Privy looks to protect user data in Web3, raises $8M in seed round

Let’s talk about the IT greenfield of the future. We do this by taking a look at the jumping-off and reconnecting points (let’s call them on-chain and off-chain) between today’s Web2 and the next generation of online business and culture, Web3.

Web3 startup Privy today announced that it has raised $8.3 million in seed funding led by Sequoia Capital and BlueYard Capital. 

Privy builds simple APIs to help developers manage user data privately in Web3. Using Privy, they can take on user data directly from their front-ends and associate it to their users’ on-chain addresses. The data is end-to-end encrypted and bypasses developers’ stacks, thereby helping safeguard user information. 

Privy’s CEO and founder Henri Stern told VentureBeat that the funding “will help us grow our team, scale our APIs and build partnerships to help developers in the space build better, more private products for their users.”

“Personal data today comes with regulatory overhead, frequent breaches and deep misalignment with users — and most developers don’t want to get near it,” Stern said. “Yet, without user data, we are flying blind, forced to build for wallets rather than people, with no real insight into our users behind the usage we see on-chain.”

Blockchains are transparent by nature. Encrypting user data is no fix to these issues because ciphers will break over time. What, then, should developers do with user PII? Privy exists to bridge the gap between real-world (off-chain) user data and the on-chain (public, verifiable) world. 

Cryptocurrency draws a crowd

More than 300 million people currently use cryptocurrency at this time, and that number is only going to grow. Because this next-generation sector stands to reshape much of the internet, finance and even our culture, this broader adoption of crypto puts developers building apps in Web3 in a challenging position: More users means more data. More data means more problems for companies handling personal data, and all of these puts developers in increasingly vulnerable positions. 

“The lack of user data in Web3 has resulted in terrible user experiences for those accustomed to the modern web,” Stern said. “Things like the inability to get an email when you’re about to get liquidated, or the need to keep signing in and out of apps to see activity across wallets. You shouldn’t have to mine your users’ data or put your users at risk to ship great products.”

How Privy’s API works

Privy allows developers to encrypt user data directly from the app front-end and privately associate data to on-chain addresses. This enables developers to accomplish the following:

• Text or email users without handling their personal information directly
• Take on financial and compliance data without storing it on your stack
• Surface a unified UI across wallets and across chains without doxxing your users

Doxxing is the act of de-anonymizing a user — revealing private information about them against their will, such as who they are or where they live. Privy gives developers data vaults in which they can secure user data, and keep it under users’ control, Stern said.

“This is just the beginning,” Stern said. “The next generation of data tooling should keep users in the loop and in control of their data across the web. As Web3 matures, we see an opportunity to reinvent the data paradigms that have failed us over the last 30 years and give users back control over their data online.”