There is a reason centralized exchanges have dominated despite being antithetical to crypto’s core tenets.
The following opinion editorial was written by Bitcoin.com CEO Dennis Jarvis.
The gross mismanagement and outright fraud in 2022 by many opaque centralized exchanges are driving people back to the core tenets of crypto, such as decentralization, self-custody, transparency, and censorship resistance. People are naturally turning to DeFi (decentralized finance). Unfortunately, much of DeFi is not yet ready to act as a suitable substitute.
In this article, I will talk about two of the most important challenges: how to make DeFi more accessible to new users and how to improve its performance when compared to centralized services.
The Onboarding Problem and Its Solution
The problem with getting new users to adopt DeFi is partly due to user experience (UX). Bitcoin.com’s Head of Product Experience Alex Knight did an excellent job outlining the problems and solutions of the UX challenges in web3 applications. To summarize: the self-custodial web3 model generally leads to developers creating a user experience that’s fundamentally different from the one people are used to in the custodial web2 model — and that creates huge friction.
Solving the UX problem is a combination of clever design, education, and incentives.
On the design front, the challenge is to create products that are as familiar and easy-to-use as the best web2 analogs. At Bitcoin.com our self-custodial multichain wallet app has long-provided an intuitive experience, but only for simple actions like buying, selling, sending, and receiving crypto. As we integrate more complex DeFi features, including our own decentralized exchange Verse DEX, right into the app, it is critical that the user experience remain as indistinguishable from web2 as possible while using web3 rails exclusively.
Yet even if web3 manages to reach parity with web2 in terms of ease-of-use, there is still the challenge of convincing people to make the switch. This is where education and incentives come in. Education will do two things: rebuild confidence in crypto, and prepare users to make the move. Incentives will provide the push that’s often needed to try something new.
Luckily, the cryptocurrency space is ideally suited to provide the perfect combination of education and incentives. I’ve written about the power of loyalty tokens in crypto, and the importance of getting them right, and we’ve thought…