Blocto - Flow Ecosystem Vol. 3

Seamless universal login for Web3

Introduction:

Web3 has long suffered user experience and onboarding challenges. The complexities of plugins like Metamask, private key management, and a lack of fiat on-ramps have capped a limit on industry growth. Floodgates of opportunity will open when the crypto industry can get consumers from zero-to-one with minimal friction. 

An important piece that must be solved in this vision is identity.  As dApps continue to gain traction, users will have one account that plugs into all of their dApps, as opposed to funding numerous unique dApp wallets on multiple blockchains. One account means users will also have one password (hash/private key) that will need to be stored securely. This concept can more succinctly be described as ubiquity - where data, accounts, and assets all exist across different platforms at the same time. 

Blocto is building at the heart of these key issues. Their product uses a smart contract wallet and hides traditional complexities involved with interacting in Web3 (private keys, gas transactions, etc). Blocto is exciting as they have the potential to be the onboarding ramp for users into blockchain, and they’ve been a core piece of infrastructure on Flow thus far. 

Executive Summary:

• Team

  • Founded by Hsuan Lee and Edwin Yen

  • Advisors include Joseph Delong (CTO at SushiSwap), Kevin Chou (Founder of Rally), Roham Gharegozlou (CEO of Dapper Labs), and Animoca Brands

• Financials

  • Raised $8m from investors such as Animoca Brands (lead investor), Alameda Research, 500 Startups, Quantstamp (closed in April 2021)

• Growth

  • Blocto Swap, which is the 1st DEX on Flow, has an aggregate trading volume of $10M+

  • Launching other products such as Blocto Auction House (NFT marketplace) and Blocto Balancer (cross-chain AMM), etc. 

  • Planning a token launch and public sale

Blocto Opportunity:

Blocto is a leader in the blockchain wallet and interface space. They have the potential to own the user lifecycle as they allow users to interact with dApps, NFTs, and DeFi. 

Their product notably adds value to two of the biggest stakeholders in Web3: 

1. Developers - Devs that are building can focus on the product itself. Instead of having to worry about new user acquisition, education, and training, they can focus on building the right product. dApp developers can leverage Blocto’s services and SDK to quickly scale their user base.

2. Users - Users will benefit utilizing Blocto due to ease and simplicity of logging into any crypto based platform. For example, by allowing users to use an email login, it makes it much easier to remember their addresses and seed phrases. 

Blocto has been a key driver in the Flow ecosystem, but they’re also planning on going cross-chain. Blocto is already live with Ethereum, Binance Smart Chain, and Tron. Solana is expected to be ready by July followed by Ethereum layer2’s (zkSync, Loopring, xDai), and other layer1’s. On Flow, Blocto’s node constitutes more than 70% of all FLOW delegators on Flow (4th largest overall). 

Blocto will also be building out multiple products: 

• Blocto Swap: automated market maker (similar functionality to Uniswap)

• Blocto Balancer: custom liquidity pools (similar to Balancer)

• Blocto NFT Showroom: NFT asset management interface

• Blocto NFT Marketplace: non-custodial NFT marketplace (similar to OpenSea)

• Blocto Vault: protocol treasury backed by revenue and fees

• Teleport: cross-chain transfer from Flow to ETH/other layer1’s. Can directly integrate into apps like Yearn.Finance and Compound.Finance

Their product suite covers many of the key building blocks that have made blockchain and crypto popular over the last few years. Users can tap into multiple blockchains, have whatever functionality they need, without ever leaving the Blocto app. 

Product Review:

Getting started on Blocto is quite easy. After downloading the Blocto App onto your phone, you sign up using your email address. The app will send a one-time password to your email which you can then use to authenticate the account. To add FLOW support, you go to the wallet icon, and then tap the icon in the top right, and scroll down until you see FLOW. 

The wallet also gives users 3,000 Blocto Points to get started. Blocto Points are how users pay their network fee across all of the various applications, while Blocto handles the complexity of gas behind the scenes. We view this as a major usability hurdle for the mainstream consumer, who may not understand block size demand, and variable gas costs. Users can purchase both Blocto Points and select crypto assets from within the mobile app. 

Since Blocto is relying on a user’s email as the last line of defense on the security side, it’s critically important for users to enable 2FA on the email they use to sign up. If a hacker were to gain access to a user’s email, they’d also gain access to the user’s funds. This can be protected against using 2FA such as Google Authenticator. 

Tokeneconomics:

It’s been historically difficult for wallets and plug-ins to capture value. On the technical side, teams are constantly integrating new tokens and blockchains. On the business side, there isn’t a great way to grow revenue. Wallets have typically taken a fee on all transfers (similar to exchanges), but this hasn’t amounted to a lot of revenue relative to how much volume an exchange does.

With Blocto, they’re taking an interesting approach to solve this growth challenge. Blocto will be taking 0.1-0.3% of all transaction fees within the network as a base revenue. This will be channeled into the Blocto Vault. Additionally, because Blocto has built out an SDK, Blocto partners can handle the integration load while Blocto focuses on building more in-app products for users. The B2B strategy with other layer1’s will bring new users to the Blocto app, helping to scale out their user base. The SDK is currently free to integrate. 

Blocto is also adding a token to their network to help create stickiness and lock in stakeholders (users, investors, etc). Tokens can be a way of rewarding your most loyal and active constituents, incentivizing them to stay with the platform long-term (we’ll dive into this later). Blocto does this quite well with their Blocto mining, while also providing hard token value relative to the total app revenue (via the Blocto Vault). 

Blocto token (BLT) is the utility and governance token of Blocto, which serves as the foundation of the ecosystem and the interconnective link between the wallet, Blocto-made products, and users. The token also has a unique fundamental value, since it can be burned to redeem value from the Blocto Vault. The Blocto Vault is similar to the protocol treasury, as a portion of all revenue / fees will be redirected to the Vault. 

The formula can be detailed as follows: 

(BLT Burn)/(BLT Supply) x Vault Assets = Assets dist from Vault

The distribution and token allocations are highlighted in the graphic below: 

One interesting takeaway from the graphic is that 25% of the total supply will be dedicated to mining. This means that a significant portion of the network will be distributed to active users/developers. Since BLT is both a utility and governance token, the mining mechanism reinforces BLT holders’ position as part of the governing body of the Blocto ecosystem.

The mining functionality is somewhat different than what you might imagine when you think of Proof-of-Work mining that happens with Bitcoin. For Blocto mining, the mining rewards are decided by the community (via governance) and distributed monthly from the mining pool. Both users and developers are eligible to receive mining rewards. For developers, they can earn mining rewards by building a dApp and integrating with Blocto; however, they need to stake BLT in order to receive the token rewards. For users, they can earn mining rewards for various activities like dApp usage and referrals. 

Conclusion:

Blocto is building in a very interesting segment of the crypto market (dApp user onboarding). Building products that balance the security challenges associated with blockchain, while maintaining sufficient decentralization has been rare. Blocto has struck a unique balance with their product that feels like Web2, but still allows users to immerse themselves in Web3 without exposing them to the challenges of things like Metamask, gas fees, and private keys.

Blocto is differentiating themselves from other smart contract wallets by adding a token to their product. We believe the token accomplishes several key objectives: 1) helps scale usage, 2) rewards the most active participants - users & devs, and 3) locks in stakeholder value. We’re excited to continue following Blocto's growth, and we’re looking forward to learning more about their public sale and offering later this year.