Hi, this is Lex and welcome to the Fintech Blueprint. It's your podcast about fintech, decentralized finance, digital banking, investing, robo advice, artificial intelligence, and all the other frontier technology that is transforming financial services. To get more content like an illustrated transcript of this conversation in your inbox, subscribe at fintechbloopprint.com. So without further delay, let's jump into today's episode. Hi everybody and welcome to today's conversation. I'm absolutely thrilled to have with us today Jess Houlgrave who is the CEO of Wallet Connect. Wallet Connect is the financial connectivity layer for the new internet and we'll unpack what that means. Jess has been an entrepreneur across blockchain, payments, commerce, in a variety of roles that are all super interesting. So, I'm really excited for this conversation. Welcome, Jess.
Lex, thank you so much for having me. It's really great to be here.
My pleasure. Let's just jump into explaining what Wallet Connect and Reown are. You're the CEO of this company. It's having fantastic traction. Can you tell us a little bit more about how you position it and what the products are?
Yeah. So, if we go back to 2018, I wasn't around then, but Wallet Connect was started by our founder Pedro Gomez, and it solved at the time one of the first big user experience challenges in crypto where we had mobile wallets and desktop applications. The problem statement was: how do I connect these two so I as an end user can interact using my wallet with this desktop application? Pedro invented a relay mechanism, and what people may be familiar with is the Wallet Connect QR code that allows a wallet to sign in to an application. That has now grown into a network of over 700 different wallets, including custodians like BitGo and Hex Trust, institutional wallets like Fireblocks, hardware wallets like Ledger and Trezor, mobile wallets like MetaMask, Trust, OKX, and many more. On the other side of the network, about 70,000 different projects, and we enable encrypted and seamless communication between these two sides. This year we think about $400 billion of value will be moved onchain between those various parties. Reown is a subset of what we do. Reown is the group within the wider project that builds a specific SDK called AppKit. The Reown AppKit is for app developers to give them a very seamless integration experience both when using the Wallet Connect network for connectivity between apps and wallets, but also for a whole bunch of other tooling and products like on- and off-ramps, mobile and social wallets, travel rule compliance messaging, pay with exchange, and other things. So overall as a group we have this network which most people are familiar with and then these developer tools that we build around that to make it easy for people to use and transact on chain.
Fantastic. Also a bit complicated. So I'm going to ask you a foundational question which I'm sure many of our listeners know but it always helps. What is a wallet?
We think of a wallet as the software that allows an end user to control their public private key pair. That might be software like Trust Wallet or MetaMask, could include hardware and software combination like a Ledger for example. The address which is the onchain address that people use, which is part of the ledger entry, can be moved between wallets. So we can export our seed phrase from one wallet and take it into another in order to manage that public private key pair. But we really think of wallets as the software or the application that is used to manage that.
So if I'm a wallet and I'm interacting with some onchain application, some smart contract, what are the hooks that I need to do that? And how does Wallet Connect integrate into that flow? Because I imagine there are some people who are like, okay, I'm going to integrate directly into MetaMask, and then they realize, well, I'm not integrated into Phantom and so on. Can you open up a little bit how that machinery works?
Think of us like this two-sided network. On the wallet side of the ecosystem, all of the wallets integrate an SDK that we have called the Wallet Connect SDK. This allows them to send and receive messages with an application. On the other side of the network, the app will have integrated some version of a product that we call the AppKit Core. That might be through an SDK that we build like the Reown AppKit or it might be through a third party SDK. So people like Coinbase Commerce, Dynamic, Privy, who was acquired by Stripe this year, Thirdweb, Rainbow Kit, Connect Kit, there's a whole bunch of ways that apps can integrate. When you have an app that has an integration with the core package and you have a wallet that has an integration with the wallet SDK, it allows them to exchange messages. A good example might be that I as an end user take my wallet and I scan the QR code in order to connect my wallet to a DeFi protocol. That as a process is a message that is being passed from the app to the wallet to say please allow a connection, and then I in the UI of the wallet get a request saying confirm that you want your wallet to connect to this DeFi application. Once that connection is established, it's like a handshake that creates a session. The state of that session is what's stored in the Wallet Connect network, and from that moment on other types of messages can be passed. So the app could request for the wallet to actually sign a transaction to authorize an onchain transaction or to do something like sign in with Ethereum or sign in with X as we call it, which is a chain-agnostic version of that in order to sign some sort of verification message. So basically we have these types of messages. They're all standardized. We work with something called CAIPs, Chain Agnostic Improvement Proposals, which kind of mimic EIPs and ERCs but are fully chain agnostic because we work at the Wallet Connect level across all different chains. These types of standardized messages allow the app and the wallet to communicate with one another.
So we are far away from the world where some application thinks about integrating with just one wallet directly. Is that how it all started back in 2017, 2018?
