How To Onboard the First Billion Web3 Users

Unlocking Crypto Utility

José.virtual | Oct, 04 2023

Imagine how insane it would be if you opened the app formerly known as Twitter and were presented with a screen to sign into AWS. Or, try to visualize ordering your new iPhone and being presented with a list of banks and currencies through which you needed to manually route payments. This is the crazy status quo of crypto and the single largest reason why wallets have not replaced credit cards at the checkout counter or in online shopping. Let’s change that.

Source: Virtual Labs

Crypto’s Locked Utility

Crypto fails as money.

A decent store of value, but a terrible medium of exchange, monthly crypto payments are measured in the millions of dollars, while daily settlements are valued in trillions.

Source: CoinDesk

There are other benefits of Web3 too, such as privacy, security, and interoperable identity. These excite me, but will face more difficult adoption cycles as they primarily benefit the user and not the application. 

But with Web3’s killer app, crypto, applications benefit from lower cart abandonment and transaction fees, and consumers benefit from convenience, fraud-protection, and lower prices. The incentives align for rapid adoption with genuine utility. So why do we not use crypto to pay for things?

The perceived benefits do yet exist. The technology is not actually cheaper, it’s certainly not faster, and it is a fiasco for even crypto natives to use, per my 45 minute struggle to bridge gas and payment tokens to buy my Zuzalu ticket. Crypto people who accept these flaws are living in a bubble, incognizant of the needs of the average world citizen. Fanaticism will be the downfall of crypto. Solana is not competing against Ethereum, nor is Sui supposed to gain market share from NEAR. These are not the issues holding back Web2 users from adopting Web3.

This worldview of “my community is better than your community” is flawed because it presupposes that more value can be easily derived from existing Web3 users as opposed to the difficult process of onboarding new ones. This is a view held by many that is holding the industry back. Blockchains are technologies, and ought to be evaluated by their cost and offerings for the sake of attracting Web2 applications.

The competition to Ethereum and Solana is therefore not with each other, but with credit cards and wire transfers. And when we compare the ease of credit cards to the complexities of crypto, it’s easy to see why blockchain has not appealed to the mainstream.

Credit cards are familiar, insured against fraud, and auto filled at the point of purchase. On the other hand, crypto is novel, non-secure for most users (who lose seed phrases and face wallet draining), and takes minutes and oftentimes multiple dollars to use.

To conclude this section, I have questioned whether the utility of crypto can ever be realized in the wake of low Web2 adoption and the apparent desire for most in this space to focus on short-term speculation. This is only natural to do in the bear.

Despite my misgivings, I have never had higher faith that crypto will become the global network for monetary exchange that was proposed in October of 2008, 15 years ago. To achieve this, our industry needs to meet Web2 users where they are now, with instant finality, no transaction fees, and peace of mind asset storage: convenience and good UX.

Dual Mandates: Business and User

There should be no such thing as a “Web3 user” or “Web3 app.” At least, to be a Web3 user, one should not need any specific knowledge or applications not needed in Web2—and a Web3 developer should be freed of the overhead of learning blockchain languages and instead focus on building their core application.

The missing feature set in crypto is thus hyper-easy-to-use infrastructure that works for both the user and the developer. Here are the necessary technologies:

- Web3 Load Balancer

  • Abstracts blockchain decision from developer, delivering decentralization at the lowest cost

- Account Abstraction

  • One-click user onboarding

- ZK State Channel

  • Improved data costs, finality, and UX

- Zero-Overhead, Seamless Integration

  • No or low-code SDK

- Cross-Chain Compatibility

  • Web3 developers build on one-chain where users reach finality, but support all others through atomic swaps

- Fiat Onboarding

  • Instant and cheap bank and credit card to wallet exchanges

- Human-Readable Contracts

  • Give users the power of the backend

The user gets even more benefits from a deviation against the status quo. Prices are lowered—passed down from the merchant’s 2% savings, minimum credit cards amounts go away, the “I don’t have my wallet on me” excuse evaporates, arbitrary credit scores and tedious applications no longer prohibit individuals from the financial system, banking and investment accounts are interoperable—so cash held in checking accounts for bills can earn interest, achieve higher fraud-protection, and online checkout becomes more convenient.

