Crypto has a user experience problem.
Investors find out their position has been liquidated on Twitter because there’s no email address associated with their on-chain account to send out an alert. A person with multiple non-fungible token (NFT) wallets has to sign into each wallet individually rather than having a universal login. Fixing the problem involves collecting user data, which makes some crypto natives anxious because Web 2 data collection has gone as smoothly as the Titanic’s maiden voyage, with a similar amount of leaks.
Data startup Privy hopes to bridge the gap between a smooth user experience and the importance of secure data and user consent. The company announced a $8.3 million seed funding round on Wednesday co-led by Sequoia Capital and BlueYard Capital.
Privy offers application programming interfaces (APIs) that developers can use to manage and integrate user data. The encrypted data is privately associated with on-chain addresses to allow developers to text or email users without directly handling their personal information. Projects requiring financial and compliance data, a common need in decentralized finance (DeFi), can take on that sensitive data without using local storage.
Privy knows the idea of collecting any data can be a hard sell in certain areas of crypto.
“My stance on privacy is that privacy isn’t about no data being shared,” said Privy co-founder Asta Li in an interview with CoinDesk. “Privacy is about control over that data. It’s about being able to revoke when you choose to and really putting that control in the hands of the users.”
Among other participants in the funding round were Electric Capital, Archetype, BoxGroup and Protocol Labs. Privy plans to use the capital to build out its team – particularly on the engineering and research fronts – and to continue creating use cases that meet customer needs.
“Our fear is that developers start just dumping user data into databases and the promise of Web 3 as a sort of sovereign space for user data, where user control is paramount, goes away.” co-founder Henri Stern told CoinDesk. “So we’re excited to get in the hands of developers as quickly as we can.”
Stern said Privy has seen a lot of activity in the spaces of DeFi, decentralized autonomous organizations (DAO) and “what we would call Web 2 serving Web 3,” which includes hardware, wallet providers, crypto exchanges and on- and off-ramps.
In other words, areas where compliance and communication are key.
Fresh off announcing a new $600 million crypto venture fund, Sequoia Capital participated in this funding with partners Shaun Maguire and Josephine Chen steering the investment.
Maguire highlighted the credentials of Privy’s “privacy-obsessed” founders. Privy’s Stern previously worked as a research scientist at open-source research and development hub Protocol Labs, which counted BlueYard Capital among its inventors. Li was a software engineer at self-driving technology company Aurora.
“We’ve seen the speed at which they execute,” said Sequoia’s Chen. “It’s been very few months since we first invested. They have a live product and are iterating with customers who love them.”
Chen noted that Web 3 tooling is far behind Web 2, which makes it harder for new users to make the transition.
“I think we’re talking about the first basic step of, ‘How do we make a Web 3 experience that’s just slightly more personal and slightly better for users overall,’” said Chen.
Crypto denizens will increasingly battle it out over whether secure data collection is worth the improved user experience.
“We try to reject the zealotry on both sides,” said Stern. “The data buffet of Web 2 is absolutely horrendous. … Building transparent infrastructure that allows for there to be a nuanced conversation around it is, I think, the only way out. … It’s an uncomfortable answer, because there is no silver bullet in privacy.”
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