Twelve years is the blink of an eye in historical terms, but it is an eternity in technology. Just look at the mobile phone, which went from a specialized accessory to an absolute necessity in less than a decade. Still, new technologies don’t always go away at once: it took a quarter of a century for the discounted washing machine to reach even half of US homes.
This Halloween marked the twelfth anniversary of Satoshi Nakamoto’s Bitcoin white paper. In that short time, Bitcoin has transformed the way we think about money, but it is still far from mass adoption. As a result, we need to ask some uncomfortable questions about what is holding Bitcoin back.
What’s the problem? The UX
In my mind, user experience (UX) has no doubt been the single biggest obstacle to ever adopting Bitcoin. But not in the way you would think.
UX is a slippery term: it means different things to different people in different contexts. With Bitcoin, for example, UX extends far beyond the intuitiveness of individual exchanges or wallets. Because we’re talking about people’s investment, security is – the – an essential consideration in any discussion of UX.
Bitcoin suffers from a usability problem that can only be fixed with a new interface. This is not a technical error but a human one: the assumption that it is safer to store coins with an exchange rather than hold custody yourself. This cannot be set with a new user interface (UI); it requires a revolution in the way we think about Bitcoin security.
In the early days, bad UX didn’t matter, as traders and speculators who had the technical chops mostly used Bitcoin platforms to navigate complexity. But when ordinary people started doubling in Bitcoin, a host of trading exchanges and platforms focused their attention on developing “user-scale” consumer experiences. Ironically, this is the moment where Bitcoin’s UX problems really began.
Where did it all go wrong?
It’s not like we didn’t see this coming. The world’s first publicity hack, from Mt. Gox in 2014 saw 24,000 people lose everything. But in the six years since then, we’ve continued in the wrong direction on safety. There is not enough room here to detail the number of exchanges that have disappeared, been hacked or, like OKEx in October, lost access to customer keys after the single worker in charge be detained by law enforcement.
In the first half of 2020 alone, blockchain analytics company CipherTrace found that investors lost $ 1.4 billion worth of crypto, much of it from exchanges that suffered hacks or, ill, committed fraud against their customers. What’s going wrong?
Instead of making it easy and intuitive for everyone to hold their own keys, the industry has focused on providing user-friendly “full-service” experiences where third parties control all aspects – including key custody.
That may be a good starting point for the first-time user, as it prevents them from making very basic security errors. But it still leaves you vulnerable to a range of threats, from inside and outside the exchange.
Despite these well-publicized disasters, our industry has yet to turn its attention to developing a standard solution to this basic, fragmented security deficit. In large part, that’s because it suits platforms to get their customers to keep their coins in exchange.
Making Security Simple
Bitcoin UX’s early efforts focused on superficial issues and dismissed the deep problem of helping users to own their private keys. They figured that solid UX for users to control their keys is an unbearable struggle and taken off the table.
Although understandable, I think it was a mistake. The whole ethos of Bitcoin is built on the idea of empowerment: to be your own bank, to manage your own savings and to take charge of your own financial destiny. But in trying to make UX more seamless for non-technical customers, protective exchanges and wallets have (unknowingly) discouraged self-sovereignty and opened the door for third-party risk. And it’s hard to imagine a worse experience than losing every satoshi from your investment.
Close-to-end user control of private keys is the holy grail of bitcoin UX resolution, and one that the industry has largely sided with.
So while many new Bitcoin users face a steep learning curve, they don’t learn that old security models don’t apply. If you lose your keys, for example, you can’t just hit “reset password” – your coins are gone forever. This, in part, explains why exchanges are so keen to own the whole experience, including custody.
But sacrificing security in favor of ease of use is a false choice. We should not underestimate the challenge, from a technical and design perspective. But it is quite possible to make it easy for consumers to keep their keys in custody, combining high security with great UX. The hardest task is educating the coin-buying public about why self-custody is so important. But it is well within the capabilities of our industry, if we only give it the priority it demands.
Over the next ten years, Bitcoin will take one of two trajectories: either a surge in mobile phone adoption or the slow rise of the washing machine. It all depends on how quickly we solve Bitcoin’s biggest UX challenge: making self-custody simple.
This is a guest post by Nick Neuman. They are solely their own opinion and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.