Spreading Crypto: In Search of the Killer Application

What type of app will take crypto to the masses? And why it’s unlikely to be one that’s decentralized or non-custodial.

Published in

Hightop

7 min readJun 17, 2020

This is the second post of our Spreading Crypto series where we take a deep dive into what it’ll take to help this technology reach broader adoption.

Our previous post explored the history of protocols and how they only become widely adopted when a compelling application makes them more accessible and easier to use.

Crypto will be no different. Blockchain technology today is mostly all low-level protocols. As with the numerous protocols that came before, these new, decentralized protocols need killer applications.

So, how’s that going? Where is crypto’s killer application? What’s the state of application development within our industry? Today we’ll try to answer those questions. We’ll also take a close look at decentralized applications — as that’s where a lot of the developer energy and focus currently is. Let’s dive in.

Popular Crypto Applications

The most popular crypto applications today are exchanges like Coinbase and Binance — each with tens of millions of users. Other popular crypto exchanges include Kraken, Bitstamp, Gemini, and Bitfinex. In recent years, new derivatives platforms have emerged like FTX and Deribit.

The most popular crypto applications today are primarily focused on trading, speculation, and finance. This class of applications dwarfs all other types of applications in terms of users and growth. That’s either a sign of strong product/market fit, or we just haven’t yet discovered other good use-cases. Or a mix of both.

Beyond the fact that the most popular crypto applications are all used for speculation, another common thread is that they are all centralized.

A centralized application means that ultimate power and control rests with a centralized party (the company who built it). For example, if Coinbase or Binance wants to block you from withdrawing your funds for whatever reason (maybe for suspicious activity or fraud), they can do that. They have control of their servers so they have control of your funds.

Most popular applications that we all use daily are centralized (Netflix, Facebook, Youtube, etc). That’s the standard for modern, world-class applications today.

Decentralized Applications

Even though the most popular crypto applications are all centralized, most of the developer energy and focus in our industry is with decentralized applications (dApps) and non-custodial products.

These are products where only the user can touch or move funds. Not even the company or developer who built the application can access or control or stop funds from being moved. Only the user has control.

These applications allow users to truly become their own bank and have absolute control of their money.

They also allow users to perform blockchain transactions and interact directly with decentralized protocols. Some of the most popular non-custodial products include Ledger, MetaMask, and MyCrypto (#ProudInvestor).

While the benefits of this type of application are obvious (user has full control of their funds), it comes with a lot of tradeoffs. We will cover that later in this post.

Libertarianism + Crypto

If the most popular applications tend to be centralized (inside and out of crypto), why is so much of our community focused on building decentralized applications (dApps)? For the casual observer, that’s a reasonable, valid question.

“Not your keys, not your coins.”

This meme is endlessly repeated among longtime crypto hodlers. If you’re not in complete control of your crypto (i.e. using non-custodial wallets or dApps), then it’s not really your crypto.

Engrained in the early culture of Bitcoin has always been a strong distrust for centralized authority and power — including the too-big-to-fail government-backed financial system. In the midst of the Financial Crisis, Satoshi Nakamoto included this headline in Bitcoin’s genesis block: “Chancellor on brink of second bailout for banks.” There has always been a close connection between libertarianism & cryptocurrency.

So it’s no surprise that much of the crypto developer community is spending their time building applications that are non-custodial or decentralized. It’s part of the DNA, the soul, the essence of our community.

Personal Experience

When I was at Mainframe, we built Mainframe OS — a platform that developers use to build and launch decentralized applications (dApps). I’m deeply familiar with what’s possible and what’s not in the world of dApps. I have the battle scars and gray hair to prove it. We’ve hosted panels around the various challenges. We’ve even produced videos poking fun at how complicated it is for end-users to interact with.

After having spent three years in the trenches of this non-custodial world, I no longer believe that decentralized applications are capable of bringing crypto to the masses.

While I totally understand and appreciate the ethos of self-sovereignty, independence, and liberty… I think it’s a terrible mistake that as a community we are spending most of our time in this area of application development. Decentralized applications will not take crypto to the masses.

Overwhelming Friction

The user friction that comes with decentralized applications is just too overwhelming. Let’s go through a few of the bigger points:

Knowledge & Education
Most non-custodial products do not abstract away any of the blockchain complexity. In fact, they often expose more of it because the most loyal users are crypto nerds. Imagine how a normie n00b feels when she starts seeing words like seed phrases, public & private keys, gas limits, transaction fees, blockchain explorers, hex addresses, and confirmation times. There is a lot for a user to learn and become educated on. That’s friction. The learning curve on this is just too damn high.
User Experience
It is currently impossible to create a smooth and performant user experience in non-custodial wallets or decentralized applications. Any interaction that requires a blockchain transaction will feel sluggish and slow. We built a messaging app on Ethereum and presented it at DevCon3 in Cancun. The technical constraints of blockchain technology were crushing to the user experience. We simply couldn’t create the real-time, modern messaging experience that users have come to expect from similar apps like Slack or WhatsApp. Until blockchains are closer in speed to web servers (which will be difficult given their decentralized nature), dApps will never be able to create the smooth user experience that the masses expect.
Loss of Funds Risk
There is no “Forgot Password” functionality when storing your own crypto in a non-custodial wallet. There is no customer support agent you can ping. There is no company behind it that can make you whole if you make a mistake and lose your money. You are on your own. One wrong move and your money is all gone. If you lose your private key, there is no way to recover your funds. This just isn’t the type of customer support experience people want or are used to.

Onyx: messaging app on Ethereum, presented at DevCon3 in Cancun.

What Our Industry Has Wrong

Decentralized applications will always have a place in the market — especially among the most hardcore crypto people and parts of the world where these tools are essential. I’m personally an active user of many non-custodial products. I’m a blockchain early-adopter, I like to hold my own money, and I’m very forgiving of suboptimal UX.

However, I’m not afraid to say the poop stinks. Decentralized applications simply cannot produce the type of product experience that mainstream consumers expect.

If the goal is growth and adoption, as a community I believe we’re barking up the wrong tree. We are trying to make fetch happen. It isn’t gonna happen. Our Netscape Moment is unlikely to arrive as long as we’re focused on decentralized applications.

There’s a reason why the most popular consumer applications are centralized (Spotify, Amazon, Instagram, etc). There’s a reason why the most popular crypto applications are centralized (Coinbase, Binance, etc).

The frameworks, tooling, infrastructure, and services to support these modern, centralized applications are mature and well-established. It’s easier to build apps that are fast & performant. It’s easier to launch apps that are convenient and on all form-factors (especially mobile). It’s easier to distribute and promote via all the major app store channels (iOS/Android). It’s easier to patch, update, and upgrade. It’s easier to experiment and iterate.

It’s easier to design, build, and launch a world-class application when it is centralized! It is why we’ve chosen this path for Genesis Block.