Unlike some proposed Web3 utilities, such as privacy and decentralization, these utilities are concrete, convincing and necessary—and will connect the world’s unbanked, placing more money in the pockets of the average citizen.

Here’s the infrastructure that must be invented and then subsequently packaged into one easy-to-use application for the Web2 normie:

Web3 Load Balancer

A load balancer redirects users between different servers to ensure optimal wait times and CPU usage. A Web3 load balancer is middleware that optimizes L1 and L2 performance given current transaction requests.

It’s surprising that this solution is not discussed given that the core issue with L2s is that they only achieve temporary vertical scaling. Solana may support 700,000 TPS, which is better than Polygon’s 65,000, which is better than Ethereum’s 27, but none come close to the exabytes of data AWS and Azure can process. Blockchain can never be stacked or improved enough to match the throughput of centralized servers. The answer is horizontal scaling by utilizing the dozens of chains already out there—the same way multiple servers are linked together and optimized through a load balancer.

Source: The Block

Another benefit of a load balancer is blockchain abstraction. When installing Shopify’s payment plugin, the application need not care about programming Visa or Mastercard individually. In the same way, accepting crypto should not mean just accepting Bitcoin. Currently, this is not possible. An application can not accept multiple cryptocurrencies on multiple chains without coding multiple smart contracts in multiple languages and storing multiple private keys.

A Web3 load balancer handles this. Not only does this payment solution offer a one-click payment option for apps to accept multiple chains, but it removes this choice paralysis altogether.

An app or merchant may consider the benefits of crypto, but become overwhelmed with researching Solana, Arbitrum, and Manta Network, finally deciding that it would be too much work and not enough benefit to bring in just one ecosystem. Removing the burden of choice from the application will make integration to blockchain at large more seamless.

A Web3 load balancer is a low-code SDK that an application integrates once and which handles all desired chains. On the payment side, it is as simple as a user connecting their wallet and the app automatically detecting and accepting that network.

When an app wants decentralized compute or storage at the cheapest price, say for storing a game leaderboard or NFT concert ticket, the load balancer directs flow to the cheapest price within the specified parameters of security and privacy. For example, traffic can be sent to Arbitrum at night when Polygon gas spikes due to gaming demand, and ZK Sync instead of Optimism if withdrawing funds quickly is a must.

Even if one chain emerged as the definitive cheapest, it is still best to abstract this from the application for two reasons. First, Web3 lacks any definitive frontrunner, and it is still better to abstract real-time security and cost decisions from those who need not worry about them. Second, even if there was a clear cheapest option, the health of every ecosystem could be improved by decentralizing transactions across networks.

A Web3 load balancer is an under-discussed solution to blockchain scaling and adoption. It truly lowers merchant and application frictions and solves blockchain scaling while distributing load to deserving chains. But the benefits cannot be fully felt without abstraction on the user side as well.

Cross-Chain Account Abstraction

Account abstraction, or smart-contract wallets, improve crypto onboarding by a factor of a thousand. The primary benefit is the abstraction of the seed phrase, replaced either by biometric-protected storage on the device or Web2 auth codes (Sign in with Google). This technology is absolutely necessary for mainstream adoption.

Despite the hype within the Web3 community, the results have been disappointing in increasing adoption outside of crypto natives. I have commented on some improvements, such as a better B2C product, no-click background onboarding, and the ever-presence of gas and latency, that could result in stronger Web2 adoption. You can find these thoughts here.

The cross-chain element here is the removal of bridging frictions so that a user can open their MetaMask to Polygon and play a game on Arbitrum without even realizing finality was on a different chain. This is another feature that is under-hyped in the space. Compared to the load balance, cross-chain abstraction is likely not discussed because of the difficulty in achieving trustless cross-chain swaps. I’ll get into how Virtual Labs plans to do this at the end.

The Web3 load balance is to the business as cross-chain account abstraction is to the users. A product that integrates both will be the first of its kind and one that can bring about significant traction to our Web3 World.

Fiat Onboarding

Unlike all other middleware infrastructure on this list, fiat onboarding is technically simple. The problem lies in regulation and the App and Play Store’s high fees. With any luck, we will get some clarity on the first point sometime relatively soon.

