Overview: A description of ETH wallets as a new sign-on solution for the whole internet, and emergent benefits for shoppers and stores.
Crypto wallets built on Ethereum are unlocking a paradigm shift for retail, starting with e-commerce and expanding to brick-and-mortar (and everything "omnichannel" in between).
What is a crypto wallet?
A crypto wallet is an app that allows users to store and retrieve their digital assets (think: money, loyalty reward cards, art, music, video game characters, etc). Since your wallet is completely unique to you, and secured by your password, a wallet also serves as a proof of identity that you can use to sign into websites.
Ryan Sean Adams pointed this out that "crypto may have accidentally fixed one of the internet's most annoying problems" by creating a tool for universal sign-in. (Shout out to the Not Investment Advice podcast where I heard this first).
The status quo for sign-on on the internet is that every website requires you to create a username and password — so you end up with 900 different accounts. Partial solutions to this exist: there are identity providers like Google, Facebook, and Shopify; there are also password managers like 1password that help organize your 900 passwords. However, ETH wallets have several key aspects that make them significantly more simple and robust:
- Ease of use. The first time you use a wallet (like Metamask or Rainbow — 101 setup guide here) to log into something (like Opensea) is magical. With very little friction you're in the door. Just as "water flows to the lowest point," the web (especially e-commerce) flows towards the most frictionless user experience. Andrew Chen talks about how this ease of use will be a major unlock for anyone thinking hard about growth.
- Universal protocol. Since it's an open source, universal standard, any site can accept wallets. It's apolitical, not tied to any company. Unlike Google, Facebook, or Shopify sign-in, it's an open protocol that allows for unbounded applications and creativity, with no gatekeeper.
- Your wallet, your data. You own all of the info in your wallet. You can create multiple wallets, delete wallets, and choose what's inside of them or not. No doubt there's work to be done on the privacy layer, but that's only a matter of engineering. Being be to control of your info at a single point within your wallet is powerful compared to trying to manage your privacy across 900 sites, or even across Google + Facebook + Shopify sign-ins.
- Metadata. Your wallet can have money, but it can also have all sorts of meta data like your shipping address, loyalty rewards, past purchases, etc. If that's the first order, consider the second order: What if your Nike card can talk to your Barry's Bootcamp card, and achievements at Barry's unlock merch or discounts at Nike? What if buying tickets to an event gets you wallet access into an app to socialize with other people who have tickets in their wallet? Theoretically, this is all possible on the current web, but ETH wallets as an open protocol make this 10x easier, which is exciting.
- You can still transact in USD. As Marc Andreessen pointed out in 2014, crypto can be used as a payment system while still allowing the transaction to take place in a USD basis. What this looks like, e.g. if you're shopping on Nike's website, is that the price would show up in USD —say $90 for some kicks. When you pay with your wallet, $90 worth of ETH gets sent from your wallet to Nike's wallet. Nike receives the ETH, and if they choose, can automatically convert that ETH into USD. So for both parties the transaction is practically in USD, but the sign in and money transfer is much faster.
Right now wallets are mainly being used in crypto communities. You can use your wallet to login and buy/sell crypto currencies, buy art on OpenSea, buy items for online games (see Kyle Russell's fantastic article on Loot), etc.
The exploding popularity of these use cases and communities, and the fundamental benefits listed above, make it it's possible (likely!) that wallets become the universal login for e-commerce stores, and everything else on the internet.