Not long ago, the prevailing narrative around digital assets was that they were a fleeting fad. Lately, it’s more difficult to make the argument that we’re not seeing sustainable participation in these markets from retail and institutions alike. Chainalysis estimates that worldwide adoption grew over 880% last year and Goldman Sachs’ homepage looked like this a few days ago:
However, with retail acceptance rates estimated between 3.9% and 15.5%, it’s clear that we’re still in the very early days of development. If web3’s aspirations of reshaping our digital landscape are to be achieved, then we’re going to need to cross Geoffrey Moore’s seminal chasm. How can the blockchain industry clear the gap between crypto’s Early Adopters and the soon-to-be Early Majority? Let’s take a dive.
Right now, crypto is still winning over members of the Tech Enthusiast crowd. However, many have their sights on larger markets and they’re formulating strategies to increase adoption. An important headwind in mainstreaming digital assets is that they’re quite complicated and, to-date, most builders have been technologists. They’ve developed products/protocols with the advantage of deeply understanding the inner workings of cryptography and networks, but now it’s time for designers and product managers to improve the user experience.
What is good design?
As someone who usually gets teased about his clothing selection, I admit to lacking the eye to discern good design. At a subjective level I know what I like, but this often runs contrary to the opinion of others. However, for the purposes of this note, I made a shallow dive into the obscure-to-me waters of industrial artistry and came across the work of a German designer and academic whose work is closely tied to the Braun and Vitsoe brands. Dieter Rams is from the functionalist school and to him, good design:
The principles above informed Rams’ decisions as he strove to achieve his overarching principle of “Less, but better.” This 2018 documentary about Rams has several interesting web3 implications and I’d recommend checking it out. However, the important takeaway is that good design comes from asking the right questions, empathy, and learning from mistakes. It reminds me of Clayton Christensen’s famous milkshake lecture.
Can we apply Rams’ philosophy to web3?
Peter Yang’s Creator Economy blog is a solid resource for those looking to explore crypto. I like how Peter shares his self-education humbly and succinctly as he leverages experiences gleaned from leading product teams at Twitter, Twitch and Reddit to materialise new mental models for web3. Innovations around self-custody wallets are core to his thesis for how to charm the next billion community members.
Right now, moving assets to or between wallets can be a terrifying experience as you send your tokens into the irreversible ether with hope that no data entry mistake was made. It’s also a pain to keep seed phrases organized and secure, but many are working on solutions to these deficiencies. On the other hand, digital safekeeps have the potential to represent our web3 identity. Some webservices already allow you to sign-in and have a profile established to your wallet address, which can also publicly and irrefutably display governance token or NFT balances to signal alignment with certain communities. There are social media, gaming and payments innovations that are emerging as well.
How can we improve the experience?
While there’s been considerable work done to build and improve user interfaces, Rams would remain justly unsatisfied with the state of today’s custody solutions. With respect to his “commandments” above, it seems the most glaring shortcoming today is “make a product useful.”
- There are protocols and Layer1s that enable clients to move away from a random string of alphanumeric characters to something you personalize, but you must have a different address for each blockchain. In time, it’d be helpful to have a single ID that interacted with several on-chain wallets behind the scenes.
- Another improvement would be to enable more everyday use cases for wallets, like NFTs to access ticketed events. High-frequency, low-value transaction hubs like transit authorities or other retail point-of-sale terminals are also important. The back-end infrastructure for this is under development, so it will be interesting to see if the self-custody side follows through.
- Enabling users to onramp fiat directly would be huge. Perhaps this would be accomplished by linking a credit card or bank account. Alternatively, incumbent financial institutions or technology companies could integrate wallets into their existing product suites.
This opinion piece brings together the last two bullets in a powerful way as Trung Phan puts forward the idea that if Apple wanted to, they could be a powerful catalyst for mainstream digital asset adoption. The company’s brand is often associated with exceptional design, security and privacy. Moreover, it’s estimated that 1B people use iPhones, so the company has the right pieces necessary to vault crypto across the chasm. Others see the promise here, too and have begun the development of a Safari wallet extension. MetaMask, the most popular digital wallet, enabled Apple Pay for the purchase of digital assets earlier this week, so this is an emerging situation worth keeping an eye on.
Are we watching history repeat itself?
It's been proposed that today’s digital wallets are akin to yesterday’s browser. It’s a fun concept to noodle over since the web portal battles of the early-2000s involved closed corporations clashing against open-source communities, which has obvious similarities to the current confluence of web2/web3 ideals.
