Senior Contributor
As Web3 and cryptocurrency applications mature and grow in user adoption, the privacy concerns around sharing your wallet address persist. Socket, founded by Stanford graduate Eva Zhang in 2022, is a Web3 privacy infrastructure for social interactions for crypto-related purposes. The New York City-based startup raised $2 million pre-seed round led by IDEO Crypto, with participation from ACME, Steel Perlot, CitizenX, LongHash Ventures, k5, OpenSea Ventures, SignalFire, Immersion Partners, Balaji Srinivasan, Theo Marcu, Anthony Ghosn, Markie Wagner and Joyce Yang.
Srinivasan says, "Socket is doing important work on privacy-preserving people and project discovery for Web3, and I am pleased to support them."
Socket founder and CEO Eva Zhang.
SOCKET
Zhang is currently the only full-time Socket team member. The company’s pre-seed round was closed in the Spring of this year. Zhang has a number of indirect and direct competitors to face, ranging from small startups like such as Disco and Big Whale Labs to incumbents like Twitter and Discord. Zhang says, “We plan on generating revenue towards providing advanced querying functions for users (while preserving user privacy) in the short term.”
Frederick Daso: Why is there a lack of secure methods to share crypto wallet addresses?
Eva Zhang: Sharing your wallet address isn’t insecure in itself. However, using your wallet address as the default way to identify yourself online often reveals more intimate financial details than you might feel comfortable with. Getting a human-readable “name” or “profile” in crypto is the equivalent of linking your Facebook profile with your credit card balance and showing it to your friends – acceptable, but oddly exposed.
Existing crypto dApps and social applications often ask for wallet addresses as a way to connect to their websites. That creates a large attack vector; when one part of your profile is exposed, so is your entire collection of financial information.
Daso: How were crypto wallets designed to overlook security needs in various sharing use cases?
Zhang: A user’s wallet address exposes their most intimate financial details - it not only gives away your crypto net worths and balances in the account but also every past and future transaction, including everyone you interact with. Big accounts can be actively watched and targeted.
Sharing your wallet address in crypto to present a specific part of your profile is the equivalent of going to a gym, being requested your gym id, and having to give away your entire credit history, net worth, every future purchase and wire for that specific card, and never being able to take back the gym’s access to that account.
While wallet addresses for transactions are easy to understand and universal in the space, addresses as the default social primitive present a host of downstream problems. These include but aren’t limited to users not being able to block Airdrops, insufficient social channels and info for project marketing on whitelists, and easy sybil attacks, among others.
As a result, the majority of crypto users prefer to use web2 platforms such as Twitter and Discord instead of sharing their wallet addresses out of privacy concerns. Since discovery is made on non-native platforms, it becomes difficult to find users and projects.
Daso: How do information discovery issues impede user interactions and collaboration through crypto wallets?
Zhang: According to our user research, 80% and 79.6% of current crypto users, respectively, decide what to purchase and which wallets to on-ramp based on close friend recommendations (1-2 degrees away) rather than influencers or the news. 90% of people have trouble keeping track of the type of information they need on connections and projects via Twitter, Discord, and Telegram.
A deluge of information results in an overwhelming amount of noise to signal and makes it tough for users to track important project updates and price information. It also makes it tough for projects to figure out marketing strategies, resulting in a cycle of high-volume Twitter and Discord messages to capture attention. Projects often spend a lot of time and money on figuring out allowlist distribution and audience retention.
Privacy has been a cornerstone of the main value proposition of cryptocurrencies and their derivative products and services.
Daso: Paradoxically, how have privacy standards of crypto wallet users limited the overall development of the cryptocurrency ecosystem?
Zhang: Crypto transactions are private and easily verified by themselves - however, once there’s any social information needed from these transactions, users immediately lose their privacy. One particular type of privacy is financial privacy - the ability to control who sees your net worth, name, projects, and balances.
There have been incredible developments in privacy applications in recent years - privacy layers, mixers and chains like ZCash, TCash, Aztec, thanks to advancements such as Groth16, Sonic, Plonk, Marlin, and hardware advancements.
Despite these advancements, privacy in crypto has mostly been limited to those built for the tech-savvy due to wallet and dApp designs. Advanced crypto users have over 10 wallet addresses and frequently make and discard wallets publicly associated with themselves (otherwise known as “burning doxxed wallets”). Managing privacy for balances, transactions, and social presence across multiple accounts in crypto becomes a taxing and annoying process.
Existing privacy paradigms are great for currencies but difficult for governance, social, and non-fungible tokens. The last wave of crypto, with the rise of social and governance use cases in the space, leaves a significant market gap for those who want both financial privacy and participation in crypto communities.
Daso: Out of the hundreds of millions of crypto wallet owners, what types of users are you initially targeting with Socket, and why?
Zhang: We’re targeting users of and projects involving tokens with social utility, such as governance, social tokens, or NFTs. For projects which rely on value from communities to succeed, increasing information and user discoverability is both vital and painful in the current model without solving the privacy problem.
Daso: Assuming Socket accomplishes its goal of enabling users to connect in a secure fashion, how will the startup then enable and encourage friend discovery of users not in their original or current networks?
Zhang: The first step to social discovery is having information primitives that make discovery easy - for instance, Facebook and LinkedIn indexed offline directories with information that was previously not searchable. Web3 opens a new opportunity to open access to useful and comprehensive social information in a less expensive way that respects user privacy.
We indexed directories of social information in crypto that were previously not searchable or human readable due to privacy concerns, now made possible by crypto with better privacy guarantees and increased user control.