The recent impressive volumes of regulated products that offer exposure to Bitcoin, such as ETFs, Microstrategy, and Bitcoin Miners, indicate that plenty of investors prefer “safe” or easy access to BTC.
I was comfortable using a Trezor many years ago to move digital assets around. I even bought myself a digital banana to see how the NFT thing worked. The NFT purchase was complex, requiring many stages and significant gas fees. Then, Opensea seemed to lose my Banana, and I could not remember which wallet I had linked it to, let alone the seed phrases.
While recovering my Banana (which may be on the rise after Justin Sun paid $6.2m for a real Banana and duct tape at auction), I soon realised my competence in self-custody had reverted to incompetence.
For new investors buying a BTC ETF on your regular brokerage platform is much easier and less terrifying than sending money to a new “exchange” regulated somewhere you would like to go on holiday.
Since the Banana incident, I have relied on trading platforms for custody of my crypto holdings.
If digital assets are going mainstream, they have to be easier to deal with. The plumbing has to inspire confidence and allow users to reach unconscious competence.
There are four stages of developing competence:
Unconscious Incompetence
The individual does not understand or know how to do something and does not necessarily recognise the deficit.
Conscious Incompetence
Though the individual does not understand or know how to do something, they recognise the deficit, as well as the value of a new skill in addressing the deficit.
Conscious Competence
The individual understands or knows how to do something. It may be broken down into steps, and there is heavy conscious involvement in executing the new skill. However, demonstrating the skill or knowledge requires concentration, and if it is broken, they lapse into incompetence.
Unconscious Competence
The individual has had so much practice with a skill that it has become “second nature” and can be performed easily. As a result, the skill can be performed while executing another task.
Old Dog New Tricks: Self Custody
I love a dystopian movie and the arguments against fiat money and financial freedom can justify the self-custody of digital assets.
To get back in the zone, I bought the cool-looking iPod-esque Ledger Flex digital wallet. I was set up in twenty minutes and quickly transferred some coins from Coinbase. However, moving assets bought on tradfi trading platforms requires another leg I have yet to test. The device and interface have improved significantly, but I’m not yet convinced they are ready for mass adoption. As tradfi platforms add digital asset capabilities and the user experience improves, appetite will grow.
Zhen Yu Yong, CEO of Web3Auth, discusses the views of Ethereum founder Vitalik Buterin vs Micro Strategy’s Michael Saylor.
“Saylor argued that moving Bitcoin into the hands of regulated institutions provides a layer of security and legitimacy that self-custody may not. He believes that established financial entities, like BlackRock and Fidelity, are less likely to face government seizure or intervention owing to their integral roles in the economic system. Self-custody advocates raged and continue to argue that relying on third-party custodians centralises risk, weakens network security, and limits the development of advanced cryptographic features.”
Zhen continues
‘While self-custody (holding your keys) offers absolute control over a user’s assets, it is often associated with a significant challenge — managing private keys can be overwhelming for many users, especially those new to Web3. Saylor is right about that.
In the first half of 2024 alone, more than 70 new layer 1s were created, surpassing 50 new layer 1s in 2023. Combine that with countless more decentralised applications built on different chains, and users struggle to navigate and manage their assets. Siloed blockchains create a fragmentation issue across Web3.
New chains will further complicate the burden and complexity for users. The problem: Fragmentation means a poor user experience.”
Read the full article here.