As Ken Seiff of Blockchange Ventures notes towards the end of this podcast, winning trends in categories aren’t typically clear at their inception. Netscape, AOL and many others appeared to have the browser/search figured out, but today, Google is dominant. It’s an important reminder that the road ahead will be bumpy as many difficult lessons will be learned. Another issue is that speculators could have made large profits investing in the failed incumbents if they’d participated early enough and recycled capital wisely. At the time, you may have taken the perspective that these innovations repeatedly failed, but in hindsight, we appreciate that it just took some time for the category to define itself.
There are some important decentralization impacts at play here. When Microsoft bundled Internet Explorer with Windows, web developers began to design sites accordingly. Some have argued that we’re seeing something similar play out in wallets today as MetaMask’s codebase is available only on a tiered proprietary license. Since making this change, it’s seen its monthly active user count grow from around 500K to over 30M and some applications are beginning to optimize accordingly. This might have the effect of centralizing web3, which would go against its ethos, or it could just be a necessary step along the journey of figuring out what kind of models work in this new frontier.
Where do you sit on the (de)centralization spectrum?
In a world where self-custody becomes the primary method of storing one’s digital assets, a single cross-chain engagement point for users would be powerful. Assuming an individual controlled their own private keys, they’d have the power to port their tokens elsewhere. In such a reality, the unique interface used would be a lot like today’s banks from the customer’s perspective.
On the trading front, the interface operator could cross orders and aggregate liquidity, which has interesting DeFi implications as it relates to trade execution and yield. Would users prefer to have a centralized company manage the related decisions or would retail want to participate in the governance? It’s probably not a binary outcome, but it seems that many enjoy the comforts of centralization:
We’ll have to see how it all plays out on the legal front, but it’s cool to think that soon individuals could effectively operate their own digital “banks”. You’ve saved some money? Protocols like Aave allow you to lend your surpluses and earn the whole return without paying any intermediary. I imagine that for most people, the thought of this responsibility would be a nightmare, so it’s natural that trusted intermediaries would step in and provide somewhat (or fully) centralized services to enjoy the benefits of scale. That said, maybe the decentralized players will achieve sufficient size to be viewed as secure while investing in broader and better user experiences:
The regulations here are tricky and, in many cases, undeveloped which really complicates this discussion. Are stablecoins securities? These assets are pegged to the value of a fiat (usually the USD), so if the necessary infrastructure were in place, they could flow just like the digital dollars you spend with your credit/debit cards. This seems a lot like cash, which is the role these tokens play in DeFi. In that context, would a company taking-in stablecoin deposits be regulated as a bank? Many more tokens, whose prices fluctuate, have security-like features such as the privilege to vote on governance proposals and perhaps even a right to fees earned by a protocol. An entity storing assets like these would be closer to a custodian. Increasingly, there’s pressure to bring token custody in-house, which helps unlock their true functionality. The security issues at stake here are important. Fortunately, companies like Fireblocks are establishing themselves as trusted partners to help financial institutions meet their fiduciary responsibilities.
Maybe the digital “bank” of the future will rewrite the script altogether. As we discussed earlier, if a wallet or other aggregating service can act as a unique point of interface but enable seamless access to multiple chains and protocols through code, the user experience would be significantly enhanced. Dieter Rams would approve of this design as it screens favourably with his “less, but more” philosophy. However, it’s possible that the cost of this improved user experience might be paid in the currency of centralization. Is this a price that web3 would be willing to pay? Can an open-source version of such an aggregator be developed? I have no idea, but watching the market figure this out will be fascinating.
Surviving the jump across the chasm requires a decent landing spot among Pragmatists. To secure one, Geoffrey Moore advises marketers to focus all their attention on a single and specific market segment. If your product/technology can improve the lives of that concentrated group so sufficiently that they provide word-of-mouth legitimacy, then it can be said that you’ve successfully crossed over. While a coordinated effort might have the advantage of scale, it’s cool to see so many web3 initiatives taking aim at their various target markets. Be it through gaming, music or trading, the law of large numbers suggests that some teams will get it right and the customers they please will become the evangelists of the Early Majority.
At Aquanow, we help institutions unlock the potential of digital assets, so if you or anyone you know are considering this functionality, then please get in touch. We’d be glad to leverage our expertise to help you outperform.
If you want to contribute to the web3 movement, Aquanow is on the look for curious and motivated folks to join our team. Feel free to reach out directly or check out the current openings here.