on

the market the wallet Wars are going to be fascinating so yeah I mean like Santi was just talking about like there hasn't been really a war because metamask has won everything but um the the apps that have acquired over a million users like the likes of uniswap and openc the fact that they're going to launch a wallet I think that's where the war actually starts the folks who already have users and capital on their platform launch launch wallets instead of just like new players who yeah I think so yeah yeah I agree um Chad anything left on the wall I do want to just get your take on before we wrap this up like other interesting things that you're looking at and spending time

on but any any like last thoughts on the wallet Wars and um I mean I'm just thinking about what you said earlier about um you know the verticalization and Geographic Focus I think like the the people who use metamask um I think they are very much crypto natives so there might be a vertical that or user segment that is somewhat underserved uh which is the people who are fairly new to crypto and they want to interact with let's say games let's assume that games are crypto games are going to take off in the next couple years

um I think this user segment may not care that much about security and care more about convenience uh user user onboarding maybe a web 2 like user onboarding and I just can't see one wallet dominating both the crypto Natives and those new users so there's probably opportunities for Wallace to serve that user segment as well do you think that we will see web 2 logins for crypto wallets like what login with Gmail what we're already seeing that um there's there's a number of startups building this uh they're not building a

end user-facing wallet but they're building sdks for other wallets and games to integrate with which offers this web to like login experience for especially for gamers so so how that works is um I mean from a user's point of view it's very simple you uh you sign in with your Google or Facebook credentials but then um the the private key some of the projects do this way so they share the private key into three shards one of the three shards is stored in your local device like your computer from which you play the game uh another Shard is stored by the game developer itself

or the wallet itself and a third chart is stored on a third-party Key Management Service like AWS KMS or something like that and so you need two of the three shards to sign transactions and if the user loses their local device you can always recover the the private key using the other two shards and by the way this is this I feel like this is very different from the rainbow social recovery which to me is back in the day was a really good idea but I feel like it's not that Innovative anymore huh you're the the login and Gmail thing

is just making me think like it is how we scale to a billion users it's against kind of the ethos of crypto is what I'd say like pros and cons um but it man I don't know like when you think about your like your your crypto wallet I think right now is like you're home for your assets like crypto tokens and things like that slowly it's also becoming your home for your nfts like like I don't think you can like the wallet is like really built for I know you hold nfts in your wallet but like it's really not built for nfts it's very like uh text based instead of image based um but like I think the next stage is like a wallets that are really built for nfts as well then it's like wallets that are built for like everything in crypto

but eventually I think like the end state of a wallet is actually just like your home for All Digital Goods like crypto or non-crypto like just your home for All Digital Goods basically um which really is what you're talking about there's like your identity it's like the home for your digital identity and having login with Google at the backbone of your entire of your entire digital identity is almost just like a shame that that's where we're that that's like the inevitable case where we're gonna end up you know what I'm saying you think Google and apple launch a wallet ciao um isn't in Instagram already

almost becoming a wallet by allowing people to to trade nfts not only trade nfts but shop for e-commerce as well like you could argue that they're a wallet what is a wallet the definition of a wallet I think is like your access point um your store the place where you store digital goods and where you access other applications in a digital place and so with like that definition um I think that Instagram is is a wallet yeah that's I'd never thought about it like that but you can access e-commerce now you can access uh messaging messaging e-commerce uh you can order things through the app you can buy and

sell nfts yeah that's an interesting thesis like I guess it's a it's a really good point that you both bring because maybe that is the way that you display someone like bottomass right which is you have such an compelling value proposition I call it action for a user that says hey come claim you're playing a a normal game and you say I've seen a lot of Webster games say look our go to market is going to be we're going to allow people to not even think about crypto just play the game one say a crew no points they will have the ability to go be prompted to go to a desktop version that circumvents apple like store and they say go go create an account go claim these tokens like that to me feels like the smart approach to acquiring a customer in a very effective

manner but it starts with a super compelling product right um to then say hey I'm gonna I'm gonna go set up create my account my keys and what have you hopefully abstracted away in a secure Manner and that again goes back to the point that I think we're talking about is it starts it begins and starts like it begins and ends with like a game or an app lifestyle app that is prompting you to there's an incentive to go and create a wallet because you know people don't wake up and think about oh okay I'm gonna go you know create 10 wallets right now like it's just like no it doesn't happen that way yeah in other words the the path towards success that metamask has taken

