The Evolution of Usable Crypto: Challenges and Innovations

Crypto is no longer in its early days, but usability is finally becoming mainstream.

### The Evolution of Crypto: From Early Days to Usable Technology
* 🚀 Despite the common belief that crypto is still in its early days, Bitcoin has been around for **15 years** and Ethereum for **over 10**, suggesting we are **beyond the initial stages of development**.
* 💡 The rise of technologies like ChatGPT demonstrates **rapid advancements in usability**, prompting the question of whether crypto is **truly early in its evolution**.
* 🌍 My experience in Argentina in 2021 highlighted that while locals were excited about crypto, they primarily used **Binance for transactions**, indicating a reliance on centralized solutions due to **high fees associated with decentralized options**.
* 💰 In 2024, Ethereum layer 2 fees have **significantly decreased to under 1 cent**, and improvements in transaction speed have made decentralized applications **more user-friendly** compared to centralized alternatives.
* 📈 The quality of decentralized applications has improved dramatically, with modern interfaces resembling those of **Web 2.0**, and advancements in **account abstraction and privacy protocols** are paving the way for **broader adoption**.
* 🔒 The future of crypto lies in **balancing decentralization with user-friendliness**, as seen in innovations like **smart wallets and privacy pools** that maintain security while enhancing accessibility.
* 🏰 The concept of "**digital castles**" encapsulates the potential of blockchain technology to create **robust, decentralized structures** that can serve various societal needs, merging both **serious and playful aspects** of crypto.
* 🤝 Ultimately, the goal is to achieve **mainstream adoption of crypto** while preserving its foundational values of **decentralization and open-source development**, ensuring it remains **accessible and practical for all users**.

a lot of the time when people talk about some of the challenges with crypto, one of the answers that people tend to give is people tend to say you know this is still early days, right? We're still building, we're still building out the basic infrastructure, you know look how

long something like the internet uh took to come into fruition, right? And this is something that I think people have been saying since uh like basically almost since Bitcoin itself launched. And one of the challenges with saying this of course is that today you

know we are not in early days anymore, right? Bitcoin has existed for 15 years, Ethereum as a project has existed for more than 10 years and uh you know we see things like ChatGPT rising up from not even existing as companies to suddenly completely changing everyone's

understanding of what intelligence even is. And so you have to ask the question of like well how do we actually even think about this right? Are we actually early? And the way that I answer this question is I think we are not early to crypto, but we are early to crypto

actually being usable. So let me explain what I mean with uh by going a little bit into history. So who here remembers back in 2013 when we were all excited about Bitcoin and uh Bitcoin was the the next big thing, Bitcoin was the next big revolution for payments and people were

making these really amazing and really earnest efforts to try to just get regular merchants all around the world to start accepting Bitcoin. Who here remembers Room 77 in Berlin? Anyone here eat there? Yeah. So the one on the right, this is Boston. It's a restaurant called

Thomas Monkfish, that's actually the first Bitcoin restaurant that I want to. So back in 2013, you could be a proud Bitcoin accepted here restaurant and also be a proud LGBT Friendly restaurant at the same time. And um, you know, crypto Twitter would not think that

there is any contradiction. Uh, so back at the time there was like real genuine excitement about this. So what happened? Well, one way to answer this is uh, we can look a little bit further and uh, the memory that comes to me is this trip to Argentina that I made in

2021. So this was my first time in Argentina and the first thing that I noticed was that there was this population countrywide that was not just incredibly excited about crypto, but that was actively using it on a massive scale. Like literally, yeah, I was walking around

on Christmas Day and the first coffee shop that I noticed was open, I walked in. The owner knew who I was and the owner let me pay with crypto for the coffee and some dessert that I had with my friends. Now they were using crypto, but they were not

using decentralized technology. What they, what were they using? It turns out the Argentinian locals were all using Binance to Binance transfers. Why? Binance to Binance transfers are instant and Binance to Binance transfers are free. And this is ultimately the same problem

that I think ended up killing at least the original wave of exploration into getting everyone to adopt Bitcoin as a currency. It was the fees. If you remember the marketing at the very beginning, why Bitcoin is great, it talks a lot about how Western Union, PayPal, credit card

companies they all just horribly gouge you on fees they charge like incredibly high fees like they're awful right but then Bitcoin itself the fees went up to $50 um Ethereum all the fees went up to the highest ever fee that I paid on uh Ether

