Unlocking Mainstream Adoption through Hybrid Custody | ETHDenver 2023

well good morning everybody it's exciting to see some friendly faces in the room and yeah thanks for getting up early this morning for me I'm excited to talk to you about unlocking mainstream adoption through hybrid custody which is a feature that's going to be relevant to everybody in the room no matter what blockchain you're building on because of erc4337 which starts to bring some of these capabilities uh to ethereum and and all of the associated sort of evm chains but it's been live since the beginning on Flow and actually I'm excited to show you some demonstrations about what's possible when you apply it to the user experience of of mainstream applications especially mobile applications before I get into it who are we Who Am I who is Dapper Labs uh we you might not know this but we're actually ethereum oh geez we wrote the original non-fungible token standard back in 2017 um and launched the first nft game cryptokitties at the first East Global event back in East Waterloo almost six years ago and since then we spent a couple years building on ethereum we built the first smart contract wallet um that's aimed towards consumers on ethereum to try to do key recovery for make key recovery easy pay for gas integrate credit cards on mobile um and your credit cards for nft purchasing and more recently we sort of pivoted to building our own blockchain flow.com which we launched in May of 2020 and a few months later in the heart of covid launched NBA Top Shot on top of the NBA Top Shot was the first nft to reach 100 million dollars in trading volume today it's at about 1.1 billion dollars in secondary market trading volume and it's all so the first nft to start the path of going mainstream you were about 600 700 000 nft holders across the ecosystem but as I'm about to explain that's just the start and the new the major unlocks are are coming uh this year since we launched the network I want to make clear flow has become far bigger than Dapper Labs it's it's playing it's about 20 million user accounts almost 400 million transactions now and almost all of them are nft transactions so there's very little defy on Flow yet although there are some very enterprising entrepreneurs and interesting projects starting up the one thing that connects all of these uh applications is that they're aimed at mainstream consumers and so we've been thinking about this problem for quite some time and I can very confidently tell you there is no mainstream adoption without mobile and there is no mobile adoption without hybrid custody which is what I want to talk about today we think mobile is the next Frontier for web 3 adoption mobile is the next Frontier for our own products with NBA Top Shot NFL all day and others across the flow Network and the unlock to making mobile easy to use and and as viral as we want it to be is hybrid custody the reason is today developers have to make a trade-off do we push users through the path of self-custody which is impossibly difficult or do we push developer do we push users through a path that is easy but actually takes away some of the benefits of web 3 in the first place you'll all be familiar with these sorts of screens because every one of us has set up crypto wallets in the past but when it comes to mainstream users that don't have a wallet installed this is a blocker that it's not 99 drop off it's 99.9 drop off and it's not a solution that's going to going to go mainstream but the problem is if your onboard users just with email password you actually break composability and you end up with application sandboxes that can't speak to each other and actually take away most of the benefits of of web 3 in the first place this is just a summary of app custody versus self-custody so the question isn't how do we create easy to use experiences for consumers the question is how do we create easy to use experiences that also allow consumers and developers to benefit from the unique things that web3 accomplishes and that until today hasn't been hasn't been super easy there's two parts to the solution part one is Wallace onboarding and what I mean by that is if a user comes to the product they want to use the product they don't want to jump around and set up a separate application set up a separate wallet and so make it very straightforward and easy for them either through guest checkout solution where you just use credit cards and give the give the user the nft directly in a mobile wall in a wallet that's controlled by their email address or a familiar web to login Facebook Google Etc this part of the solution most of you will be familiar with because it's already possible through a kind of application custody or semi-custodial Solutions but the second part of the solution is hybrid custody and this is where things get taken to the next level because you can provide the same excellent onboarding the same seamless experience that every consumer is used to on mobile or in web 2 while still preserving the composability and the developer experience of actually being able to build on top of these wallets the path through doing that is through account migration via account delegation so the way it works is a user would set up a web 2 identity whether it's email address or password or through Facebook or one day centralized identities that they already have such as uh Google Netflix ID Disney whatever it might be and that actually gives them a child account that gives them a wallet that's on chain with nfts that sit um on on chain I can be read by any on-chain tool but it's secured through their username password and what they do is they delegate control of that account to a parent wallet that can be a fully self-custodial wallet or it can be a wallet that's secured through multi-factor authentication whatever it might be and what that means is that parent wallet now has full control of the application and you actually end up in a situation that mirrors how permissions work on your mobile device each application has full control over the assets inside that application but needs to ask permission from the operating