Delegation Flow

What happens when a user approves delegation and how to handle the webhook.

Server-only
This page covers your server webhook handler. The client triggers delegation; your server verifies, decrypts, and stores materials.

When a delegation is triggered, your endpoint receives a webhook named wallet.delegation.created. The delegated materials are in data.

{
  "messageId": "f44da9f0-a5b5-47f6-965f-f04af51c903e",
  "eventId": "2cf779a8-89da-486f-974e-2b77b738e4ac",
  "eventName": "wallet.delegation.created",
  "timestamp": "2025-10-01T15:13:26.348Z",
  "webhookId": "9a31fefc-64e4-4551-81da-1502eacc852d",
  "userId": "7eb7843b-2a4d-4f69-b95e-d219f0662fda",
  "environmentId": "53728749-1f19-4cab-becf-b88f952c3a3c",
  "environmentName": "sandbox",
  "data": {
    "chain": "EVM",
    "encryptedDelegatedShare": {
      "alg": "HYBRID-RSA-AES-256",
      "iv": "dzePdAUMQd6lWQngEXWPdQ",
      "ct": "pJIT5UU...XcWeYsXhygL2QbQcWZK6Rs5_CuiCDb_dHC_7P1tC...",
      "tag": "Yq8bpMU8huIx7UzUUUgI9Q",
      "ek": "uix2E6E...Keru7HWqeu7ktw"
    },
    "encryptedWalletApiKey": {
      "alg": "HYBRID-RSA-AES-256",
      "ct": "PzeliI...0kB9C0",
      "ek": "iWJgZQ...rxt",
      "iv": "RpC5nw1b4udgJqnC1p0evQ",
      "kid": "dynamic_rsa_lSuvWlCy",
      "tag": "-ZtmOG6gYTzS53wVMNK0Ig"
    },
    "publicKey": "0xd74ff800a3c6f66ecd217118aaa6fb1c916fa4e2",
    "userId": "7eb7843b-2a4d-4f69-b95e-d219f0662fda",
    "walletId": "25193936-3ecd-4c1b-84e6-9eabc82e53c2"
  }
}

Verify → Decrypt → Store

1. Verify the webhook signature. Use your webhook secret and the x-dynamic-signature-256 header: compute HMAC-SHA256 of the raw request body with the secret and compare to the header value in constant time. Only proceed if the signature is valid.

import * as crypto from "crypto";

export const verifySignature = ({
  secret,
  signature,
  payload,
}: { secret: string; signature: string; payload: any }) => {
  const payloadSignature = crypto
    .createHmac("sha256", secret)
    .update(JSON.stringify(payload))
    .digest("hex");
  const trusted = Buffer.from(`sha256=${payloadSignature}`, "ascii");
  const untrusted = Buffer.from(signature, "ascii");
  return crypto.timingSafeEqual(trusted, untrusted);
};

The payload you pass to verifySignature must match exactly how it was sent (same JSON structure); otherwise verification will fail.

2. Decrypt data.encryptedDelegatedShare and data.encryptedWalletApiKey.
3. Store userId, walletId, and decrypted materials securely (e.g., envelope encryption, KMS, at-rest encryption).

Encryption fields
alg: hybrid (RSA‑OAEP + AES‑256‑GCM); iv: AES IV; ct: ciphertext; tag: GCM tag; ek: encrypted content‑encryption key; kid: key identifier for rotation.

Example: Node (using Dynamic SDK)

We provide a helper function to handle decryption for you. Install the SDK:

npm install @dynamic-labs-wallet/node

Then use the decryptDelegatedWebhookData function:

import { decryptDelegatedWebhookData } from '@dynamic-labs-wallet/node';

// In your webhook handler, after verifying the signature
const webhookData = req.body; // The webhook payload

const { decryptedDelegatedShare, decryptedWalletApiKey } =
  decryptDelegatedWebhookData({
    privateKeyPem: process.env.YOUR_PRIVATE_KEY, // Your RSA private key
    encryptedDelegatedKeyShare: webhookData.data.encryptedDelegatedShare,
    encryptedWalletApiKey: webhookData.data.encryptedWalletApiKey,
  });

// Now securely store these decrypted materials
// decryptedDelegatedShare: ServerKeyShare object
// decryptedWalletApiKey: string

If a delivery fails, you can replay it from the dashboard. Use the eventId as an idempotency key.

