The Case For Social Wallets

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The Case For Social Wallets

To boost Web3 adoption, we need to simplify entry points and earn the trust of newcomers at scale

The Case For Social Wallets
Photo by Milad Fakurian on Unsplash

I’ve become increasingly obsessed with the primitives surrounding Web3.

As someone with a builders mindset, I see the endless potential of blockchain as the infrastructural tech for the next wave of internet innovation (probably through rosy lenses). But for most of the population, there is still a great deal of education and validation outstanding. Sadly, credibility is seriously lacking in a space where rug pulls and scams are daily occurrences.

This calls for a necessity to simplify Web3 entry points to their core. As builders, our goal should be to

  1. Increase fresh user inflow
  2. Sustain ongoing participation in this space.

Our role as ‘degens’ is not to stop curious minds from joining our quest to shift value away from big tech and towards independent creators. On the contrary, our role is to make Web3 more approachable so we can earn the trust of newcomers at scale.

It’s time to lower the barriers of entry.

This might be how.

Here is the Web3 Social Wallet Playbook written from the perspective of being one of the community platforms soon to be mentioned.

Departure

In the realm of currency-based wallets, there is plentiful evolution. Big players like Metamask, Phantom, and Rainbow are moving the needle to access Web3 quite a bit by mostly solving the currency storage and transaction use case. In my eyes, the next wave of Web3 adoption will get captured by democratizing community participation. Social Wallets are one of many methods.

Current

Social tokens are a means of proving community association through on-chain ownership of digital assets. For clarity, there are fungible and non-fungible tokens that grant access to Web3 experiences. Here are 2 examples:

  • Fungible » FWB requires ownership of $75 tokens once approved to enter the depths of their community experience.
  • Non-fungible » Anti requires ownership of the Antipass, which immediately grants community access without approval.

Each of these token types has its pros and cons, and their relevance for adoption will depend heavily on individual use cases. Why does this matter? There is a trendy development in the depths of Web3, where infrastructure to support communities running on social tokens is being built. Checkout: islands, metalink, matrica, backdrop and guild. Roughly speaking, there are 2 types here

  1. Aggregators who provide the software infrastructure for token-based communities to engage their users
  2. Shapers who provide tooling for communities to launch & scale their token.

This is the 2022 landscape:

Competitive Analysis matrix of the biggest Web3 community players.

Currently, differentiation through feature-set seems to be the go-to-market for all platforms. To stand out, a positioning must evolve that hit’s the sweet spot of High differentiation x High demand. In my eyes, this is the Social Wallet — which no one is developing at the moment of writing.

Strategy

First, we need to orient our strategy towards a north star that helps us stay focused, aligned, and agile. We could become a Challenger, we could Piggyback another, or we could Dominate a corner. But all of these won’t be as effective as Being the Alpha because we should leverage our first-movers advantage. Next, we need a solid plan to reach product-market-fit. For this, we need to find clarity around our Market, Product & Model.

Market

To estimate the market we could potentially activate for the product category of Social Wallets, we can look at the number of yearly added wallets. This gives us a rough idea of how much user inflow we can expect:

  • TAM (100%) = 70million users.
  • SAM (30%) = 21million users.
  • SOM (10%) = 2.1million users.

Now that we know our SOM, we can narrow our addressable target audience down into 3 distinct web3 groups: Noobs, Degens, and Legends — each with unique Problems and Motivations. I’ve observed that Noobs need the most service. To put simply, Noobs are high-intent newcomers interested in getting their hands dirty with fungible or non-fungible social tokens — they are severely underserved with solutions and well overserved with educational resources. Let’s put these 3 segments into perspective:

The 3 segments of Social Wallet users in web3.

Sadly, most miss the forest for the trees and put all their efforts towards building intricate solutions for Degens and Legends. Great products solve a core pain point and follow up with education, not the other way around. There is a lack of radically simple, reliable, and relatable Web3 products.

Product

Knowing who we are serving makes knowing what to build a lot easier. But why not just use any of the aforementioned mainstream crypto wallets? It’s still way too complicated despite Moonpay or Simplex being integrated with most wallets.