is more of an exception rather than the rule um absolutely ciao where are you as we think about wrapping this conversation up um you see more startups in crypto than I think anyone in the world more crypto startups you and Imran and the team at a lion Style what what are what are you seeing that like most people are overlooking just because they aren't interacting with these like early stage Founders who are building things that won't be big until probably 2025 or 2026. what are we missing um so there's two really important enabling Technologies right now

and enabling Technologies um create new opportunities and these two enabling Technologies one is ZK the other one is AI I'm sure many of you have played around with GPT um but I think there's going to be really interesting really interesting things happening at the intersection of crypto and Ai and crypto and and ZK um I I personally understand the AI part more than the ZK part so I can't really Envision how what kind of crypto applications can be enabled by ZK but uh AI I think it's gonna be super interesting what l1s are people building on these days

um okay so here's an alpha that I haven't shared um so since um FTX collapsed um Solana has taken a real hit in terms of developer adoption and um all the content you see out there is how the D5 volume has gone down like that's very objective information but what people are probably not seeing yet is um Solana taking a hit relative to ethereum and the Altus in terms of Developers where we see increasing developer adoption is ethereum l2s arbitrary and optimism

and our data shows that they're very clearly since November go ahead on a market share basis um are you tracking this as projects leaving Solana and moving to arbitrum or optimism interesting that you didn't say polygon or maybe you don't consider that a Trill but or new projects that haven't deployed in any chain new products and going your products the developers that are moving I only have some anecdotal uh data points so not big enough to draw any conclusions and regarding polygon the reason why I didn't say polygons because polygon starts with a very high bass

line um so the the input even if there's any Improvement um it's it's very hard to see in the data but optimism and arbitrum are starting at a much lower Baseline so improvements are very obvious what have you seen a particular SKU preference of one over the other or is it kind of 50 50. I would say between arbitrary and optimism 50 50. interesting what are some of the talking about Founders and projects you're working with in the cohort uh because I think you guys are an incubator that works really closely with the founders like are very engaged and

I've seen that kind of firsthand what are some of the things that are are top of mind for Founders these days um it's the bear Market um it's you know how much runway they should have uh when is the best time to go out and raise again what do they do if their traction their metric whatever metrics that they track does not improve and by the way this is something that that almost like everyone like all the VCS you know they gave advice like uh you need to have like two years of Runway this is the best time to like all these platitudes the one thing that I don't see anyone say is that

um in the bear Market what I've seen is that no matter how hard you try as a Founder your metrics are always going to be correlated with the price of Bitcoin and it's really really [ __ ] painful like no matter what you try no matter what product features you roll out no matter what growth hacks you roll out you're going to be at the mercy of the price of Bitcoin and it's it's a soul crushing and so the what I tell our Founders is if your metrics are flat over the past year you're out performing like 99 of all the startups out there yeah that's a good point have you noticed a particular uptick in Upper a certain type of application idea vertical

recently or over the last year I guess if you you know maybe defy not so much and more skewed towards gaming or infrastructure or marketing like you know um in the last half a year or so there's more slightly more ZK slightly more AI um there's fewer games um a lot more B2B startups so startups that build products for other crypto startups um

a lot of layer two products for some reason um in terms on the human capital my last question here is on the human capital side of things one how do you measure that to um what are what's what are some of the trends that you're observing in terms of where people are coming from um and the quality of these founders a year ago there were a lot of Founders coming from AI into crypto uh now there's a lot of Founders going from back into AI especially ever since shot Chaser

um yeah on this point do you see a convergence is it over hyped like is it is are blockchain's a substrate for AI you know like it's certainly hype driven I'm also seeing a fewer um Founders coming from Big tag these days um there's far more crypto natives like young Evergreen Founders uh very very strong very talented but that's what I'm saying too is more Founders who are like they worked at coinbase for three years um or they like I think if you work outside of crypto like now is it not usually the time that you get into

crypto as a Founder it's like let me risk it all start a company which is already super risky and go into crypto which if you haven't gotten into crypto at this point you probably see it as pretty risky it's like a lot of the companies now are like they spend honestly there's some second time crypto Founders now which is like maybe their first thing didn't work but in in your criteria as I think of you guys as the Y combinator of web3 um what are like what maybe give me an example of a team that you kind of took a flyer on and then widely surpassed or has like surpass your expectations and I go back to the example of for instance the Airbnb guys barely made it to the cohort uh I believe and it was because