100%. So I remember when I was building my first startup in this space, something called the Codex Protocol. We were really early in this idea of using NFTs, although they weren't really called NFTs at the time, to track the provenance of assets. We were building this application and all we could do was have the MetaMask browser extension as the way to connect. For every other wallet, we were either going to have to make one-by-one integrations, which was obviously technically complex, or we were going to say, 'Hey, we just opened up to MetaMask users, and if you don't have a MetaMask wallet, you can't use this app.' So a world without Wallet Connect now is one where as an app developer, you would have to integrate some three, four, 500 different wallets in order to be able to open up to that broad user base. There are obviously other standards like EIP-6963 which allows an app to automatically recognize browser extension wallets. So there are a few other innovations around there. The best way to think about it is that single integration to access all wallets.
Interesting. It reminds me a little bit of the early days of using credit cards on the internet when there were no standardized processors to take in credit card information. So you were just sending your data and your number into some text form stored on some server. It took a while until you had the standards for interoperability and encryption. Now, if I'm coming to some onchain application that doesn't prompt me with a Wallet Connect choice, I start feeling like this isn't a very safe place to be. We're now much more mature in the infrastructure that can actually get a user into one of these DeFi apps.
Yeah. I think this whole thing of helping users to feel secure is really at the heart of a lot of what we do. Over the last year, we've seen huge growth in the number of payments companies wanting to accept crypto as a payment method. Every now and then I see their first implementations and it's kind of like going back in time in crypto world because there's, you know, type your wallet address in this box or copy and paste your wallet address. As a crypto user, this gives me this tingly anxiety where I'm like, 'Oh god, I'm going to fat finger an address and the funds are going to go to the wrong place and I don't know where this is being sent.' The whole point of Wallet Connect in many ways is that you have this ability to seamlessly connect your wallet. It's as simple as scanning a QR code and clicking confirm. You don't have to worry that you're typing in an address wrong or copying and pasting and you lose a digit. Over the last couple of years, we've really invested in other security things that we can layer on top of that to give end users an even more comfortable experience. We have this thing called the Verify API where an application verifies the domain that they're using on the network. In the wallet itself, if it looks like you're interacting with a domain that isn't what it says it is, you're going to get a warning saying this has been flagged as a malicious domain or this is an unverified domain. Please take care. We're about to extend that to some other features around smart contracts later this year. So as you say, it's giving people this kind of familiarity. You mentioned when you did your very kind introduction for me, I spent some time in the payment space and even just as an end user of payments experiences, I kind of know when I see a Visa or a Mastercard sign wherever I am in the world, it gives me this feeling of, okay, I trust this. I'm happy to give over my credit card because they accept Visa and they're part of this network that gives me confidence and imbues trust. I think in crypto, Wallet Connect has in some ways, and I hope over the coming years we will do even more to prove that, becoming that symbol of trust for end users that gives them confidence that they can connect their wallet safely and securely and transact.
It's funny you describe the fear of fat fingering an address. I don't know the last time you've had to use the traditional banking system and send a wire, you know, and you have to literally type in the number of the international routing numbers and so on and then you're not allowed to copy paste things in.
Um, and it's just I mean horrible.
People feel like the crypto user experience is bad, but $100 to put things into a form is definitely much worse. I want to ask you a question on sort of the scale. The numbers that I've seen are 50 million unique actives. Can you talk about how you define who are those 50 million people? Where are they? And is that just like a monthly active doing stuff? What's the whole install base of the crypto universe based on where you sit?
We look at one of the most interesting things about the place that we sit in the ecosystem is some of the data that we have access to, which we take very seriously. When it comes to the transactions themselves, they're all encrypted, but we look at who's transacting, how they're transacting, how much volume is being processed. The 50 million active wallets basically comes from something that we call a client ID which identifies a specific wallet address pair. We've been looking at that since V2 of Wallet Connect. Back in 2023, just before I joined the company, there was a huge protocol upgrade which was very complex for the whole industry because everyone needed to make a lot of changes as a result. We did that to set the scene for decentralizing the network, which we finally added third party node operators last year. Anyway, I slightly digress. Basically that 50 million is the number of unique end users who have transacted using Wallet Connect since V2. So since the middle of 2023, a lot of those are repeat users. To give you some other idea of scale, as I mentioned earlier, this year we think we'll do about $400 billion of onchain transaction movement as a result of Wallet Connect. About 70,000 different applications have registered project IDs and about 700 different types of wallets.
What do you think is the total crypto user installed base across the world? What would you guess?
I actually have no idea. Do you have a number for that?
That's fair. If I count the addresses across the large chains, I think you're getting into over half a billion addresses, maybe towards a billion now. It's been a while since I've looked at the numbers.