was uh actually for a privacy preserving transaction so admittedly the gas went went up and uh you know basically like big parts of Twitter comment every time I do things so privacy protocols have a really good product market fit and so the transaction fees about $800 so

basically the reason why a lot of this stuff failed is fees what's new in 2024 well this is a chart of fees on Ethereum layer 2s they have gone down from being somewhere between 10 and 50 cents to being under 1 cent basically

zero at the same time optimism and Arbitrum two major Ethereum layer ones have hit this important security milestone that's called stage one and multiple zk-EVM rollups have also told me that they plan to head to stage one very soon so rollups are rapidly

becoming safer and rollups actually are finally affordable but this is not the only thing that's improved one of the other annoyances that I distinctly remember suffering on my trip to Argentina was uh I tried paying one of these people in ETH on layer one the

transaction fee was about $4 and the transaction took about 5 minutes to confirm now this was after EIP-1559 had come on chain but this particular wallet it had not actually upgraded to EIP-1559 yet so on Bitcoin blocks come every 10

minutes and so you have to wait 10 minutes potentially an hour for transactions to confirm on Ethereum. Theoretically the block time is 13 seconds, but because of the way that the gas market used to be really inefficient, sometimes you'd have to wait a totally

random amount. If you get unlucky, 5 minutes, maybe even longer for a transaction to get included. EIP-1559 actually basically fixed this, and if you add on the merge, one of the things that the merge did is it also cut in half the average waiting time until the

next block. And so with both of those things actually these days, I reliably have my own transactions confirmed in 5 to 15 seconds. Then if you use layer twos that have fast pre-confirmation, often this gets down to 1 second. And so basically the two big

problems that are this, the biggest things that made centralized UX much better than decentralized UX in 2021. Today decentralized UX has them too, but also we can look at the general user experience, quality of applications. So on the left here you have EtherTweet from 2015 and you know it looked, it clearly

looks like a hackathon demo. Now on the right here you can look at Firefly, which is a client for Forecaster and Twitter and Lens. And if you look at the quality of the UI, like this looks like a web 2 level of quality, but it, it's a

decentralized application under the hood. But also this year we saw progress in account abstraction. We saw more and more people using Safe. We saw ZK-rollups, EIP-7702, we're starting to see mainstreaming in ZK-snarks, all kinds of different applications. So we have new

and better privacy protocols Railway Oxo uh zoo zoo pass which we'll talk about a bit later raro which can prove that in zero knowledge that you have a passport and then you could do voting on top of that also even existing ease of use improvements between ler 2s two years

ago everyone was complaining about having to manually switch networks today I think like for at least the last year I actually haven't yet manually had to switch networks so before the limitations of the technology were a stopping factor like I even remember that moment where crypto kitties looked

like it might become this really big breakout app but then what happened crypto Kitty's own success pushed the ethereum gas price all the way up to 50 gwei ethereum became basically unusable and that by itself put a ceiling on the growth This is noer true but this basically

means that the reasons not to use crypto are noer here What about the reasons to come in the first place One of the uh mistakes that I think people sometimes make is uh talking about crypto as being an efficiency technology This is something that a lot of people talked

about even back in 10 years ago so this is a a random page from 2013 that was just listing the benefits of accepting Bitcoin right so P Made Easy um security and control over your money zero or L Fe or low fees protect your identity right

so two of the four are I think things are features that are very unique to crypto the other two well they were unique to crypto then but are they now right today we have Venmo we have a much better sea payments there's WeChat

Pay the centralized systems keep getting better and better, but yet in some places payments and access to finance remain stubbornly difficult. Why do they remain difficult? It's not because of access to technology. It's uh, basically because of limitations in global politics. So I think it's important to remember right

that the kinds of benefits that crypto brings to the world, they don't have to do with technological improvements of the same type as switching from a regular jet to a supersonic jet. It's a technological improvement, it's a type of technology. What kind of type? So one way

to look at this is uh this blog post that Josh Stark from the Ethereum Foundation wrote about two years ago, and the title here is "Atoms, Institutions, and Blockchains." And the thesis is that blockchains allow us to to create a kind of digital hardness, any kind of social

hardness basically that lets us create persistent digital structures that are hard, that and that can resist being broken in the same way that you can make hard physical structures out of something like concrete. And if you think about how how blockchains, from some of the previous

cipher punk technologies that they came from, things like mixnet, things like Tor, things like BitTorrent, the thing that you realize is that blockchains are all about creating persistent structures that are extremely robust, right? So a file sharing network, well if a if your file sharing network blows up, that's fine.

