Plaid’s Wallet Onboard feature tests decentralization

Opening up wallets

Crypto is touted by enthusiasts for its ability to be trustless and conduct transactions without intermediaries. A new product from Plaid challenges that idea. Some enthusiasts may see this as more encroachment of traditional finance in crypto. But others could see this as an inevitable maturing of the industry.

Security is an ongoing challenge for crypto, and crypto wallets in particular are a vector of attack. A number of hacking and social engineering attacks have occurred that find various ways to connect to the wallets of unsuspecting users and drain their tokens.

Plaid is getting deeper into crypto, this time through crypto wallets. A new tool it’s introducing Thursday helps developers connect crypto wallets to apps.

• Fintech app users have gotten used to seeing Plaid’s logo pop up when they try to connect their bank accounts. Now Plaid is trying to play a similar role for crypto applications. Consumers who want to use a NFT marketplace, blockchain game, or DeFi app and click on a button to “connect wallet” will see a screen from Plaid pop up offering to connect their wallet of choice.
• Plaid’s new product is a way to address security fears, but it also feeds into an ongoing debate over just how decentralized crypto can be while addressing consumers’ needs for secure, easy-to-use apps.
• Plaid’s Wallet Onboard has integrated with more than 300 wallets, including MetaMask, Coinbase Wallet, Trust Wallet, and Ledger. And it’s trying to address the security concerns around wallets by having any developer who wants to use its product go through its existing traditional compliance and risk checks, said Alain Meier, head of identity and fraud.

Plaid’s crypto offering is striking in inserting itself as a centralized authority into a decentralized world. Many who are new to crypto or want the familiar feeling of safety of a traditional finance application may welcome and trust Plaid’s involvement.

• Plaid isn’t getting involved in crypto transactions between the apps and wallets it connects, and can’t see those transactions, Meier said. But it is counting on some brand recognition in crypto, since it already helps exchanges such as Binance.US and Gemini with things like bank connections or sharing crypto data.
• Plaid is looking to move further into crypto, especially with its identity-verification products for traditional finance. These include a new behavioral analytics tool that can predict whether you are entering your own Social Security number or a fraudulent one based on the way it is entered into a form.
• The company is also working on a way of verifying identity without sending data to an app, a feature which may appeal to more privacy-conscious crypto users. For example, if a product is age-restricted to 18- or 21-year-olds, Plaid could just pass on that verification without sharing a user’s birth date.

Since Plaid sits at the middle of a range of this data, this type of identity tool is a logical next step. As it gets further into crypto, though, it may find a challenge persuading the more hardcore blockchain developers and savvy customers that trusted is better than trustless.

— Tomio Geron (email | twitter)

A version of this story first appeared on Protocol.com. Read it here.

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