Real Crypto Adoption Needs Real Crypto Infrastructure (These 7 Upgrades, for Starters)
Internet video took off in the 2000s with widespread broadband adoption. What are the equivalent requirements with blockchain technology today?
Kgothatso Ngako saw a problem. He believed his neighbors in Africa would benefit from owning bitcoin, but most did not own smartphones. Internet penetration in Africa is only 30%. Millions were unable to, as the slogan puts it, “be their own bank.”
Ngako wanted to change this. A former software engineer at Amazon, he had already worked to translate bitcoin education materials – such as Satoshi Nakamoto’s white paper – into over 20 African languages including Kiswahili, Shona and Oshiwambo. But that would only go so far. Knowledge would be worthless unless people had a way to actually own bitcoin.
“Luckily, on the African continent the GSM infrastructure is quite solid,” says Ngako. So thanks to this network, many Africans used text-based flip phones. Could Ngako tap into the GSM infrastructure and create something bitcoin-compatible?
He quit his job and built “Machankura.” The word doesn’t have an exact translation, but Ngako says it’s a “slang term that usually refers to money.” Machankura is a text-based interface that allows for the sending, receiving and spending of bitcoin, enabled by the Lightning network. A user can create a Lightning wallet directly on their flip-phone. Over our Zoom call, Ngako held up a phone and demonstrated the functionality: A simple screen gives options for 1. Send BTC; 2. Receive BTC; 3; Balance and History; 4. Spend BTC, and so on.
Machankura is still in its early beta phase, but Ngako says it has been in active use for six months. He envisions solutions like this as a way to onboard more Africans, adoption he sees as long overdue.
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“From an adoption perspective, bitcoin is not where it should be,” says Ngako. He notes that Mobile Money, a digital (non-crypto) payment platform launched in 2007, has 6 million active users in Kenya. Why can’t bitcoin do the same thing?
Or, zooming out the lens, why isn’t there more bitcoin and crypto adoption? What’s holding back the tech? The recent problems of the space have been well-chronicled – the meltdowns of FTX and Celsius Network, the pop of the non-fungible token (NFT) bubble, the jitters of a recession, the whims of U.S. Federal Reserve Chair Jerome Powell, the overall souring of the vibes.
But you can also point to a shaky infrastructure. “The infrastructure that is driving Web3, broadly, has some catching up to do,” says Ryan Servatius, head of strategic partnerships at Mysten Labs. Many have argued that the crypto space is now where the internet was in the early 1990s. Servatius takes the analogy one step further: He argues that the internet did not flourish until its infrastructure matured.
“Infrastructure was the key ingredient,” says Servatius. “Broadband penetration was the single critical driver,” as the Netflix and YouTubes would not be possible “until you had sufficient broadband penetration in the United States.” Servatius believes that the blockchain space is still “pre-broadband,” and that we “still have to get that infrastructure stood up at a level that will allow the world to embrace something that is fast and cheap.”
There’s little consensus on exactly how the infrastructure should be improved. Or which projects will win. Ask 100 people in crypto and you’ll get 100 different answers. A debate between the bitcoin maximalists, Ethereum die-hards, and the many aspiring “Ethereum Killers” (such as Solana, Cardano or Servatius’ Mysten Labs) would make Kevin McCarthy’s Speaker of the House debacle, by comparison, look like the pinnacle of Athenian democracy.
And what even counts as “blockchain infrastructure”? You could make the argument that every project in crypto – meme coins excluded – is a type of infrastructure. It’s a tricky concept. It’s almost unpleasant. Compare this to the more colorful corners of the space: You can squint and visualize the virtual reality of the metaverse; it’s easy to imagine the artwork of an NFT; you can even understand (if not endorse) the appeal of “number go up” price speculation.
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But infrastructure almost feels invisible, and maybe that’s the point. “The average person shouldn’t know anything about infrastructure,” says Andrew Keys, co-founder and managing partner of Darma Capital. This is how it works on the internet. “When you buy a ticket on Orbitz to fly somewhere, no one gives a [damn] if you use a SQL database or a Kafka database. You just use Orbitz,” says Keys. Blockchain should work the same way. “When blockchain works, it’ll be boring,” says Keys, adding that the experience should feel no different from the world of Web2, with the exception that “instead of an intermediary extracting 40% for putting a driver and passenger together, a la Uber, [when] it should only cost 1%.”
That’s the goal. And if the space wants to emerge from crypto winter, it will take real progress on this boring, behind-the-scenes, invisible work of plumbing and wiring. That’s what’s needed for widespread adoption – it needs to be easy and accessible and fun.
So with the understanding that this is far from comprehensive and likely to spark debate – (if it didn’t, we’d be doing it wrong) – these seven buckets are what we talk about when we talk about blockchain infrastructure:
Smoother UX across the board
What’s it like for a newbie to purchase an NFT? “It’s a train wreck,” says Paul Brody, the head of blockchain projects at Ernst & Young. “If you try to take a new person through buying an NFT it’s incredibly horrifying.” You first need to create an account in an exchange like Coinbase or Binance, then open a MetaMask wallet, transfer funds, connect to OpenSea and so on. “Compare that to using ApplePay to buy something online,” says Brody. “It’s just a really terrible, terrible experience.”