Crypto skeptics still can’t wrap their heads around the necessity of this onboarding flow for crypto wallets in web3:

Thanks ramper.xyz

A Social Wallet simplifies this by focusing solely on social tokens for the sake of participation and leaves out all other crypto coins. This lowers the barrier of entry drastically and allows for a reduced product spec sheet:

Yes:

  • Custodial (optional)
  • Sign, transact (mint/buy/sell)
  • Cross-chain (ETH, SOL, XTZ)
  • Holds (non)fungible social tokens

No:

  • In-wallet Fiat
  • In-wallet Crypto
  • In-wallet swapping
  • Send, receive or withdraw

In contrast to Metamask, there is a clear tradeoff. The Social Wallet is more secure because it’s heavily limited in capability so it can serve a unique use case: seamless token ownership. It is designed with the three laws of simplicity coined by Harvard Professor George Whitesides in mind:

  1. Predictable » is instantly easy to understand.
  2. Accessible » drastically shortens the crypto learning curve.
  3. Serve as a building block » uses familiar web2 authentication.

Even better, it opens up possibilities for slowly guiding noobs into Web3 and accompanying them on their journey of becoming true Degens and Legends. All through a frequently used digital product. The Social Wallet transforms the previously complex user onboarding for digital wallets:

Thanks ramper.xyz for this web3 wallet onboarding flow.

Instead of 10+ steps, there are now only four: Enter Web3 App → Custodial Login / Signup [SSO] → Autoexchange Fiat~Crypto w. Credit Card → Interact w. social tokens → Repeat.

The goal of the social wallet is to simplify web3 token participation — fungible & non-fungible. What’s better is that its benefits far outreach the primary target audience of noobs, who now get tokenized without being a crypto expert. Degens also benefit from a safer way to engage with web3 social. Legends benefit from a higher degree of user inflow and overall token buy-in.

An all-around win-win-win situation for all stakeholders.

Model

So how does this all make money? Good question. Social Wallets run on fee-based pricing. Free for the end user, but paid per interaction. Companies earn from % currency conversions (Fiat~Crypto) and % from transactions (minting, buying, or selling tokens). If we were to introduce a lifetime NFT that unlocks 0 fees and other added benefits, we could further explore Business to Token experiences (B2T) that open up to a range of revenue streams flowing into a company-wide treasury.

This is how it all comes together:

The business model for Web3 Social Wallets by @itsjulianpaul.

What I love about the concept of a decentralized treasury is the transparency with which companies can distribute a % of total revenues to causes the community finds important: charity, creator funding, and community launchpad. The possibilities are truly endless.

Growth

Understanding the Market, Product, and Model leaves only one more thing left to do: a solid flywheel to grow this new product category. For this, the framework behind demand-driven supply couldn’t fit any better. It minimizes the chicken and egg problem found in marketplace models.

Flywheels visualize what lever is most important to get a growth strategy spinning first and what levers to work on in case user growth slows:

Web3 Social Wallet Flywheel for Community Platforms by @itsjulianpaul.

In the beginning, there will be a race to onboard communities with their own native tokens and new social wallet users at the same time. Then, once the core feature set is fully functional and stable, the name of the game shifts quickly to converting users through content-driven education into launching their own tokens and communities. To achieve this, we need to run community-driven experiments to find out what infrastructure our core members want most — then double down on what worked best.

Future

The goal of Social Wallets is to empower non-crypto-natives to partake in community building with their very own Web2.5 wallet. But with any new product category entering a market, we want to leverage our first mover’s advantage to be & stay the Alpha. Here are 3 metrics to measure success:

  1. Usage: DAU, MAU and Transactions.
  2. On-chain user activity — new & old tokens.
  3. % of total monthly & yearly wallets created.

Nailing all 3 of these will result in Social Wallets becoming the long-term defensible MOAT any Web3 community platform has always looked for.

Go to Publisher:

Entrepreneur's Handbook – Medium


Author: Julian Paul