In major media outlets, references to Bitcoin and other cryptocurrencies have become commonplace, yet crypto adoption still needs to overcome several hurdles. From exchange hacks and scams to building a clear case that makes a convincing argument about crypto’s value proposition for most people. But, the biggest hurdle is the simplicity of the user’s experience. On one end wallets need to empower people, giving them full control of their coins, and on the other managing private keys needs to be simple and seamless. For most people, managing your own private keys or mnemonic phrase is a difficult proposition. I am sure you’ve heard the phase “Not Your Keys, Not Your Bitcoin“. What this means is that if you store your crypto assets on an exchange or with any kind of third-party custodian, you have no guarantee of ownership. The reality is that most people today aren’t ready to be their own bank. If there is one thing you want to do with your money is that you want to keep it secure. Security is the first and most important principle for crypto to appeal to mainstream users.
Users face a dim reality. All the available options in the market are either too complicated or too insecure, because they force the user into a security model they cannot handle easily. Either they sacrifice security for convenience and usability, by keeping their crypto on exchanges, or they need to manage their own security, by protecting their private keys and securing the mnemonic phrase.
If your private key or mnemonic (seed) phrase is lost or stolen, your funds are gone forever. There is nothing like the horror of realizing you’ve lost your private key or can’t find the paper with your seed phrase. Human error is an unfortunate reality and when it comes to crypto it happens a lot.
On the the other hand, for many it is common to buy and sell and hold cryptocurrencies on exchanges like Coinbase, Binance or BitStamp. Even though exchanges are convenient, history has proven that they’re a risky option. Most exchanges are rarely insured and when they are, the coverage is just partial.
In 2019 there were 12 major cryptocurrency exchange hacks, with over $292 million stolen. Cointelegraph as has a nice timeline with all the major hacks of the year.
Then you have hardware wallets. Some are easy to use, but I think it’s fair to say that most regular people are going to have a hard time understanding how they work. And anyway, why would anyone need another device to store crypto when they can already do everything else from their smartphones.
The current state of wallets is certainly immature and for most people they are confusing. Bitcoin’s mass adoption is inevitable and it will become even more evident, when the next financial crisis hits. When that happens, people will gravitate to Bitcoin and will do everything from their crypto wallets. In 2012, around the time of the first halving, there were only 43,500 wallets. At the end of 2016, the total number of wallets were 10.98 million and this past May they reached 48.37 million. One million wallets were created 30 days before the recent halving on May 11th.
For crypto to scale and achieve mainstream adoption, non-custodial wallets need to become “smarter” and streamline user experience without taxing security. They need to provide a consumer-friendly banking experience, while maintaining better security and ease of use.
- Keyless signing and recovery: Deploy technologies like Threshold Signatures (TSS) that can sign transactions and recover funds without a private key or seed phrase. Moving away from paper backups to Multi-party computation (MPC) would a huge leap forward.
- Freeze wallet: Enable functionality that lets users freeze their wallets, just like a credit or debit card in case of suspicious activity.
- No addresses or QR codes: Just like a simple banking app, you connect to people you know to send them crypto using their name, instead of their address.
Wallets will serve as the gateway for all of our transactions and not just for storing or trading cryptocurrency. They will lets us manage and trade traditional financial assets, like a savings account, stocks, and bonds. But our digital wallets will also let us manage non-financial assets as well, like our passports, driver licenses, social security numbers, and voting registration.
Security and custody are paramount.
Those of us are familiar with writing down seed phrases and private keys and putting them in a secret location, understand that we need a lot more than a piece of paper, to make sure our money is safe. There are a lot of good wallets, but we don’t need another wallet to store hundreds of different cryptocurrencies. We need a non-custodial wallet that offers features familiar to traditional banking, and removes the complexity of buying and storing digital assets, while keeping them safe from hacks.
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