0xPass is among the many startups trying to make crypto wallets secure and convenient for mass adoption. Specifically, it's solving the login piece of user experience, which, at the moment, is cumbersome and requires users to have a decent level of technical know-how.
Incubated at the Stanford Blockchain Club, 0xPass allows developers to build multiple authentication methods into non-custodial wallets. Its web2 counterparts would be players like Auth0 or the infrastructure undergirding password managers like 1Password.
In November last year, Krish Chelikavada and Keon Kim were pitching their project at AllianceDAO's demo day when news came that FTX had collapsed. What followed was a chain reaction that ultimately led to the current "crypto winter," causing cryptocurrency values to plummet. But as many technical crypto projects would say, the winter is good for building.
"We were trying to build something that's the complete opposite to FTX," Chelikavada told TechCrunch in an interview. He was referring to the infrastructure that supports self-custodial wallets where users have full control over their assets, a feature that's increasingly in demand following FTX, the centralized exchange, imploding. Meanwhile, much of the speculative activity in crypto has died down, giving more space and time for blockchain infrastructure to take shape.
After a year of building, 0xPass is announcing today its $1.8 million pre-seed round from investors in both the U.S. and Asia. They include AllianceDAO, Soma Capital, Alchemy Ventures, Blockchain Builders Fund, Formulate Ventures, Kommune, Hashed EM, Signum Capital/UOB, Nonce Classic as well as famed angels Balaji Srinivasan, the former Coinbase CTO, and Cory Levy from Z Fellows.
Chelikavada acknowledged that the FTX incident "spooked a lot of investors" and "valuations [in the crypto industry] have gone down," though his company wasn't affected as much.
0xPass's backers are betting on the future of non-custodial wallets. Self-custody, however, puts the burden on users to keep their keys safe, which is why the developer community has been searching for ways to ensure users can enjoy the web2 level of ease in managing passwords without the involvement of one centralized party.
To that end, 0xPass takes advantage of an increasingly popular cryptographic method called multi-person computation, or MPC, to "shard" keys into multiple pieces and distribute them among multiple parties. But unlike traditional MPC solutions, which split the key shares between the users and the back end of the service providers, 0xPass allows key shares to be distributed solely across network nodes.
"The problem with [the traditional MPC method] is it reduces the flexibility because you can't program or customize the authentication rules or the transaction rules as you please. As a developer, you have very little control because the user has to always initiate transactions," explained Chelikavada.
0xPass is built upon increasingly sophisticated MPC algorithms. Chelikavada explained that "we just split the private key so that the shards are distributed among these nodes [that participate in 0xPass's Passport Protocol network]. And we use secure enclaves and MPC algorithms to make sure that the entire system is non-custodial in nature.”
There's a handful of MPC solution providers out there, but Chelikavada doesn't think 0xPass is necessarily competing with them because developers have "varying needs" around how they'd like to manage users' private keys.
Essentially, 0xPass is built for developers who are looking for flexibility over authentication rules, which, for example, allow them to program automated transactions, the founder said. They might be crypto projects that want to authenticate users with web2 login methods or wallets in need of an infrastructure provider. To monetize, 0xPass plans to charge customers for access to its key management system based on usage.
While competition might not be intense at the moment, the greater challenge lies in the nascent nature of the crypto space, which raises questions about regulations.
"I think our biggest unknown right now is more from a regulatory perspective because we don't know how governments are going to look at wallet infrastructure," said the founder. "So I'll say, from a macro perspective, that's the one thing that we'll have to wait and see what happens."