Nikolas Sargeant
San Francisco–based Magic, which earlier this year raised $52 million in a round led by PayPal Ventures, recently released a buyer’s guide entitled ‘How to Choose the Right Wallet-as-a-Service.’
According to its introduction, the document – which was produced based on conversations with enterprises and developers – is “designed to offer valuable insights and practical guidance, empowering businesses to navigate the complexities of this choice.”
WaaS describes wallet infrastructure APIs that give businesses the ability to create and offer customers access to crypto wallets natively in their applications. Wallet-as-a-service provider Magic, whose aforementioned funding round gave it a valuation of just under $500 million, covers topics such as service, security, blockchain compatibility, compliance, and features in its 32-page guide, and provides at-a-glance checklists throughout.
While the company acknowledges the “inherent biases that stem from our role as a WaaS provider,” it says its goal is to provide impartial insights that facilitate the vendor evaluation process. Unsurprisingly, no Magic competitors are mentioned in the guide – indeed, no specific WaaS solution is mentioned aside from, well, Magic. Well, a ‘How to buy sneakers’ guide written by a Nike employee is hardly going to mention Adidas, is it?
Magic’s Key Wallet-as-a-Service Considerations
The first question the guide tackles, from the perspective of a business weighing up WaaS providers, is non-custodial or custodial? Magic nails its flag to the mast by summarizing both options before stating that non-custodial is the superior choice, enabling users “to retain ownership and control over their digital assets” and minimize exposure to counterparty risks.
Magic also touches upon many businesses’ preference for a white-label WaaS solution, wherein they can integrate their brand identity into the wallet itself, as well as their preference for retaining an existing identity provider when choosing the wallet provider’s authentication mechanism.
As far as onboarding is concerned, the guide emphasizes the convenience of WaaS when compared to conventional web3 wallets, noting the entire process is streamlined and user-friendly thanks to the integration of familiar account credentials such as email (rather than seed phrases).
The first chapter of the guide provides a useful checklist of 10 questions businesses should ask of would-be WaaS providers, such as “Is the WaaS infrastructure able to scale to tens of millions of users?” And “Does the WaaS support the blockchain I wish to build on?”
Assessing WaaS Features
A major takeaway from Magic’s guide is the importance of selecting a Wallet-as-a-Service provider that offers “bundled services,” something that will prevent the need for multiple Request for Proposals (RFPs). In Chapter 2, these various features are examined including NFT functionality, fiat on-ramp add-ons, and value-added services like data analytics.
For businesses interested in creating a digital collectible experience, Magic emphasizes that a reliable payment processing system is vital and that an effective WaaS provider will enable seamless NFT minting and purchases.
The importance of fiat on-ramp integration within the wallet infrastructure is also stressed, and so too are the advantages of using a solution that offers a “gas subsidy feature” to enable gasless transactions and reduce friction. Such a feature also eliminates the need for companies to manage an institutional gas wallet or continually acquire cryptocurrency.
As in Chapter 1, Magic concludes this section with a list of questions that should be posed to WaaS providers to appraise their additional web3 capabilities.
Security, Reliability, and Credibility
The third and final chapter of Magic’s buyer’s guide deals primarily with issues of trust and reliability, with suggested questions for vendors including ‘How many wallets have you created in total?’ and ‘Have you successfully launched projects with reputable brands?’
Another aspect covered in Chapter 3 is integration, specifically the ease with which a solution can integrate a business’s existing infrastructure without overburdening its product and engineering teams. This, the guide notes, will help to accelerate deployment and ensure a smooth transition.
With regards to security, Magic recommends prioritizing a provider with robust security protocols and a comprehensive compliance framework, in addition to a “mature enterprise-ready security program.” Lest the business owner scratches his head about what this entails, Magic elaborates by mentioning areas such as Vulnerability Management, Cloud Security, and GRC (Governance, Risk, and Compliance).
The level of support received by the customer is a paramount concern in any industry, and in Web3 it’s perhaps more important given the steep learning curve and esoteric terminology: the guide recommends determining whether the provider offers a strong Service Level Agreement (SLA) guarantees, ensures continuous uptime, and offers on-call support during critical launches.
In conclusion, Magic’s ‘How to Choose the Right Wallet-as-a-Service’ guide will prove to be an invaluable resource for businesses considering getting into Web3. The document’s easy readability and digestible checklists are likely to make the WaaS vetting process easier, not least by increasing the likelihood of businesses simply opting for Magic after they’ve finished reading the guide!