You just switch to a different one, and after a week everyone forgets. If a blockchain blows up and you switch to a different one, everyone loses all of their money. This is a fundamental difference between what technologies before blockchains did and what blockchains do.

and so blockchains because of this enable the internet to not just route around weaknesses in old world structures but also do an actually better job of uh building better alternatives that can solve similar kinds of problems so blockchains are digital concrete and digital concrete digital concrete

for building digital castles in the sky so who here has uh seen this uh this movie *Laputa: Castle in the Sky* raise your hand if you've seen it raise your hand if you know the opening theme song okay let's do a sing along [Music]

[Music] so this is uh one of the actually so the reason why this movie is fun is I mean first of all I actually think it's like great and I think like Studio Ghibli is absolutely top tier and you could probably tell I've

seeing this like five times at least but um it turns out that it was like also somehow accidentally the inspiration for Ethereum without us even me even realizing it basically what happened was in 2013 I was browsing a Wikipedia list of fictional elements right and I came

upon Ethereum in that list and in the list I saw okay this looks like a really nice name right and you know it reminds me of this 19th century scientific theory this idea that there's this medium that permeates everything and so okay fine I picked the name then two

months later one of the Ethereum Foundation designers back before it was even called the Ethereum Foundation uh decided to use this diamond as the Ethereum logo I thought okay this is a really cool diamond it's I like the logo it's beautiful years later I watched

this movie for the first time and then I saw wait they have Ethereum crystals crystals look like diamonds and so it turns out that a lot of Ethereum like art was uh inspired by this without even realizing it so and the other thing about that like that

song right is that the song like it actually sounds nice right like I think in crypto you know we actually need better songs right it's like you know a lot of the time if you ask someone to like come up with an anthem for a project like they come up with something

that's totally cringe right it's like decentralized We Stand United a hash confirmed a new block invited like okay you know if you like rap then that's good right but uh do you really want that to be your anthem forever right okay so I mean you know back in 2013

right there was this other song that I remember there there it was uh there was this artist named Krya it's Q said and done all your fiat inflate be on the Sun but no more because now there's a better one and its properties perform better

than all the rest of them it's mathematical no more double spend it's encrypted put your cash in your brain or it's wearable a new form of wealth begins wait who here actually remembers that one okay I do uh so see it like digital

castles in the sky I think are the unifying theme that combines the serious and the fun aspects of crypto together this is what I want people to remember a castle is something that can protect you and keep your family and keep your tribe safe a castle can also be a castle in

Disneyland that lets your community have fun, a castle can also be a museum that preserves all of the entire thousand-year history of your culture, and a digital castle similarly can be all of these things. And digital castles of all types are something that we can

build on, on top of Ethereum. So done with digital castles, um, what should our key goal be? So this is, I know, my view that I've said the whole time, right? We need to satisfy the needs of mainstream adoption and we need to hold on to open source and decentralization

values at the same time. What does this mean? So, example one, it's right there's two to hold your, um, one of those, you, you know, you do like the crazy self-sovereignty maximalist thing, you write down a seed phrase, you do

everything offline, you take your seed phrase, you engrave it on a piece of titanium, you put your titanium inside of a lockbox that's made out of even more titanium, and then you like put that lockbox 10 meters underground, and then your coins

are safe, right? So that's one approach. The other approach is to say, 'Bro, I'm like a normie, I'm not going to do all that.' And so instead, you basically go and you take your coins and you go off to give them to some trustworthy guy, you

know, there's this nice guy, his name is Sam, he goes on panels with Bill Clinton, he's got to be trustworthy, and uh, you know, two years later it uh, you know, it turns out that your assessment of who's trustworthy and who's not was a little

a bit wrong, so I think these are not the only two alternatives, right? So basically, if you want to be protected against centralized bad actors, then you do the traditional self-custody thing. And if you really want, you can put it in titanium and put it 10 meters underground.

