Decentralized identity startup Spruce wants to help users control their sign-in data

Signing into websites using your Google or Facebook account has become so commonplace that lots of people don’t think twice before doing it. Keeping control over one’s own identity on the internet often requires a substantial sacrifice of convenience, so plenty of users have accepted the status quo of social media platforms being able to access and share their data freely, sometimes even in nefarious ways.

Spruce, a decentralized identity startup, thinks the blockchain can fix this. The company won an RFP from the Ethereum Foundation and Ethereum Name Service (ENS) to develop a standardized “sign-in with Ethereum” feature that could be interoperable with web2 identity systems. The goal of allowing users to log in using a cryptographic identifier such as their Ethereum wallet address is to let them control what information a platform receives about them when they sign in rather than automatically surrendering the data to the platform.

Wayne Chang, co-founder and CEO of Spruce, told TechCrunch that web2 platforms that offer sign-in capabilities have been able to access this data in the past because they offer trust and verification to users of the network. He and his co-founder, Gregory Rocco, both worked at blockchain infrastructure provider ConsenSys before starting Spruce. The company has been holding weekly calls to solicit input from the broader community on the “sign-in with Ethereum” project as it develops the feature, Chang told TechCrunch.

Chang used the example of Uber to illustrate why centralized platforms have been viewed as valuable in the past and how a decentralized network could take its place.

“If there’s an intermediary like Uber collecting 25%, they have to be doing something for the system. But what does it look like if those [intermediaries] became networks, and they were more like public utilities than a private company that’s trying to collect rent?” Chang said.

Spruce co-founders Wayne Chang and Gregory Rocco Image Credits: Spruce

That’s the question Spruce is trying to answer by building a public utility of sorts for internet users, but doing so requires individual users to build trust with one another by voluntarily sharing data through the network when they can’t rely on a centralized intermediary to make assurances.

“If we imagine a smart contract-based ride-sharing system, there’s a lot of concerns about that, because you don’t want to just send a transaction to a smart contract, and then step into the next car that pulls up. Instead, it’d be nice if the driver could present that they are a licensed driver, haven’t had too many accidents, and that the network has [validated] their good reputation,” Chang said.

In turn, the driver might want to know something about the rider’s reputation, akin to their star rating. Data on the internet could move in a similar way if it was decentralized and permissionless, allowing individuals to control what information they share with platforms, Chang continued.

“A different way to phrase it is that there are transaction costs associated with booking a rideshare, and there’s a trust portion of those transaction costs. If you’re not able to mitigate [distrust] enough, then those transactions just won’t happen, so if we can move data in a decentralized and authentic way, then maybe a lot more is possible,” Chang said.

Spruce offers two main products — SpruceID, a decentralized identity toolkit, and Kepler, a self-sovereign storage product. These products support use cases in service of Spruce’s broader goal, such secure sharing of trusted data, DAO-based credentialing and reputation, and permissioned access to DeFi through a partnership the company has with the Verite protocol.

Its customers are mostly web3 projects looking to integrate the “sign-in with Ethereum” feature, Chang said. The feature has enjoyed a positive reception on social media from projects such as TIME Magazine’s TIMEPieces NFT project and decentralized autonomous organization (DAO) voting tool provider Tally.

Spruce just announced it has closed a $34 million Series A round led by Andreessen Horowitz. Other participants in the round include Ethereal Ventures, Electric Capital, Y Combinator, Okta Ventures, SCB 10X, Robot Ventures, and OrangeDAO, the company says. The startup announced it had raised a $7.5 million seed round in November last year.

It plans to use the new funds to double its team of 15 employees by the end of the year, Chang said. He doesn’t want to scale the team past 30-35 employees in the near term, though, so the company can stay nimble and focused on solving specific problems such as key management for users who forget their passwords, he added.

Chang sees “sign-in with Ethereum” and Kepler as the two main products Spruce plans to develop using the new funding, he said. “Sign-in with Ethereum,” in particular, is likely to be a catalyst for Spruce’s growth, he added.

“We’re really hoping sign-in with Ethereum will become the standard choice whenever [users] want to sign in with something,” Chang said. “A really important note about that is it has to be an open, community-owned standard. We see [the feature] as the entry point for a lot more than just Spruce. I think that a lot of folks are looking at sign-in with Ethereum to be this way that users can use their existing wallet and interact with a new decentralized identity ecosystem.”