Consensys, an Ethereum-focused crypto infrastructure company, announced on Monday that it has closed a deal to acquire Web3Auth, a security management company.
The acquisition is particularly important for Consensys’ most popular product, a crypto wallet called Metamask. Web3Auth is part of a larger effort to make the wallet more accessible to non-crypto native users, and allow them access without the onerous and often perilous process of remembering their passwords.
“This integration enhances MetaMask’s capabilities significantly, embodying our belief that the best web3 wallets will seamlessly integrate an infrastructure that supports a wide range of empowering features,” Joseph Lubin, Founder & CEO of Consensys, said in a statement.
Dan Finlay, co-founder of MetaMask, added that the acquisition is “really about smoothing that adoption ramp and providing a more familiar backup experience to people.” This latest acquisition comes 10 months after Consensys acquired Wallet Guard, a browser extension that alerts users to malicious transactions on MetaMask.
With more than 100 million users, MetaMask has become one of the leading self-custody wallets since it launched in 2016. Self-custody refers to a type of crypto wallet where investors maintain total control over their holdings, rather than handing over their crypto to an exchange like Coinbase.
The benefits of this include avoiding third party risks and restrictions, like limits on the size of transactions. But in order to provide these upsides, self-custody wallet users are required to maintain their own private key—an alphanumeric code that unlocks their wallet. And unlike traditional bank accounts, there is no “forgot your password” option.
That has led to incidents of people who theoretically have access to vast wealth, but have forgotten their codes. That may be contributing to why there are 1.8 million Bitcoins—about 9% of the token’s total supply in circulation—held in wallets that have been totally inactive for a decade or more, according to a 2024 survey conducted by Fortune in collaboration with crypto data analytics firm Chainalysis.
Finlay says these passwords create a barrier to entry for new crypto users who don’t trust themselves to hold onto their private key, but also don’t want to engage with large crypto exchanges—especially after the FTX collapse.
“Don’t share this with anyone, but also don’t lose it is a very difficult needle to thread,” he said.
Consensys and Metamask are trying to solve for this with the Web3Auth acquisition; that company, founded in 2019 and formerly known as Torus, has developed software that allows users to create and log into their self-custody wallet through their social media accounts like Google, X, or Discord, rather than remembering their passwords. Web3Auth also offers services that increase security, like multi-factor authentication.
Most of the Web3Auth team will be joining Consensys, according to a spokesperson for Consensys. Consensys declined to disclose the size of the deal or whether it was made in all cash, stock or both.
