Trust is still a must in the trustless world of cryptocurrencies
As stated in the Bitcoin (BTC) whitepaper by Satoshi Nakamoto, the core of the cryptocurrency is a peer-to-peer e-cash system that eliminates the need for intermediaries such as banks. This intellectual independence and the ridicule of clinging to traditional banking systems are ubiquitous throughout the crypto world.
However, if mass adoption is the goal, some hand-holding becomes necessary to get everyone on board as we move towards a truly decentralized financial world. We can’t expect our grandparents – who have trouble sending emails – to figure out how to manage private keys, seed phrases, digital wallets and send your birthday present in Bitcoin without your assistance. In fact, this transition to decentralized funding goes well beyond birthday deposits and includes productivity gains, liquidity mining, and unavailable token auctions. As a result, trusted intermediaries have never been more necessary to fulfill the primary aspirations of DeFi and cryptocurrencies.
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Robots don’t need trust, but humans do
Faith is paramount to daily life in any civilization. We trust the opinions of doctors. We trust that the taxi driver will take us where we need to go. We trust that the food we are served in restaurants is safe. We believe that cars stop when the pedestrian signal is at a zebra crossing.
In the trustworthy world of cryptocurrencies, we still make decisions about who and what to trust. Most of us aren’t developers or engineers with the ability to parse the code of every DeFi protocol and token before we get involved. Instead, we collect information and evaluate the actions to be taken based on our understanding. The central questions in this decision-making process are: Do we trust the organization and the people behind the protocol? Do we trust that they are acting in good faith and that the record will keep what it says?
Studies have shown that as new technologies develop, our confidence grows. Despite the novelty of algorithms that implement machine learning and artificial intelligence, people are increasingly trusting algorithms towards their colleagues. A study published in Science every day found that when subjects were presented a photo to a crowd and asked who better to reach the correct number of people in the photo, the AI said more than humans. At the same time, another study found that a person’s confidence in technology depends to a large extent on how they use it, a degree in technology or engineering, and familiarity with online algorithms that lead to greater confidence in AI.
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The results of both studies certainly also apply to the crypto world. Growing trust in technology has made the adoption of cryptocurrencies increasingly popular. It is important to note, however, that this introduction comes at different rates for different demographics. Those who are most exposed to newer technologies – engineers and developers – are the first to adopt; those with the least exposure and access to resources lag behind. Hence, those of us who have been immersed in the world of cryptography have a responsibility to support those who are less exposed. We do not want to end up with a “technology background” where those with more technical knowledge are the most privileged and those with the least are denied participation. This assumed obsolescence would contradict Bitcoin’s original promise of democratization.
The usability challenge of cryptocurrencies
We have to admit that cryptocurrencies present unique usability challenges. Even those with internet access – currently measured at around 4.66 billion – are often limited to social media, search and email. These web users are familiar with email and password logins. Adding private key management – a string of numbers and letters difficult to understand by the human eye – requires overcoming a lack of familiarity with which web users are familiar.
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The core value of “your key, your coin” is to revolutionize our financial system by allowing users to control their assets instead of depending on banks and vendors. However, that empowerment also brings a burden that many newcomers may not be immediately ready for. We have all heard horror stories from users who lost their private keys and were denied access to potentially millions of dollars worth of cryptocurrencies as a result.
I think we shouldn’t insist on throwing new people into crypto waters and asking them to swim. Once people are comfortable with managing their private keys, the training wheel can step in and shoulder (and profit) their own “your keys, your money”.
New users must be fully supported
The proportion of DeFi users is still quite small. According to ConsenSys Q1 “DeFi Report”, the total is estimated at around 1.75 million. Compared to 4.66 billion internet users, this discrepancy represents a huge growth opportunity in the crypto economy. I would argue that exchanges and platforms that prioritize education, user experience and customer support stand out from the crowd this year and into this year 2022 will conquer significant parts of this untapped market.
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Women in particular are a rapidly growing group of users, and crypto platforms do not provide enough resources to serve them. A survey of CoinGecko 2020 users found that only 9% of women have even heard of DeFi. This discrepancy between male and female users is unacceptable.
The only way for cryptocurrencies to reach their true potential and give a global user base control of their own worth is for us to see adoption across all demographics, including gender, age, education, geography, and technical knowledge. As decentralized technologies seek to eliminate middlemen, human contact therefore remains critical to the widespread adoption of cryptocurrencies.
Laurence Newman is Co-Founder of Coinmama, a serial entrepreneur and a bitcoin veteran. After Laurence struggled to buy Bitcoin on her own, she set out to create a seamless, safe, and engaging buying experience for everyone, and so Coinmama was born. In addition to his work on the board of directors, Laurence is also responsible for marketing and strategic partnerships at Coinmama.