Twelve years is historically the blink of an eye, but it’s an eternity in technology. Just look at the mobile phone, which went from niche accessory to absolute necessity in less than a decade. Yet new technologies do not always rise immediately: it took a quarter of a century before the modest washing machine to reach even half of America’s homes.
This Halloween marked the twelfth birthday of Satoshi Nakamoto’s Bitcoin whitepaper. In that short time, Bitcoin has changed the way we think about money, but it is still a long way from mass adoption. That’s why we have to ask some uncomfortable questions about what’s holding Bitcoin back.
What’s the problem? The UX
In my opinion, there is no doubt that user experience (UX) has always been the biggest obstacle to Bitcoin adoption. But not as you might think.
UX is a slick term: it means different things to different people in different contexts. With Bitcoin, for example, UX goes much further than the intuitiveness of individual exchanges or wallets. Since we are talking about people’s investments, security is a – the – crucial consideration in any discussion about UX.
Bitcoin is suffering from a usability problem that cannot be solved just like that with a new interface. This is not a technical mistake, but a human one: the assumption that it is safer to store coins on an exchange rather than keep them for safekeeping. This cannot be solved with a new user interface (UI); it requires a revolution in the way we think about Bitcoin security.
In the beginning, bad UX didn’t really matter as Bitcoin platforms were mainly used by traders and speculators who had the tech to navigate complexity. But when ordinary people started to float in Bitcoin, a host of exchanges and trading platforms turned their attention to developing “consumer quality” user experiences. Ironically, this was when Bitcoin’s UX troubles really started.
Where did it all go wrong?
It’s not like we didn’t see this coming. The world’s first highly publicized hack, from Mt. Gox saw 24,000 people lose everything in 2014. But in the six years since, we’ve gone in the wrong direction when it comes to security. There is not enough room here for it number of exchanges that have gone bankrupt, been hacked or, as OKEx did in October, lost access to customers’ keys after the only employee responsible for them was detained by the police.
In the first half of 2020 alone, blockchain analytics firm CipherTrace discovered that Investors lost $ 1.4 billion in cryptocurrency, largely from exchanges that have suffered from hacks or, nauseatingly, committed fraud against their clients. What’s going wrong?
Rather than making it easy and intuitive for everyone to hold their own keys, the industry has focused on delivering customer-friendly, full-service experiences where third parties have control over every aspect – including key retention.
That can be a good starting point for the new user as it keeps them from making very basic security mistakes. But it still leaves you vulnerable to a range of threats from both inside and outside the exchange.
Despite these much discussed disasters, our industry has not yet turned its attention to developing a standard solution to this gaping fundamental vulnerability. In large part, that’s because it suits platforms to let their clients keep their coins on the exchange.
Making security simple
Bitcoin UX’s initial efforts focused on superficial issues and dismissed the deep problem of helping users own their private keys. They thought that a solid UX for users to control their keys was an unbeatable battle and took it off the table.
While that is understandable, I think it was a mistake. Bitcoin’s entire ethos is based on the idea of empowerment: being your own bank, controlling your own savings, and taking charge of your own financial destiny. But in trying to make UX more seamless for non-tech clients, exchanges and custody wallets have (perhaps unknowingly) discouraged self-sovereignty and opened the door to third-party risk. And it’s hard to imagine a worse experience than losing every satoshi of your investment.
Accessible end-user control over private keys is the holy grail of bitcoin UX solving, and it’s one that the industry has largely bypassed.
So while many new Bitcoin users face a steep learning curve, they don’t learn that old security models don’t apply. For example, if you lose your keys, you can’t just hit “reset password” – your coins are gone forever. This partly explains why exchanges are so eager to own the entire experience, including safekeeping.
But sacrificing safety in favor of ease of use is a wrong choice. We should not underestimate the challenge, both technically and in terms of design. But it is entirely possible to make it easy for users to keep their keys, by combining high security with great UX. The more difficult task is educating the public who buys coins about why self-preservation is so important. But it’s well within the capabilities of our industry, as long as we give it the priority it requires.
In the next decade, Bitcoin will follow one of two trajectories: either an increase in cellphone-style 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 easy.
This is a guest post from Nick Neuman. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.