Love them or hate them, the European Union’s Digital Markets Act has seemingly forced Apple to allow third-party app stores by March 5th of 2024. This would catapult mobile crypto UX through the creation of Web3 app stores. It has yet to be seen if this change will actually take place on the scheduled date.

Human-Readable Smart Contracts

Continuing with our theme of underemphasized technologies, human-readable smart contract development is underfunded. It has been a highly requested feature in Virtual Lab’s Virtual Rollup, however. This signals that games care about improving their user experience to onboard Web2 users all the way down to the wallet interaction.

The issue here is actually security. Because machines speak in ones and zeros, any interface displaying anything but the base code must be trusted as an interpreter. While this sounds scary, wallets like MetaMask do not accurately reflect the blockchain data either.

While the date below does represent code, without talking directly to the terminal, the user has no way of knowing the validity of the transaction data. The deposit amount can easily be increased and misrepresented on the web interface. A trustful system is unavoidable here.

Source: Polygon Scan

While some hardline cryptographers would still argue that mathematical purity is the best we can get for security, the average user cannot understand binary and will instead be confused on what they are signing. I put forth that the wallet with human-readable contracts will be the interface that onboards the most Web2 users.

The point of displaying the contracts at all is to give the user the power of the backend server, typically controlled by the application. Why does this matter?

Just this weekend, I booked flights for my team to travel to Istanbul for Devconnect. EDreams fraudulently replaced the passenger name (Nadeem) with the billing name (José). Had the wallet interaction come up with the contract data, I would have been able to see what their system was reading before signing. Furthermore, I spent over an hour on the phone with their support team attempting to correct the mistake. They claimed it was not possible because the leniency time period has expired. Having return and refund policies signed by both parties and human-readable is supremely useful from a “code is law” perspective.

For example, all flights originating to or arriving in the United States have a free 24 hour cancellation period, guaranteed by the Department of Transportation. Yet, I cannot tell you how many times I have had to fight to force airlines and travel agencies to uphold the law. Blockchain solves this. Place the ticket and funds into a holding contract where both can be rescinded unilaterally within 24 hours, after which they are atomically deposited into the respective wallets. This will also be useful in canceling online services, ingraining company terms and conditions, and any other time you’ve needed to talk to customer service—having access to their backend would probably be helpful. 

Zero-Knowledge State Channels

Last but not least, I will discuss Virtual Lab’s core offering. The pitch is that Virtual Rollups, a type of state channel, improve UX by eliminating wallet interactions, gas, and latency. This is absolutely true for recurring transactions, like those found in games. We have found incredible success and product-market fit with this. But, Virtual Rollups have limited utility within one-time payments as this data cannot yet be trustlessly bundled (as state channels require one on-chain transaction to open the private Byzantine fault tolerant ledger). That is, without the Ontropy Network.

With the launch of the Virtual Wallet just two weeks ago, users can use their stored collateral to replace the previously needed state channel creation transaction. Now, in the plane ticket scenario, for example, the user and airline open the ZK state channel over a libp2p connection and reach instant finality without gas, latency, or wallet interactions by using their existing stored funds.

The Virtual Wallet makes this possible via a trustless sequencer. While this does not compromise security, as users still store their own signatures and keys and have the ability to place transactions on-chain themselves, it means unlike transactions within the Virtual Rollup itself, the gas to pay for the creation of these channels is merely abstracted away, not eliminated. Still, costs are improved by initiating multiple Virtual Rollups within the same transaction.

As we continue to research and build recursive ZK tech, this will become possible without the help of trustless sequencers. The goal here is to allow one-time transactions and the creation of channels to be trustlessly bundled within a private N/N ledger itself that is signed by all concurrent nodes. This would be possible by making all of the users themselves the nodes in the network validating their own data. If Alice sent a payment to Bob, Bob sent a transaction to Carol, and Carol to Dylan and so on, then all users would form the gasless payment network through the creation and recursive addition of lightweight proofs that could be verified in browsers and mobile phones over 3G networks.

This tech is far away, but we’ll have some updates to share in Q1 of next year!

