ANALYSIS – The core of crypto, as established by Satoshi Nakamoto's bitcoin whitepaper, is a peer-to-peer electronic cash system that eliminates the need for intermediaries like banks. This spirited independence and scoffing at the hand-holding of traditional banking systems is pervasive across the crypto-sphere. Yet, when mass adoption is the goal, some hand-holding becomes necessary in order to bring everyone along on the journey towards truly decentralized finance.
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We cannot expect our grandparents, who have difficulty sending an email, to sort out how to manage their private keys, seed phrases, digital wallets, and send your birthday gift in bitcoin without some assistance. Indeed, given this transition to decentralized finance is already well beyond sending birthday money and has evolved to include yield farming, liquidity mining and NFT auctions, trusted intermediaries have never been more essential to fulfilling the mainstream aspirations of DeFi and crypto.
Trust is paramount to daily life in any civilization. We trust the opinion of doctors. We trust the taxi driver will take us where we need to go. We trust the food being served to us at restaurants is safe to eat. We trust that when the walk signal lights at a crosswalk, cars will stop.
In the trustless world of cryptocurrencies, we still make decisions about who and what we trust. Most of us are not developers or engineers capable of analyzing the code of every DeFi protocol and every token before we participate. Instead, we gather information and assess what action to take based on what we do understand. Key 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 the protocol does what it says it does?
Studies have found that where we put our trust is evolving alongside the development of new technologies. Despite the novelty of algorithms deploying machine learning (ML) and artificial intelligence (AI), increasingly, people are putting their trust in algorithms over fellow human beings. A study published in Science Daily found that when subjects were presented with a photograph of a crowd and asked who would be better at arriving at the correct number of individuals featured in the picture, more subjects said AI than humans. At the same time, a different study found that a person's trust in technology is highly dependent on their exposure to technology, with degrees in technology or engineering and exposure to online algorithms leading to higher levels of trust in AI.
The results of both studies surely apply to the world of cryptocurrency as well: growing trust in technology has made the adoption of cryptocurrencies as widespread as it is, but it's important to recognize that this adoption is occurring at varying rates across different demographics.
Those with the most exposure to novel technologies – engineers and developers – are the earliest to adopt; those with the least amount of exposure and access to resources trail behind. It is, therefore, incumbent upon those of us immersed in the crypto sphere to prioritize supporting those with less exposure so we do not end up with a technopoly wherein those with greater technical knowledge are the most privileged and those with the least are denied participation. That hypothetical dystopia would be contrary to the original democratizing promise of Bitcoin.
We must acknowledge that cryptocurrency presents unique usability challenges. Even among people who have access to the internet – currently circa 4.66 billion – use is often limited to social media, search, and email. These web users are comfortable with email and password logins. Adding management of private keys – a string of jumbled numbers and letters that is difficult for the human eye to interpret – requires overcoming this lack of familiarity to which web users have grown accustomed.
Making the most of the crypto potential
The core value of "your keys, your coins" is revolutionizing our financial systems by endowing users with control over their assets rather than relying on banks and other centralized third party service providers. However, this empowerment also comes with a burden many people new to the space may not immediately be ready for. We've all heard the horror stories of users losing their private key and, as a result, being denied access to potentially millions of dollars worth of cryptocurrency. I'm of the view that we shouldn't insist on throwing newbies into the crypto waters and demanding that they swim.
Once people become comfortable managing their private keys, the training wheels can come off, and they can take on the burden (and benefits) of "your keys, your coins" responsibilities for themselves.
The overall percentage of DeFi users remains quite small, estimated to be around 1.75 million. Compared to the 4.66 billion internet users, this disparity highlights the massive opportunity for growth that remains in the crypto economy. I would argue that the exchanges and platforms that prioritize education, user experience, and customer support over all else, will separate themselves from the pack and take the lead this year and into 2022, gaining significant portions of this untapped market.
Women, in particular, are a rapidly growing user demographic, and crypto platforms are not spending enough resources catering to them as they should. A CoinGecko 2020 user survey found only 9% of women have even heard of DeFi. This disparity between male and female users is unacceptable.
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The only way cryptocurrencies will achieve their true potential and empower a global user-base with control over their own value is if we see adoption across all demographics, including gender, age, education, geography, and technical knowledge. Therefore, as much as decentralized technologies strive to eliminate middlemen, the human touch remains critical to the widespread adoption of cryptocurrencies.
Laurence Newman is the co-founder of Coinmama cryptocurrency exchange platform.