system or in this case in on in the wallet case from the parent wallet in order to access anything outside of its sandbox then the user can eventually set very fine-grained controls on what an application can or cannot do with with their assets what that means on the back end is that the user can onboard seamlessly into a web 2 product but then be able to use their blockchain wallet to access any web free product without changing without transferring your assets without changing their public wallet address without without doing anything other than cycling their keys and actually setting up a web 3 identity after they've already onboarded into the product that they're that they're excited about and so hybrid custody and I'll go through a demo that actually shows this in action Highway custody eliminates the need to have a separate wallet to get started it eliminates need to switch back and forth every time you're signing transactions inside a mobile application the only other way to do it would be to delegate the entirety of the control of your wallet into the mobile application which is a huge security hole and actually lets developers leverage any payment method whether it's IAP Apple pay whatever it might be and lets users have fine grain control over their assets and not have to give up using anything in the world of web 3. full composability full interoperability easy onboarding um and so compared to application custody as I mentioned it means that user has full control over the assets can take them anywhere they want no transfer required and if they set up a self-custody wallet they can actually take full control over uh an account that was created using a web to Identity we just hosted a hackathon recently forty percent of the submissions leverage this uh mechanism and and everybody that used it it sort of uh lit a little bulb in their minds because they realize this is the true path to mainstream adoption it's make it easy for people to come in but give them access to all of the benefits and make it easier for developers not have to distinguish am I building for a centralized ecosystem or a decentralized ecosystem build it once run it everywhere and let the user have the choice of what software they want to use to uh to experience it so I always warned that the video might not load so what we did was we actually took some screenshots of this demo but you can try it yourself flw.

gg hybrid that'll take you to the demo application there's full sample code setup and actually this is the the to my knowledge you know the only demonstration of what is you know account account abstraction hybrid custody at work um but let's walk through it slide by slide this is a rock paper scissors game those of you who've played cheese wizards understand the um the the sort of inspiration here and what it what it kind of might mean in the future I'm looking at you Oxo um but but let's let's get started so here the in the demo it starts with Google authentication it doesn't actually have to you can skip directly to the transaction screen and do a guest checkout put in your credit card information you can use you know stripe uh test accounts Etc and and you get the account you get thrown into the game so one step you have an nft you started playing the game um and this is rock paper scissors as I mentioned I'm gonna choose Rock because that's obviously the strongest and and turns out I won the game I actually had to play a bunch of times to get this screen but um that's that's I guess testing life so when you win the game the app gives you 10 uh credits 10 tickets which are fungible tokens that sit inside the app custodial wallet that was created for you when you're logged in via the Google Google's sign in but and you can click on this link and go check it out in in the you know any block Explorer flow view in the case of ethereum would be etherscan Etc but the the the point for the user is now that I'm onboarded now that I'm activated I've actually won something I have an incentive to connect my wallet whether it's to sell the thing I just want or to access new products and services that that thing enables so in this case I hit settings I hear hit connect my flow wallet these are three non-custodial wallet options on Flow today you know I sign in ETC and and what happens is the app account just gave permissions over all of its assets to the parent wallet and so the application can still control and let you play the game seamlessly without having to jump back and forth and sign transactions but you now also have control of the assets inside it from your main web 3 wallet in this case a non-custodial wallet and so I can go to an entirely different website a Marketplace and in this case log in with my web3 account and have access to all of the assets within that within that Marketplace and the distinction here is you don't log into the marketplace with your web 2 account there's no Google login here it's a full web free login but it has access to all of the um all of the assets inside so like I said you can go check out the experience yourself flw.gg hybrid and obviously follow flow and and you can join our community to get to try these tools and and platforms and services out in production right now and I think this is this is what what we get really excited about um and let me let me um in the couple minutes that I have left just highlight this is as important at an onboarding and user experience issue as for new users as it is a security safety and sustainability question for existing users because this the the parent wallet because of account abstraction an experienced user can add multi-factor security to it can be able to put find grain controls of what applications can or cannot do with their products in uh can actually use the secure Enclave to store some of their keys and do and do key signing securely and it's together the whole package is how web3 can go mainstream so thank you everybody for coming to the coming this morning I hope this helped catalyze some ideas you can go check out the demo today on Flow and I'm excited to see what everybody will will build thank you so much [Applause]