they were very Scrappy in the way that they had sold like you know I was at cereal boxes during the presidential campaign and that impressed program and he squeezed them in last minute but it just to me it's like remarkable in the sense that sometimes the best Founders really prove themselves over time and initially it's not very obvious sometimes the the more articulate composed Founders are not the best ones and I'm curious to get your perspective on that and how you make the filter maybe for someone listening out there that wants to apply to to your cohort I mean I think fundamentally we look for

Founders our criteria are actually very similar to the criteria of the early days of YC that is we're looking for undervalued Founders who have the potential to become really really good and they tend to be very technical they tend to think about things from first principles they might not be a very articulate uh they may not be busy they may have they may not even have the business Acumen but we believe that these are things that we can help them with because the Alternatives we look for very strong founders with strong you know track record of building previous startups but these would be the people who can raise from VCS why would they why why would we go after them right want to help the ones that are extremely undervalued so oftentimes we

accept Founders who are similar to you know the you know the the airbnbs the similar stores with similar stores to Airbnb encounters right um but the key difference between what we're looking for now and what YC is looking for now at least in terms of crypto companies is that I really want to see Founders think from first principles and understand or at least can tell me why they're doing crypto because a lot of them they look really strong on paper but they can't explain why they're using crypto as their foundational technology to do to build their product and these are the founders I one I think they're building products

that may not be that interesting and two they might they may not have that much conviction into crypto in the first place and they probably leave and by the way a lot of them are leaving right now um in in this year especially in the middle of the bear Market this will be my my last question I wanna I think you're one of the best thinkers out there you've been around for such a long time we're at that point where a lot of people outside of crypto and even within crypto are saying what's the whole point of this like what are we actually what a point to me some useful applications that make all of this worthwhile or is this just a uh you know a casino that allows people and provides great entertainment and specular value is that just it like what do you tell to

a skeptic a cynic out there that is really questioning the region of existence of this industry yeah I mean all the the most vocal critiques I've I've seen and that are those who don't really need crypto in the first place and they are let's say Americans uh very wealthy or reasonably well off but if you travel anywhere in South America or Southeast Asia chances are if you pick a random person in the street and you talk to them chances are they've interacted with usdt and they use usdt as actually an inflation hedge number one

and two as a payment rail to pay each other um I think stable clients are actually have made a lot of impact positive impact onto the world that most reasonably well-off people in in the west have not really personally experienced yeah what do you think I guess as a follow-up and I'm cheating I always do this but say it's the last question never is but what do you think is that so stablecoins Trojan Horse strategy people want to hold dollars you can hold usdc regulated you feel comfortable perhaps it's not an endorsement but you know um

what is that next catalyst that that you know macro aside that really on boards um the next couple million users into the space I mean I I love to say games or social networks but in the end I think it's going to be speculation again until until we reach that saturation point I think that the first 80 percent of the world that will be on board into crypto are going to be onboarded via speculation and once we've reached that saturation chasing the next Bonk exactly yeah and I think it's fine like using speculation to onboard people into crypto to eventually to give us time as crypto natives to build actual

applications with real utility like social networks or games or whatever um I think that's that's so I'm okay with that yeah Chad this is this is awesome man appreciate you sharing the uh fat wallet thesis and some other some other interesting thoughts at the end here with us um it'll be interesting to see I mean I feel like we've for many years like the Spencer noon and Rick Burton Post showed us like we've been talking about the fat wallet uh the the wallet Wars and the fat wallet thesis for a little while now so it's gonna be really interesting to see if this year as the year plays out but anyways man always love having you on and yeah thanks again great thanks for having me yep sure thing for anyone I guess listening out there uh when's the next cohort

um when can they apply you're still running it what's the best way to learn about that process and and what you're kind of thinking best way to find you I think that deadline for that to apply it to the next cohort is Gen 14 or 13 so a week from now um so um I think the best way to learn about us is talk to our alumni um um and they will tell you amazing things about us not just Engineers for the record people from all kinds of backgrounds can apply right yep 100 well appreciate it talk to you soon man thanks guys [Music]