3 Ways To Solve Crypto’s Trust Problem
In August 2018, a Harris Insights Poll commissioned by Gem, found that 41% of Americans will never invest in Bitcoin or other cryptocurrencies. Given they’ve seen the carnage of this year’s bear market as many top coins have lost more than 90% of their value, it would be easy to claim that Bitcoin is dead.
But as usual in today’s click hungry media, the stats weren’t anchored and with some digging you would have found a poll by the same organization (this time commissioned by Blockchain Capital) where the number of Americans planning to never invest in Bitcoin was 37% at the peak in November 2017! So with all the eulogies we’ve seen in 2018 and the 90% declines, only a small percentage more of Americans have been converted to forever no-coiners. Bitcoin might not be dead after all…
But though Bitcoin isn’t dead, is it really alive?
A deeper dig into the survey results would have found a startling stat.
82% of respondents found the Big Banks (e.g. Wells Fargo, JPMorgan, Goldman Sachs) more trustworthy than Bitcoin.
For the digital currency arguably created in response to the actions of the Big banks in the lead up to the GFC, this makes one thing clear: Bitcoin and Crypto have a trust problem.
So how do we solve crypto’s trust problem? There are endless ideas and heated debate, but from my perspective there’s a few solutions that might work.
Improve Usability
Pre-2014 Crypto UX was a different world compared to the slick user experiences we see today by providers like Coinbase and Jaxx. With wallets downloadable from .exe files and requiring you to run a node, the average user’s quick foray into the crypto rabbit hole would require them to trust that they weren’t downloading a deadly virus before even jumping into the money aspect.
You could only imagine how paranoid someone trying to buy drugs on the Silk Road must have felt!
However as both the 2014 and 2017 booms came and went, new participants were brought into the space. Crypto departed from an industry reserved for developers, and filled with the best designers, marketers, product managers and financial engineers. They came in waves and each of them brought their own unique experiences, motivations and expectations that improved usability standards.
While some UX is still clunky today, services like Coinbase and dApps like Peepeth are lightyears better than the experiences we had even 12 months ago. Usability improvements have increased adoption, as we’ve seen an overall constant increase in the daily on-chain transactions, though prices have gone through drastic booms and busts.
With more people building upon Bitcoin and crypto’s foundations, we’ll solve for more usability problems and at the same time solve for trust.
Stop Rent-Seeking
For an industry ridding the world of rent-seeking, crypto has a hell of a lot of rent-seekers. From paid project reviews to vague “partnership” announcements, the recent bear market has left many in the industry caught with their hands in the cookie jar.
Often reviews on popular youtube channels are upwards of $10,000 USD. Those from startup-land who are building legitimate projects and know how hard it is to earn (or raise) money in an early-stage startup, are NOT going to spend that for a 30 minute interview with a not-so-trustworthy influencer.
Because of this, the shitcoins that get featured by influencers are usually financially engineered pump&dumps, have teams that are inexperienced in deploying capital to build and grow products, or worst of all––are outright scams.
Even partnerships with publicly listed companies have some supposed “fixer” in the middle who’s getting their cut for setting it all up. BMW is $50B company, it’s not partnering with your favourite shitcoin.
This all results in retail investors and potential end users getting burnt, and a lack of trust for all in the industry.
Embrace Onramps that are Useable Today
The best way to increase trust and bring crypto to the masses might be to use the existing financial system as a trojan horse. While many in the space will argue against ETFs and stablecoins, the reality is that both will bring increased adoption to the space.
A Bitcoin ETF
Getting into crypto today still requires many trust hurdles for the average retail investor. Some of these hurdles include:
- Can I trust uploading my passport into this exchange?
- If I make a bank transfer will my money arrive?
- Can I trust that this exchange won’t get hacked?
- Where is this exchange? Do they have a branch?
Compared to logging into your brokerage account and making a trade, the trust hurdles seem endless. Investing in a Bitcoin ETF, might not give users ownership of their keys or let them experience the magic of transacting without a trusted intermediary, but the diligence process that retail investors will go through has the potential to convert some of them away from the incumbents and into the realm of an open financial system.
Stablecoins
With all the stablecoin hype, new entrants to the space might wonder if all the buzz about crypto is simply to use another version of the dollar controlled by the US government?
No matter what Bakkt says, even the truest of believers aren’t spending their Bitcoin at Starbucks anytime soon. But without significant use of products and infrastructure, learning can’t be done, and improvements can’t be made.
For this dilemma, stablecoins are the answer.
- They provide an easy crypto-to-fiat solution to increase spending of holdings
- They increase usage of dApps as the token isn’t used for price speculation
- They enable micro-transactions with the potential to create revolutionary applications
For these and other reasons– stablecoins are the bridge, not the final destination.
Thanks for reading! You can keep up to date with my future posts by following me on twitter: https://twitter.com/vancityreyes
The opinions in this blog are by no means facts nor are they meant to be investment advice. I’m simply overviewing some of my half-baked ideas, and I’d be happy to hear about what you think as well!