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Best Practices for Secure Storage

After decrypting the delegated materials, proper storage is critical. The delegatedShare and walletApiKey, in combination with your Dynamic developer API key, provide full signing authority and must be protected with defense-in-depth strategies.

Recommended Storage Approaches

1. Envelope Encryption with Cloud KMS (Recommended)

Use a cloud Key Management Service to encrypt the decrypted materials before storing them in your database.

AWS KMS Example:

import { KMSClient, EncryptCommand, DecryptCommand } from '@aws-sdk/client-kms';

const kmsClient = new KMSClient({ region: 'us-east-1' });

async function encryptWithKMS(plaintext: string, keyId: string) {
  const command = new EncryptCommand({
    KeyId: keyId,
    Plaintext: Buffer.from(plaintext),
  });
  const response = await kmsClient.send(command);
  return response.CiphertextBlob; // Store this in your database
}

async function decryptWithKMS(ciphertext: Uint8Array) {
  const command = new DecryptCommand({
    CiphertextBlob: ciphertext,
  });
  const response = await kmsClient.send(command);
  return Buffer.from(response.Plaintext).toString('utf8');
}

Benefits:

• Centralized key management with automatic rotation
• Hardware-backed security (FIPS 140-2 Level 3)
• Audit logging of all encryption/decryption operations
• Fine-grained IAM policies

2. Google Cloud KMS & Secret Manager

Similar to AWS KMS, but integrated with Google Cloud’s ecosystem.

import { SecretManagerServiceClient } from '@google-cloud/secret-manager';
import { KeyManagementServiceClient } from '@google-cloud/kms';

const secretClient = new SecretManagerServiceClient();
const kmsClient = new KeyManagementServiceClient();

async function storeSecret(projectId: string, secretId: string, payload: string) {
  const [version] = await secretClient.addSecretVersion({
    parent: `projects/${projectId}/secrets/${secretId}`,
    payload: {
      data: Buffer.from(payload, 'utf8'),
    },
  });
  return version.name;
}

3. Azure Key Vault

Microsoft Azure’s managed secrets and key management service.

import { SecretClient } from '@azure/keyvault-secrets';
import { DefaultAzureCredential } from '@azure/identity';

const credential = new DefaultAzureCredential();
const vaultUrl = `https://${vaultName}.vault.azure.net`;
const client = new SecretClient(vaultUrl, credential);

async function storeSecret(name: string, value: string) {
  await client.setSecret(name, value);
}

Security Requirements Checklist

Regardless of your storage method, follow these requirements:

• Never log plaintext materials — redact delegatedShare and walletApiKey from all logs, error messages, and monitoring
• Encrypt at rest — use AES-256-GCM or equivalent; ensure database/storage has encryption enabled
• Encrypt in transit — all communication must use TLS 1.3
• Implement access controls — restrict which services and roles can decrypt materials
• Enable audit logging — track all access to encrypted materials with timestamps and actor identity
• Separate encryption keys — don’t reuse keys across environments (dev/staging/prod)
• Use unique encryption per record — generate new IVs for each encryption operation
• Implement key rotation — rotate encryption keys periodically (e.g., every 90 days)
• Plan for key compromise — document incident response for key material exposure
• Secure deletion — overwrite secrets in memory after use; use secure deletion for storage

Storage Schema Example

CREATE TABLE delegated_shares (
  id UUID PRIMARY KEY,
  user_id VARCHAR(255) NOT NULL,
  wallet_id VARCHAR(255) NOT NULL,
  chain VARCHAR(10) NOT NULL,

  -- Encrypted with KMS/Vault
  encrypted_delegated_share BYTEA NOT NULL,
  encrypted_wallet_api_key BYTEA NOT NULL,

  -- Metadata for key management
  encryption_key_id VARCHAR(255) NOT NULL,
  encryption_algorithm VARCHAR(50) DEFAULT 'AES-256-GCM',

  -- Audit fields
  created_at TIMESTAMP NOT NULL DEFAULT NOW(),
  last_accessed_at TIMESTAMP,
  access_count INTEGER DEFAULT 0,

  -- Indexes
  INDEX idx_user_wallet (user_id, wallet_id),
  INDEX idx_created_at (created_at)
);

What NOT to Do

• Never store plaintext shares in databases, files, or environment variables
• Never commit encryption keys or shares to version control
• Never use the same encryption key across all users
• Never skip signature verification before storing materials
• Never rely solely on database encryption without application-level encryption
• Never expose decrypted materials through APIs or logs

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What's next?

Learn how to use the delegated materials in Developer Actions.