Brody suspects that true widespread adoption, especially for large companies, will not happen without smoother software. “It has to be easy enough for a typical enterprise IT developer to make use of,” says Brody. “They have to be able to plug it in. It can’t be, ‘Hey, I need to build a specialist blockchain team.’” (Brody’s team at EY is working on such solutions; they’ve already piloted a supply chain project with Peroni beer.)
In a similar vein, other projects are trying to make it easier for Web2 companies to plug-and-play with Web3 on the consumer side. Take “brand loyalty” NFTs. I’ve spoken to many Web3 advocates who are bullish on mainstream brands using social tokens, NFTs, or other chunks of Web3 to create super-charged rewards programs – frequent flyer accounts on steroids. But the exact how this happens seemed to be a yada yada yada.
Enter projects such as Dispatch, which is building ways for companies to directly communicate with crypto end users, such as zapping messages to their Ledger wallets. Then this syncs to the company’s normal CRM [customer relationship management] interface, a la Salesforce. “I tell everybody, this is the future, but I’m going to put it in your CRM for you,” says Byron Sorrells, head of Dispatch. “You have to meet users where they are. We can’t expect another massive behavior change for adoption. I think it will be, ‘I’m doing what I’ve always done, but underneath it is the magic of Web3.’”
In his own way, Sorrells is using the same playbook as Ngako in Africa: Expanding the crypto infrastructure by creating an easy solution for the end user. In Ngako’s case, it’s letting Kenyans use their text-phones to get bitcoin. In Sorrell’s, it’s using enterprise software but injecting it with NFTs, or as he puts it, “Mailchimp, but make it blockchain.”
Better (decentralized) wallets
“We need really great wallets,” says Paulina Joskow, head of partnerships at Ramp, a project that’s building payment rails connecting crypto to the global financial system. “They’re the backbone of how we use and operate in the crypto ecosystem every day.” The current state of wallets? The way Joskkw sees it, “We’re not ready for the next wave of mainstream adoption.”
The “Better Wallets” mission is what Kgothatso Ngako is working on in Africa. The Better Wallets mission is why Ledger hired Tony Fadell, the designer of the original Apple iPod, to create its next generation devices. And the Better Wallets mission, for many in the space, is a way to bring crypto back to its decentralized roots.
“What we learned this year is that a lot of these non-self-custody solutions – centralized finance solutions – had major problems,” says Amanda Cassatt, founder of the Serotonin marketing agency. She points to the meltdowns of FTX, Celsius Network and BlockFi as centralized solutions that ran amuck. “This highlighted the need to have really good UX, but also to enable genuine self-custody by users.”
The FTXes of the world might not have been safe, but they were a snap to use. Cassatt wants to see that same dead-simple experience, with a decentralized twist. “I actually don’t really think that someone has gotten onboarded into Web3 if they’re not custodying their own crypto,” says Cassatt, formerly chief marketing officer at ConsenSys, the Ethereum development studio. There’s an understandable reluctance to go full self-custody. The average person (myself included) gets queasy at the idea of having to keep track of a 16-word seed phrase. Or to keep a hardware wallet safe. Within months of buying a car, for example, I lost the title and had to spend hours at the DMV pleading my case; maybe crypto could help me “be my own bank,” but I have a feeling I’d be a lousy bank.
So what’s needed, Cassatt argues, is not a centralized solution but easier decentralized ones. Something to let even the pinheads like me feel comfortable. Cassatt is bullish on the concept of “progressive sovereignty,” where a user gradually becomes more of their own custodian as they learn more about Web3.
“The mission right now is to get as many people as possible to self-custody their bitcoin,” says Alex Gladstein, chief strategy officer at Human Rights Foundation and a prominent Bitcoin advocate. “Right now, we don’t need any fancy software upgrades for Bitcoin to do that.” Gladstein believes that “the infrastructure is more on the app level.” (He considers Ngako’s work in Africa, as well as the self-custody Muun wallet, as prime examples.) Gladstein acknowledges that the Bitcoin network software will eventually need an upgrade, but says “we haven’t crossed that bridge yet.”
While it’s true that newbies struggle with seed phrases, Gladstein notes that in the 1990s his parents struggled to remember curious new terms like “email passwords” and “usernames.” They used sticky notes on their monitors. “Ultimately, we figured out ways to deal with that,” says Gladstein, “and that did not stop email from taking over the world.”
Building better bridges
How good is one blockchain at playing nice with another blockchain? Glitches still happen. This leads to theft and a loss of trust in the system, as over $2 billion was hacked from blockchain bridges, according to an estimate from Chainalysis.
“I really hope we can spend the next months or years, depending on how long the bear market lasts, improving how we approach bridging between layers,” says Joskow, at Ramp. “Because this is something we need to do without giving it a second thought.” For example, she believes that we’ll soon be in a world where Ethereum’s layer 2 systems (such as Optimism and Arbitrum) will be widely used side by side, depending on the context and the application. “So before we approach mainstream adoption,” she says, “we need to provide a secure way for people to swap tokens between layers.”
