Dolomite Traditional Accounts
For niche users familiar with the DeFi space, traditional email & password logins are a thing of the past, replaced with external wallet applications such as MetaMask or hardware wallets such as a Ledger. Using Ether as a means to pay for Ethereum network/gas fees to interact directly with DeFi applications comes as second nature to users who are well aquanted with decentralized financial applications.
For the majority of traders, onboarding into DeFi (decentralized finance) is daunting and cumbersome. For starters, a potential trader must own a couple dollars worth of the Ethereum coin (ETH) or purchase some, and then download or purchase a third party wallet. After these two giant hurdles, a trader must then use some of their newly aquired ETH to pay for and execute transactions just to enable trading on the exchange. Many traders on centralized exchanges understand that a 12-word phrase is how they access their wallet, but their understanding stops there. Users are mostly unaware of the use cases of a wallet beyond using it to hold and send Ether and ERC-20 tokens. Using a wallet to trustlessly trade can be explained easily, but the process to go from 0 to trading is not an easy task. Our goal with Dolomite is to build a decentralized exchange (DEX) that anyone can use completely trustlessly and without ever losing sole custody of their funds. But, there is a massive amount of potential users who are using centralized exchanges who could be using Dolomite if it were made simpler to use. We see too large a learning curve for onboarding traders into DeFi. We aim to bring this curve down drastically, and here is how:
- Familiar signup process that anyone with a bank account would be able to easily grasp.
- Decentralized trading without any hurdles or confusion.
- Users do not need to interact directly with the chain. Ever. Thus they do not need an Ether (ETH) balance to get started.
- Deposit funds into Dolomite by simply sending Ether/Tokens to a deposit address.
- Familiar withdrawal flow: the network/gas fee is paid in the token being withdrawn.
- Users maintain sole custody of their assets.
Why does a DEX support these accounts?
At the moment, everyone in the DeFi ecosystem is trading with others in the space. Although growing rapidly, this space is niche and relativley small. There is an incredibly large amount of people who are not using DeFi products as they deem them too difficult to use. Dolomite aims to capture both audiences and bring DeFi out of the niche it is and into the broader trading world. Those traders using MetaMask or a Ledger will be able to trade with users using an email & password login seamlessly.
How it works
When signing up on Dolomite, a user is presented with the option to load an existing wallet (such as MetaMask) or to signup with an email and password. The UI for this is made to draw those without an existing wallet into a traditional signup, and to encourage those with a wallet to quickly choose their wallet loading method and proceed. Those who choose traditional signup and enter their email and password will be shown a "Recovery Phrase" as the next step of the onboarding process. This recovery phrase is a 12 word mnemonic phrase for standard Ethereum wallet. We brand the wallet as a "Recovery Phrase" because 1. it is more easily understood and 2. that's what it is — users only need this in the event that they forget their password. After being prompted to write the phrase down, warned about it being the only way to recover their funds if they forget their password, and re-entering the phrase, the user's account is created.
At this point the user can trade up to $300 per day and will be prompted to upgrade to tier 2, in which they enter their phone number and street address. Upon entering this information, their daily limit increases to $1,000 and their phone number will automatically be used along with their account credentials for authentication on login. At anypoint before or after tier 2, a user can enable 2fa through an app of their choice to replace text message code confirmation on login.
It is important to note that on account creation, the mnemonic phrase (and associated private key) are generated by our frontend but never sent to our backend server. In fact at no point, ever, does the user's private key, mnemonic phrase or password get shared with our server. Account creation involves the user encrypting their mnemonic recovery phrase, private key and password so our server can avoid having custody of a user's wallet at any point. So far, we have described how we onboard users and secure their wallet (private key) behind a traditional login system with cell-phone/2fa security features. But we have not described how this wallet avoids the need for Ether, token approvals and WETH. We do this through the use of a smart wallet and the
Dolomite Smart Wallet
The Dolomite smart wallet differs from a regular crypto wallet in that it is powered by smart contracts on the Ethereum blockchain. This enables Dolomite users to avoid needing to setup their dolomite account with an on-chain transaction and users can withdraw their funds by paying the network fee in the asset being withdrawn (as opposed to ETH). The way these contracts work is based on the principle that if a user uses their wallet to sign a message (which costs nothing) and in said message is some information about an order or withdrawal (such as the fee amount), then the signed message can be submitted to a smart contract, and the smart contract can verify with absolute certainty whether or not a user agreed to pay said fee to withdraw their funds.
Those with a solid grasp of DeFi will be able to use Dolomite and keep their private key out of Reach of Dolomite's frontend application. Traders who are currently using centralized exchanges can take a step in the right direction by signing up using a familiar and easy to use flow/account that removes all the hurdles faced by newcomers to the DeFi ecosystem. And these two types of traders can trade amongst eachother on one platform that suits the needs of all traders.