Missing pieces in crypto #1

TL;DR: Crypto industry has a highly evolved financial system but still few use cases and actual economy underneath (yet!). Most of the space is still around financial speculation. In this series, I try to map some friction points I find in my day-to-day research in crypto in order for users to come. This specific post talks about the lack of layers of abstraction I encountered when trying to buy $FWB social token.

Background

The Crypto industry has been evolving at an amazing pace for over a decade. Today it composes a small universe that includes an evolved financial system in which you can convert fiat2crypto, trade, lend, borrow, underwrite derivatives, and much more, all with multiple centralized and decentralized alternatives.

The state of crypto right now can be somewhat confusing. Common sense will lead us to think in an economy a financial sector will usually be created on top of the real sector, not the other way around. But yet somehow the crypto industry is missing a real economy to be built underneath. We have shiny exchanges, decentralized banks managing billions, future markets for crypto, but what real economic value is actually being created underneath?

The financial layer in crypto is ready. What’s missing is a real economy and use cases that don’t involve financial trading and speculation. The million-dollar question in crypto is when will ordinary users will use it and for what use-cases beyond the enthusiasts/ speculators/ early adopters.

This series will be around friction I find on my day-to-day crypto research. I believe that a collection of different friction points (currently lots of them) is what preventing adoption to happen and I would like to point out the ones that I find interesting.

Missing piece #1 — insufficient layers of abstraction while I was trying to buy social tokens

One of the interesting projects I encountered lately is called Role. Role is a platform that enables anyone to mint his/her own personal token that can be used in various ways, for example creating a community token that enables restricted access to the community’s resources (e.g. premium discord channel). Each of these tokens is an ERC-20 token that can be listed and traded on decentralized exchanges on the Etheruem network. The creation of a token that can be traded and accrue value is making a strong incentive for token holders to participate and help the community grow its intrinsic value.

I think of a world in which premium community tokens can be traded at thousands of dollars due to the exclusivity they provide to join high valued communities and get exposed to tiered premium content.

One of the communities already up and running is called Friends With Benefits (LoL great name).

This is how they describe the project on their website:

Friends With Benefits is a private discord server. A group chat full of our favorite thinkers and creators. You can think of FWB like any other social network, it’s a space that has value because of the content and ideas the users of that social network create and share.

The thing that makes Friends With Benefits different is that in order to be a part of Friends With Benefits you must own at least 55 $FWB cryptocurrency tokens.

$FWB token is listed and traded on Uniswap (volumes are still very low so be careful if you experiment with that. NOT investment advice).

I love the idea that you can buy a token and get premium access to a discord channel with influencers and interesting community members. The fact that I can trade the access for $ whenever I want is great, and I also like that I can tell it to more people and increase demand to something I have a stake in.

This is how you can purchase the $FWB tokens right now:

Wait, what?..

I just wanted to get exposed to some cool stuff not reinvent the whole universe

In order to get access to the FWB community I need to:

1. Buy some crypto on an exchange (If I don’t have an active account I need to open one, upload my ID and go through an exhaustive KYC process)
2. Download a Metamask wallet
3. Buy ETH on the exchange
4. Withdraw the funds to my wallet
5. Buy FWB on a DEX
6. Connect to the Discord server and prove that I got 55 $FWB

So much friction will drive away anyone who is not already in crypto. All these layers of complexity are just too much for ordinary folks.

What can be done to reduce friction?

I think that social tokens can go through mass adoption only when you have a maximum of 2 steps that get you from A to Z. Something like:

1. You approach a web UI in which you can register your personal details and credit card number. This is the buying process of a token — no exchanges, no withdrawals, just plain and simple registration and a purchasing experience online like everyone already knows
2. You get a ticket that you can show on Discord that proves you have ownership of enough $FWB tokens to get access

So what should be built for this to happen? This kind of scheme takes into account a custodian backend that should hold the crypto tokens for users (that abstracts away downloading and using Metamask). After the user entered his credit card, the custodian should by himself approach an exchange, take the $ that he received from the credit card clearing company /PayPal /other, buy ETH, withdraw it and exchange it for FWB, hold it if for the user and issue some kind of a passcode that proves ownership (everything should be recorded on a centralized database owned by the company operating the frontend). Support should be built for any problems arising.

If we actually do that, we abstract away signing to an exchange (huge friction point) and buying and interacting with crypto (huge friction point). When you kind of think of that, in that case, the user doesn’t even know he is interacting with crypto. It just another technology on the backend that allows him to see premium exclusive content other people can’t.

Obviously core users will still want to use the crypto features, withdraw the token to their personal wallet and maybe trade in the future. These core features that are crypto enabled will still be used but only by the more sophisticated users.

If you find any other interesting friction points and ideas on how to abstract away crypto complexity, please reach me on Twitter. Would be also happy to hear feedback. https://twitter.com/levin_idan

Cheers,

Idan