Wallet Strategy Part 1: The Tide Will Never Rise for Decentralized IDtech

Why Your Best Product Instincts Will Sink You in Uncharted Waters

Series Preface: For context around the topics and terminology discussed in this series, as well as a bit about me and why I write about them. 

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I’m publishing this series, because we have a big problem in decentralized IDtech.  I call it the Three-Wallet Problem.  Until it’s solved, all other challenges in the space will be of little consequence.

Kim Cameron wrote in May of 2005:

No one is as pivotal to the success of the identity metasystem as the individual who uses it. The system must first of all appeal by means of convenience and simplicity. But to endure, it must earn the user's trust above all.

This is wisdom, and it’s never been more relevant.  We ignore it at our own peril.  

The Three-Wallet Problem will cause your wallet strategy to backfire and jeopardize the long-term viability of your organization. 

It’s already begun to manifest, and it will only get worse.  If the community remains on its current course, this problem will single handedly sink your product or business and prevent the rising tide you’re working so hard to create — and ride to new heights.

But this problem has a solution, and your organization’s wallet strategy will be the key to unlocking it. I hope you’ll find this series valuable in shaping the right wallet strategy, because in some sense, we’re all in the same boat.

Our Shared Vision: The Rising Tide

Since you’re reading this, we likely share a vision for a future where the tide rises and lifts all boats in the process.  The rising tide eventually brings about a ubiquitous identity and trust layer for the Internet, which reaches even as far as in-person interactions in the real world. 

In our shared vision, the proliferation of W3C DIDs and VCs improves enumerable facets of society and daily life.  And this drives exceptional growth for your product and organization, thanks to your long-term bets on these transformational technologies.

I desperately want to see the vision realized.  Don’t you want the same?  Don’t you want the tide to rise in decentralized IDtech and lift all boats, including yours?

But it’s never gonna happen. 

I hate saying so, but it’s true.  And worse still, it’s us — experienced Product people — who are preventing it. We bring our experiences and expertise to the table.  We draw on our past successes building, launching, and growing products. We lean on our hard-won lessons and battle-tested strategic playbook.  As a result, we confidently craft and execute on a wallet strategy that harms our own product and business.  

But that’s only because decentralized identity wallets are fundamentally different from any of our previous products. 

Your Wallet Strategy & Why It Will Sink You

The tide will never rise, as long as we keep trying to treat wallets like the products we’ve had success leading in our careers.  When we try to bring our existing product-strategy playbook into this space and apply it to wallets, experienced Product leaders actively prevent the rising tide. 

• Does your strategy treat your wallet as a key component of your product offering?

• Are you optimizing for your wallet’s user growth and retention?

• Do all your users adopt your wallet as an early phase of your product’s onboarding flow?

• Are you crafting your wallet to perfectly suit your industry vertical, problem domain, product, and feature set? 

• Will your wallet help to differentiate your product to build a strong, defensible moat around your business?

If you answered yes to most or all of these questions, you have great product-strategy instincts. And applying them in the realm of decentralized identity wallets is going to backfire. By the end of this series, you’ll understand exactly why — and how to craft a winning wallet strategy.

Throughout This Series

In this series of eight posts, you’ll gain the unconventional insight you need, to craft a winning wallet strategy and execute on it: 

• Learn why the rising tide is path-dependent and the role of wallets is pivotal.  

• Uncover the Three-Wallet Problem (in Part 3) and understand its implications. 

• Find out why “wallet wars” will ensure mutual destruction for all players in the decentralized IDtech space. 

• Reveal that the rising tide depends not only on the development of atomic networks but also on “safe and open shipping lanes” to connect them. 

And there’s good news! 

The Three-Wallet Problem has a solution — one that can sidestep the problem and bring about the rising tide.  By the end of this series, you’ll not only discover the solution but also craft a playbook for your organization to steer clear of the problem altogether. 

Your long-term success hinges on getting this right, and in this series I aim to articulate rationale that centers your product or company’s self-serving interests, not just the success of the broader community and society as a whole.

The Wallet-Moat Paradox

I’ll conclude this first post in the series by introducing a concept that illustrates the dynamic that accomplished Product leaders don’t yet understand — which causes them to choose the wrong wallet strategy, despite great strategic instincts and the best of intentions. 

I call this unusual strategic dynamic in decentralized IDtech the Wallet-Moat Paradox:

Crafting your wallet strategy to bolster your product’s moat, and keep competition out, will backfire — primarily keeping new users out and enabling competitors to flourish.

Introductory illustration of the Wallet-Moat Paradox

Why is this a paradox?  Because building a strong, defensible moat is a wise business strategy to defend our product from competitors. But it doesn’t work in the realm of wallets. By attempting to build a moat with your wallet strategy, you’re isolating your product on an island, separate from the broader ecosystem, rather than riding the rising tide of decentralized IDtech. 

Hidden in the subtext of this paradox are both the problem and the solution. Together, we’ll discover and explore them both in subsequent posts in the series. I hope you’ll join me, because I want your product or company to succeed, alongside other pioneers in the space. 

In Part 2 of this series I’ll share my own horrible plan to move my writing to a new kind of “website”.  My horrible plan will serve as a relatable metaphor to illustrate the dynamics that underpin this paradox.

A Dialogue with Product Leaders and Executives

There’s a lot to cover in this series: the problem, the solution, and the seeming paradox they imply.  I’ll also share actionable advice for avoiding the Three-Wallet Problem, tailored for various wallet journeys, including that of organizations like yours.  As we make our way through these concepts, please bring both an open mind and a critical eye, as I’ll be grateful for your feedback to help me sharpen (or perhaps even invalidate) these arguments.

I’ll aim to publish one post in this series per week.  If you’re working in decentralized IDtech, I hope you’ll follow along, give me feedback, and share anything that may be useful to your colleagues or broader network.  

To get them as soon as they’re published, you can subscribe for free.

Before We Continue

What I’ve outlined above and will cover in this series may be uncomfortable to consider.  In preparation for Part 2, take a moment to contemplate another paradox, longstanding and rigorously-researched advice from Good to Great: 

You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be.

— Jim Collins, The Stockdale Paradox

We will prevail in the end. But on the way, we indeed have some brutal facts to confront.  I hope you’ll join me in striving toward both.

Up Next in Part 2

In the next installment of this Wallet Strategy Series, we’ll delve deeper into the dynamics and challenges of decentralized IDtech:

• Inevitability and Path-Dependence: We’ll explore how the future of decentralized IDtech, though seemingly inevitable, is significantly influenced by the choices we make now. This includes the timing of this technological shift — whether it unfolds over a few years or radically longer.

• Pivotal Role of Wallets: We'll start building a detailed framework and vocabulary to understand why a "moat" strategy for wallets is counterproductive, pushing users away rather than drawing them in.

• Unveiling Decentralized Dynamics: An examination of the inherent characteristics of decentralized networks, contrasting them with the centralized models we're accustomed to, and why a different approach to product strategy is essential.

• Traditional Instincts in a New Light: We'll discuss how traditional business and product strategies remain relevant but require significant adaptation to align with the unique demands of decentralized IDtech.

Join me in Part 2, as we continue to unravel these complex themes, offering insights and strategies for navigating the uncharted waters of decentralized identity wallets. Your engagement and feedback are invaluable as we collectively shape the path forward for the wallets ecosystem.

I hope you’ll subscribe, reach out with feedback, and share the series to invite more community members to the discussion!

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Next in the Wallet Strategy Series:

Wallet Strategy Part 2: Unusual Dynamics & the Role of Wallets