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The crypto ecosystem is presently a more than trillion-dollar space, consisting of a wide range of players, including more than 22,000 crypto assets and 500+ exchanges facilitating the exchange and trade of these assets.
While there is diversity, there is skewness in the crypto space, as Bitcoin and Ethereum dominate with over 60% share in the global market. That, however, is changing, with numerous other assets steadily increasing their share, adding the much-needed vibrance and dynamism to the crypto ecosystem.
Now, before we discuss why the crypto industry must prioritize user experience and privacy, let's first look at its scenario in terms of users.
According to the market size numbers available in the public domain, the global crypto ownership rate in 2023 is slightly above 4%, roughly translating to 420 million global crypto users. Of these 420 million crypto users, 260 million are from Asia, followed by North America, with 54 million users.
Around 21% of American adults have been crypto owners as of 2022, with high-income earners being more inclined to own cryptocurrencies. A study shows that although only 15% of the general public in the United States earn more than US$100,000, this income category represents 25% of crypto owners.
A crypto adoption study by Chainanalysis ranked Vietnam at the top of its global crypto adoption index as of 2022, followed by the Philippines and Ukraine.
The gender-wise distribution of crypto owners is heavily skewed toward the male population, as 70 percent of crypto owners are men.
Summarily, the penetration of cryptocurrencies - yet to become homogeneous globally - has been evident across continents, income groups, races, gender, ethnicity, and other demographic parameters.
How do these users leverage cryptocurrency, and for what purposes is it to be seen? For instance, crypto can be seen as assets held for long-term value appreciation, a medium of transaction, or even a tool of exchange. It could even be seen as a risk-diversifying asset class that portfolio investors want to keep in their books.
Initially, traders got into the crypto market to earn profits. Retail investors have entered the space enthusiastically for the past half of a decade. According to many analysts, the 2021 bull run of Bitcoin was driven mainly by retail investors.
What accelerated the entry of retail investors into the market further was the outbreak of the Covid-19 pandemic and the downfall it caused for traditional asset classes. The move to digitization on a massive scale and the expansion in notions like the metaverse drew people towards virtual assets.
Institutional investors were always there in the crypto market. Even before the retailers entered the space, private institutions and high-net-worth individuals had been present.
Currently, many corporations have included crypto assets in varying percentages in their portfolio. Companies like Tesla, Square, Gucci, and Microstrategy have entered this space. A host of venture capital funds are also investing in crypto economy solution-based projects run by promising startups worldwide.
With such a diverse stakeholder base recognizing the value in the crypto economy, there is enough dynamism around customer entry points - products, solutions, and facilities through which users will access the market. In the coming segments, we will discuss these solutions helping the customer enter the market, their functionalities, and the concerns that come with them.
The function of a cryptocurrency exchange is nearly the same as that of a stock broker in traditional finance. The exchange offers digital tools to consumers to buy and sell currencies like Bitcoin, Ethereum, Tether, and many more.
For a crypto exchange to be efficient and user-friendly, it has to offer services with high security, intuitive and user-friendly design, and low transaction fees or brokerage.
Crypto exchanges can be centralized or decentralized. A centralized exchange is more adherent to governmental regulations and recommendations. They often require USD deposits and onboard the user through a rigorous identity verification process on the platform.
On the other hand, decentralized exchanges are free from centralized authorities looking over user onboarding and other processes. These exchanges usually run on user-owned distributed nodes. However, the absence of centralized authorities does not mean a lack of transparency in transactions or fees relating to the p2p exchange of cryptocurrencies.
Apart from exchanges, consumers can leverage crypto assets through a host of DeFi apps. DeFi stands for decentralized finance: a financial system in line with the founding philosophies of blockchain and distributed ledger technology. It facilitates intermediary-free peer-to-peer transactions through well-built self-executing technologies.
DeFi is a paradigm where blockchain applications serve the financial purposes of consumers instead of banks or other similar intermediaries.
A host of financial-world objectives can be accomplished using DeFi applications. For instance, using DeFi apps, consumers can lend or borrow. Consumers who do not want their cryptocurrency holdings to sit idle can deploy them to such lending-borrowing protocols to earn interest.
On the other end of the usability spectrum, some borrowers can not access traditional funding avenues. Such people can leverage these protocols to conduct peer-to-peer transactions with the lender to borrow the necessary funds.
Decentralized exchanges, which we have already talked about, are also examples of DeFi applications, where intermediaries are removed for consumers to trade directly with one another.