The primacy of privacy
For those who are unfamiliar with the space, the concept of “crypto privacy” has the whiff of the Dark Web, illegal drugs, money laundering and the funding of terrorists. Privacy can sound a little naughty.
If you’re in this camp, you should have a conversation with Paul Brody, the executive at Ernst & Young. Brody explains that privacy is essential to corporate America, and this has been true since the early days of the internet. Think about e-commerce. “The killer application of the internet, as it were, turned out to be commerce. Buying stuff,” says Brody. “For that we had to have privacy.” Imagine if all of your Amazon purchases were visible for the world to see. Thanks to the boring internet infrastructure work of SSL encryption, we can shop online safely. “That’s entirely missing today from the blockchain ecosystem,” says Brody. “That’s job #1.”
Just as you want to keep your Amazon splurges to yourself, companies need to keep their operations private. If a car manufacturer, for example, uses a public smart contract to buy tires from a supplier, the on-chain transactions could tip their hand to competitors. “The details of corporate supply chains are very, very sensitive,” says Brody, which is why supply chain projects are “almost impossible on a public blockchain.” (His team at EY is working on solutions, some of which will be tested in the next few months.)
“Web3 is vastly more transparent than the web we’re trying to replace,” says Alex Pruden, CEO of Aleo (a privacy-focused blockchain system). “If you buy your wife an anniversary gift, all of that is on-chain and recorded for all the world to see.” He believes this is “one reason you haven’t seen broader adoption,” which is why “the scalability and the privacy provided by Zero-Knowledge proofs are essential.”
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Zero-Knowledge poofs (or ZK proofs) let you prove that something is true without disclosing other sensitive data. It shares only what’s needed. An easy example: In today’s world, if you walk into a bar and are asked to show your ID, the bouncer can see details including your home address, height and driver’s license number. But the only relevant data is your birthday – are you over 21? In a smart ID that’s powered by ZK proofs, the only thing you’d show the bouncer is a field displaying “Over 21.”
Pruden is so passionate about the importance of ZK infrastructure that he organized an open competition, called “ZPrize,” to goose its growth and innovation. He says that over $4 million has been awarded so far; the prizes are for extremely simple-sounding categories including “Accelerating MSM Operations on GPU/FPGA,” “Plonk-DIZK GPU Acceleration,” and “Accelerating NTT Operations on an FPGA.” And people think this stuff is complicated?
Web3 social infrastructure
Cassatt predicts that 2023 will be “The Year of Web3 social,” finally unlocking decentralized alternatives to the Twitters and Facebooks of the world. (Others do, too.) Whereas many grumble, with some merit, that blockchain is often “a solution in search of a problem,” here the problem is clear: The clout you earn on one platform can’t be ported to another. This feels suddenly relevant as Twitter wobbles.
Mainstream adoption of Web3 social media won’t happen, says Cassatt, without more work on a protocol level. She points to Lens Protocol as her favorite example, which allows for people to build their own decentralized, censorship-resistant social media applications. “That’s going to onboard a lot of users,” Cassatt says, partly because this use case is “less dependent on price” and instead offers “real utility on Web3.”
Data needs to be indexed to be quickly accessed. “The analytics and indexing infrastructure is really, really important for developers,” says Pruden at Aleo. Without getting too deep in the weeds (or drilling down into things like “Plonk-DIZK GPU Acceleration”), the key point is that there are different ways that indexing can be done. Centralized or decentralized. Pruden hopes to see more open-sourced, decentralized indexing solutions emerge, as these are part of the “defaults” for the overall system. “The defaults today are hosted infrastructure and non self-hosted wallets,” says Pruden. “And if we don’t push back against those defaults, then those forces of gravity will continue to get stronger and stronger.”
Finally, something crucial to just about every project in the space:
Thanks to the Lightning Network, transactions that took 10 minutes on Bitcoin can now happen in a millisecond. This breakthrough in infrastructure is what enabled Strike (the mobile payments app) to launch in El Salvador, which paved the way for legal tender. While the verdict is still out on the El Salvador bitcoin experiment, it’s a plum example of how boring, quiet progress in infrastructure can suddenly unleash breakthroughs.
Dozens of competing layer 1 projects, of course, are all racing to deliver faster and cheaper and greener and better alternatives to Ethereum. The work at Lightning continues (such as helping developers build Lightning-friendly apps), as does the work of Ethereum itself. “Ethereum does require more scaling,” says Brody. “The Merge doesn’t solve all the problems.” He views the Merge upgrade to proof-of-stake as a triumph for demonstrating that Ethereum could “migrate $700 billion worth of mission-critical infrastructure without a hiccup,“ but it’s just part of a much longer journey.
Ethereum’s short-term focus is on sharding, which the Ethereum Foundation defines as a “multi-phase upgrade to improve Ethereum’s scalability and capacity,” which should further lower fees. The full road map was sketched by Vitalik Buterin himself, containing the milestones of “Surge, Verge, Purge and Splurge.” Hats off to Buterin, as “Merge” isn’t the easiest word to rhyme.
And let’s just hope there isn’t a Scourge.
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