If you want to be protected from your own mistakes, you do a centralized exchange. What if you want both? This is what smart wallets with multisig let you do. Multisig means you have multiple keys, so you might have, for example, six keys out of which you need four to send a

transaction, and you could even have a rule that for small transactions you only need one. And those keys can be any combination of keys that you can control. Um, friends and family, ZK wrappers of existing services, so you could even make a YAK wrapper of an email you can

literally today make an Ethereum account, which is a smart contract wallet from which you can only send transactions if you generate a proof that you control a particular email address, right? So you can basically take Web 2 trust anchors and you can like pull them into

the Web 3 world. And in the Web 3 world, you can even diversify your trust, right? So you can ZK wrap a Gmail account, which is a US company, then you could combine that to make another one of your guardians be a ZK wrapper of, uh, you know, like an

Indian government ID, and then you make a third key be a hardware wallet that was made by a company in China, right? Like you can maximally diversify everything. And so even you, you can actually get the benefits of institutional trust without a lot of the

weaknesses. So example 1.5 decentralized social media UX. Forecaster is a user experience wise warcast as a web2 quality app, but you can set your recovery address, the thing that has ultimate control over your account, to be your multisig. And I personally trust my

multisig way more than any one of my centralized accounts. Example two, payments. So this is a doo- it's a wallet that is meant to be entirely Ethereum based, but it has the same UX quality as Venmo. Example three, privacy pools. Privacy pools uses a mechanism where

users can prove that their Depo- their withdrawal came from some deposit without revealing which one, but revealing that their deposit did not come from one of the bad guys. And so this is a way that allows you to have a very high degree of privacy for regular

users and meet a lot of uh important compliance needs, but without actually having back doors. Example four, ZK social media. This is a zoo pole which uses zo pass and so can prove that you're a human, prove that you're a member of a community, solve proof of personhood

problems, solve reputation problems while still preserving your privacy. It's not about either you're an Anon or no and nobody trusts you, or you're KY-C'd, verify that you have no privacy. It's like no, you can have privacy and you can have trust at the same time. Example five,

Ethereum layer one. A lot of technological improvements that are happening that make the layer one both more performant in terms of red ring finality time, increasing capacity, and at the same time more decentralized and easy to verify. And a lot of these things are already

happening right so this like these are all directions that the ethereum ecosystem and I think crypto in general are going to be going over the next 10 years right we uh basically the two wrong paths are one is to sacrifice practicality for decentralization and forever being an

ecosystem that's just appealing to itself and only has 691 users the other bad path is to sacrifice decentralization for practicality and to say okay well we're trying to get mass adoption and so guess what the next great crypto application you have to log

into it with a freaking Gmail account right what what do we do best well no you know we do not have to take either of these dark choices we have decentralization and we have practicality at the same time eat both pills be purple take both thank thank

Vitalik Buterin - What Excites Me About the Next Decade - TOKEN2049 Singapore 2024

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The misconception of crypto being in its early stages and the reality of its usability.

Common argument that crypto is still in early stages, similar to the internet's early development.

Counterargument that crypto is not in its early stages, citing Bitcoin's and Ethereum's age.

Rapid advancements like ChatGPT's emergence challenge the notion of early stages.

Claim that crypto is not early, but its usability is still in its early stages.

Historical example of early Bitcoin adoption attempts in 2013.

High transaction fees hindering early crypto adoption and the shift towards centralized solutions.

Observation of widespread crypto usage in Argentina in 2021, but through centralized platforms like Binance.

High transaction fees as a major obstacle to Bitcoin's early adoption as a currency.

Comparison of high crypto transaction fees with those of traditional payment systems.

Examples of high Ethereum transaction fees, even for privacy-preserving transactions.

Improvements in transaction fees and user experience in 2024.

Significant decrease in Ethereum layer 2 transaction fees.

Increased security of Ethereum layer 2s and rollups.

Improved transaction confirmation times due to EIP-1559 and the merge.

Comparison of past and present decentralized application user experience.

Advancements in account abstraction, ZK-rollups, and privacy protocols.

Shifting focus from efficiency to unique benefits of crypto.

Critique of the misconception of crypto as a purely efficiency-driven technology.

Comparison of crypto's past benefits with current centralized alternatives.

Persistent challenges in payments and access to finance despite technological advancements.

Crypto's benefits are not solely technological, but also relate to global political limitations.

Crypto's role in creating persistent and robust digital structures.

Blockchains as a means to create "digital hardness" and resistant structures.

Comparison of blockchains with previous technologies like mixnets and Tor.

Fundamental difference between blockchains and previous technologies in terms of consequences of failure.

Blockchains' ability to build better alternatives to solve existing problems.

Balancing mainstream adoption with open-source and decentralization values.

The metaphor of digital castles representing the multifaceted nature of crypto.

The need to balance mainstream adoption with open-source and decentralization values.

Examples of extreme self-custody versus complete reliance on centralized exchanges.

The solution of smart wallets with multisig for combining security and usability.

Examples of applications balancing decentralization and user experience.