A final use case is with holding contracts, which play a large role in NFT creation, B2B transactions, and inter-corporate accounts. To continue with the airline example, to create the 24 hour refund period with human-readable contracts as described above, a gas-guzzling transaction would need to be proposed twice. But because the same contract will hold all of the volume from many users, these funds can be trustlessly called into the airline’s or other app’s EOA with a single 520-bit accumulator, as opposed to what would have been thousands of transactions and dollars.

The result of this tech to the user is the coveted zero-gas, zero-latency transaction, not possible with L2s scaling solutions. With the exception of the combined load balancer and cross-chain account abstraction SDK for applications, ZK state channels like Virtual Rollup will have the biggest impact on Web3 UX and the onboarding of new users.

Autonomous World and Virtual Lab’s Roadmap

I am a strong believer in 0xParc’s Autonomous Worlds theory that new technology will first be tested in games due to players having a high tolerance for friction and fascination with new concepts. This is one reason why Virtual Lab’s Virtual Rollups are implemented primarily across games. But this is just step one.

The launch of our first consumer product, the Virtual Wallet, amasses users and lays a foundation for a future recursive ZK network. Essentially, Ontropy will be one of the only consensus layers in history to have users pre-launch. The Ontropy Network also serves to further improve UX by abstracting Virtual Rollup creation, creating a completely zero-gas experience.

The next paradigm shift is Cross-Chain Compatibility (CCC). If Virtual Rollups are the product for games and developers and the Virtual Wallet gasless transactions are for the consumer, CCC is what we will sell directly to the chains. When describing Ontropy, non-EVM L1s and L2s have been most excited by the prospect of becoming backwards compatible with MetaMask and the resulting increase they could see in their TPS and WAU.

Of course, CCC is exciting for users and dApps too, who will now be able to access each other without bridging frictions. Virtual Rollups equipped with CCC are a giant leap for Virtual Labs as well because we will be able to offer utility to all dApps, not just games. Using the power of atomic swaps, a user with Ethereum loaded on MetaMask will be able to easily purchase a Zuzalu ticket on Optimism, trade on dYdX on Cosmos, and buy an NFT on Solana, all without having an EAO on these chains or waiting to bridge funds. This is different from CCIP and IBC because it is interoperable and backwards compatible. The Virtual Rollup is named so because it requires no additional specifications and assumes no chain as a prerequisite. It can be deployed on any chain, as is the nature of a state channel. A brief summary is outlined below of how this is possible, but stay tuned for some big announcements regarding CCC at Devconnect!

Source: Virtual Labs

After CCC, Virtual Labs will begin to implement the vision of a Web3 load balancer. After Cross-Chain Compatibility is achieved, this will not be a difficult technical challenge. Rather, the exercise will be in working with L1s and L2s and focusing on onboarding Web2 users for the first time.

The end goal of improved UX is to onboard the first billion users into Web3. Still, it is easiest to start with crypto natives who already tolerate bad UX, bad gas, and bad latency. However, the hire of our marketing lead, Jeremiah, was made with this goal in mind, given his background in traditional sales from Harvard. Virtual Labs is well positioned for this exciting stage.

Addressing the other middlewares I’ve emphasized should exist, we will incorporate account abstraction into our techstack from Biconomy and Fiat Onboarding from MoonPay or possibly Zephyr. The “Zero-Overhead, Seamless Integration” feature is the core focus of our Virtual Rollups SDK and we will continue to build with developers in mind on all future products.

Addressing the final point, Human-Readable Contracts, Virtual Labs has no immediate plans to develop this interface, but do not be surprised if it comes in a future update.

For the rest of Virtual Lab's future, we will be focused on user-validated data and creating a ZK recursive lightweight proof network. There’s a lot to be excited about here.

This basket list of infrastructure that Web3 needs to overcome the limits of the blockchain and unleash crypto’s utility is not intended to be built all by one company. However, these technologies should all be incorporated into one great product. We intend to build the missing features in this product that others are not funding. We will know we’ve made it once our parents and grandparents can use crypto to improve their lives and save them money, without ever knowing they transacted on the blockchain.

Thank you for reading! This was a special post for me as it describes the Web3 World I want to live in as well as my role in enacting it. So, here’s my personal Telegram: @josebetandcourt I would appreciate any thoughts or feedback you had here or on X :).

If you enjoyed this post, follow me and Virtual Labs on X and subscribe below to receive next week’s article directly in your inbox. 


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