DeFi applications have also empowered investors to deploy sophisticated trading strategies like DeFi derivatives. DeFi derivatives help users go beyond the realm of spot trading and trading specific coins or tokens.
Through derivative trading strategies, users can perform leveraged trades by betting more than they have. They can create synthetic assets that follow traditional stock or commodity prices as the derivative's underlying asset.
The use of Decentralized Finance tools and instruments may face multiple challenges. For any application to be effective and efficient, it must mandatorily score well in usability and security.
Usability is again a function of multiple aspects, including design, cost-efficiency, speed, user experience, and more. We will try to look at some of these challenges that the crypto & DeFi economy faces in usability.
Decentralized exchanges often suffer from issues related to network congestion and slow transaction speeds. Processes might take time, resulting in scalability challenges.
The crypto world is a comparatively younger space. It has been around for nearly a decade now. The lack of domain experts is another challenge that often reflects in development work. Since the developers are also learning with the industry's growth, solutions they offer to a problem often take time for finetuning and optimization.
While user experience can always be improved, security and privacy of data and user information come with very little margin of error.
The crypto world, owing to the properties of blockchain technology, distributed ledger, cryptography, etc., is known for its transparency and security. At the same time, like any other technology paradigm, it is vulnerable to cyber attacks, hacks, and breaches.
Publicly available data shows that hacks are increasing in the cryptocurrency domain. Chainanalysis data shows that in 2021 and 2022, the total value stolen in crypto hacks amounted to nearly US$3.8 billion and US$3.3 billion. It was a substantial surge compared to the previous year's volume. Both in 2018 and 2019, this value was US$0.5 billion.
The security challenges arise from vulnerabilities in critical codes that support the operations of major crypto exchanges and businesses. The self-executing smart contracts are another area that hackers frequently target.
Cybersecurity breaches manifest their negative impacts in two ways: they can result in the loss of consumer funds and compromise user data. In both cases, consumers are likely to lose their trust in the crypto economy.
While these aforementioned broad sets of challenges exist, performance parameters of crypto solutions can also often pose difficulties. Many crypto services often charge high transaction fees for the services they offer. It acts as a barrier for many interested investors to join the platform, resulting in less liquidity and less effectiveness.
Usability issues, especially user experience, can be solved by regularly collecting user feedback. Optimization of design might require multiple iterations in the interface. When it comes to making the user experience more pleasant, these optimizations should always remain the operational focus of crypto businesses.
Maintaining data privacy by ensuring a secure platform is probably the most vital challenge the crypto world needs to solve. The codes need to become more secure.
Open-source platforms often help enhance the robustness of these codes. Developers need to remember that stealing funds or tokens is not always the only agenda of cyber attackers. There are instances when hackers have deleted wallets, removed users, and caused a range of other troubles.
For example, Shyft Veriscope - the only frictionless Travel Rule Solution, has been designed with user experience and privacy in mind. Not only has Shyft Veriscope made the Travel Rule compliance hassle-free for Virtual Asset Service Providers, but it also ensures that there is minimal impact on the user experience.
As for privacy, all Travel Rule data exchanges between the VASPS occur in a peer-to-peer mode. Hence, at no point does the Travel Rule data pass through Shyft's internal servers.
Hence, it goes without saying that for the crypto ecosystem to grow beyond this point, we must prioritize user experience and privacy in everything we build. And only then will the crypto world prosper and gain the mass adoption every crypto enthusiast wishes for.
They want to regulate every phase of the customer experience and the provider's journeys. Licensing, in-depth customer identification requirements, heavily detailed KYC and AML mechanisms, continuous monitoring in search of potential fraud - all these are in the mind of the regulators.
However, these efforts should not hinder an emerging industry's growth. While ensuring maximum protection for user funds and personal data is always prudent, businesses must be empowered with opportunities to innovate.
Only innovation can lead to a more efficient, inclusive, and equitable crypto economy. Excessive compliance requirements should not stop that from happening.
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Shyft Network powers trust on the blockchain and economies of trust. It is a public protocol designed to drive data discoverability and compliance into blockchain while preserving privacy and sovereignty. SHFT is its native token and fuel of the network.
Shyft Network facilitates the transfer of verifiable data between centralized and decentralized ecosystems. It sets the highest crypto compliance standard and provides the only frictionless Crypto Travel Rule compliance solution on the blockchain while ensuring user data is protected.
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