As funding into web3 projects cools down during the crypto winter, startups in the space are increasingly focused on building bridges for mass adoption and exploring revenue opportunities to stay afloat. The key to driving mass adoption? Offer experiences that are so seamless that users don't realize blockchain is involved.
One company that is demonstrating how blockchain can come in handy in real life is Kansas-based Redeem, which allows users to claim non-fungible tokens using phone numbers rather than having to set up crypto wallets. Off the back of its recent $2.5 million pre-seed funding round led by Kenetic Capital, the startup is deploying its NFT solution to manage a VIP dinner at the tech festival SXSW this week.
The co-founder and CEO Toby Rush is a third-time entrepreneur who, in 2016, sold his biometric company EyeVerify to Ant Group, the fintech affiliate of Alibaba, for $100 million. Few other companies in the world are as adroit as Ant in building intuitive fintech products. Together with its nemesis Tencent, Ant popularized the use of scan-to-pay to over one billion people in China.
Rush subsequently got acqui-hired by Ant's corporate venture team, focusing on blockchain deals. It was an experience that paved the way to find practical use cases for blockchain.
"As you know, cryptocurrencies aren't allowed in China. NFTs that we have over here aren't really a thing in China. But hardcore business use cases are. How can blockchain make businesses better? That was my investment focus," Rush told TechCrunch in an interview.
"So as I started to learn about blockchain, it was very much practical, realistic. It's not that how do we go trade in NFTs, how do we create a new token, it was really much more what I would call hardcore business cases," he added.
Rush eventually identified a use case for NFTs and started Redeem early last year. He was fascinated by the technology "not as pictures, but as a digital asset that can live outside the walled gardens of Apple, or Google or Facebook, Ticketmaster, or Visa," he admitted.
"When I can own a little piece of data outside of their walled gardens, lots of other people can engage and collaborate with me in an open ecosystem."
The challenge of utilizing NFTs, he reckoned, is that the onboarding process and even using them after onboarding is really hard. Instead of building an NFT infrastructure from scratch, Toby looked to an established, ubiquitous global directory system -- phone numbers.
"Carriers have spent billions of dollars making sure there's only one device in the world that can use my phone number right now. There are 6.8 billion smartphones already deployed, so leverage that -- if you have your phone, you have a wallet," he explained.
This is how Redeem helps bring users into web3 by opening their first wallets, the gateway into all things crypto. Say they are attending an event that distributes NFTs as swag, they will first scan a QR code with their phones. Two links will pop up -- onboard via SMS or WhatsApp. Say the users pick WhatsApp, Redeem will then automatically create wallets for them in the backend, put NFTs into their wallets and send them a message on WhatsApp linking to their newly created wallets.
Basically, Redeem is using users' phone numbers to authenticate who they are and create unique wallets. Rather than having them go through the process of signing up for a wallet and noting down the 16-word recovery phrase, it leverages the popular methods of QR code scanning and text messaging.
"When you send a message, there's only one device in the world that can send a message from your phone, and that's you. When you get to choose your preferences, it's creating a message, so it's pre-populating who it's sending it to, and this is the NFT you want to claim. When you hit send, your phone number is claiming this NFT. So we create a wallet and send you a response back, and you are onboarded."
The system can similarly be used to authenticate people's access to events. At the VIP dinner at SXSW hosted by Arkive, a company that is building a decentralized museum, Redeem's solution is helping to verify the identity of 200-something attendees. Once they scan the QR code at the gate, Redeem's backend will check whether they have the required NFT ticket in their wallets that are linked to their phone numbers.
Redeem isn't trying to be a wallet itself but more a connectivity layer through a B2B2C strategy. Users can bind their wallets, be it Metamask or Phantom, to Redeem as their default solution.
And why should event organizers use NFTs rather than the traditional ticketing system? The differences lie in control. In existing practices, centralized ticketing enablers like Ticketmaster control users' data. In web3, any group can engage with an audience through NFTs without having to ask permission from Ticketmaster.
Redeem is already getting traction from event organizers. While Rush declined to disclose who his company is talking to, he hinted that these are "brands that do lots of sponsorship and marketing and live events."
"So they want to do activations on-site, but they don't want activations to stop on-site. If they get NFTs, there's a way for them to do lots of post-event engagement," Rush said.