The Need for a non-custodial wallet
The crypto market has experienced large amounts of turbulence from the fallout of Celsius and Voyager. Most likely there would be a bear market without these events but I sincerely doubt we would see sub-20K Bitcoin. In a market filled with fear, bad actors created even more. Those experienced in the crypto community have argued the need to hold your own keys to your coins. In the words of Andre Antonopoulos "Not your keys, not your crypto. Your keys, your crypto". In fact, Bitcoin was designed for the user to hold their own keys. It was made as a protest against banks and the fallout of 2008.
So why do we try to bank a "bankless" system?
Newbies don't know better. They lack education and are intimidated by "non-custodial wallets". They worry about losing the words to their wallets, and non-custodial sounds difficult. Besides that why should they take the extra step and get their crypto off the exchanges? They just don't know better.
The bridge between fiat and crypto Part 1. We still live in a fiat world. If you want to get started in crypto you need to exchange your dollars for crypto. There aren't enough opportunities for the average person to earn crypto. In the fiat world, you typically sell a good or service to receive money. There needs to be more opportunities for earning crypto (and day trading, staking, and yield farming don't count). Without reliable platforms for earning crypto, it will always be seen as an investment vehicle and not a true system.
The bridge between fiat and crypto Part 2. The ability to purchase goods and services with crypto has improved over the last ten years.If you are dedicated to only purchasing goods and services with crypto you can probably get 80% of what you need. But even the most die-hard crypto purist will find themselves using fiat (at least for paying taxes). Most people need to exchange crypto for fiat every now and then. And this puts crypto users back into the banking system.
Big Business is incentivized to bank us. Banks make lots of money! Why wouldn't they try to get us into their new system?
We are culturally used to banks. Western civilization has relied on banks for a long time. We just assume there will be a bank for that.
Institutions have advantages over individuals. Let me give a painful example. How many of us have been "rug pulled" by various "DeFi" projects? They are successful because most of us don't know how to code. The average crypto user is not able to analyze the code and look for the common signs of a rug pull. A large institution can hire a programmer and have them verify it. This is one reason why platforms like BINANCE thrive. People would rather stake with Binance because they trust them to verify the projects.
What can be done?
I don't claim to have all of the answers to the problem of centralization but I do have a few ideas.
- Educate the Newbies. All of us need to take the time and educate one crypto newbie. Make it a "pay it forward" system where the newbie you teach helps someone else in the future. The materials, the teachers, and the websites are out there. We just need to step up to the plate.
- Fiat Bridges. It will probably twenty years to completely get away from the old banking system. One thing we can do is make it so we use platforms that give us as little centralization as possible. For instance, the Divi Wallet provides keys to your crypto and has built-in features for connecting your buying, selling, and trading crypto. You can connect your bank account to your wallet and then buy Bitcoin, Ether, USDT, and many other coins directly on the wallet. This does connect you to a centralized service as soon as your purchase the coin it goes straight to your non-custodial crypto wallet. It's not like using an exchange that holds your coins before you can withdraw them.
- Big Business and Cultural Attitude. This will take years of uphill fighting.
- The Institutional Advantage. This is probably the greatest difficulty. How do we convince people to self custody their coins when they worry about losing them in the latest DeFi debacle? I see two paths. Path 1 is to convince people to self custody the obvious and easy coins like Bitcoin. If you are just going to HODL why leave it on an exchange? It may be hard to convince people to self-custody DeFi tokens when they don't even know what they are doing and plan on putting them in a smart contract. Path 2 is to find a way to make DeFi better for the average user. This "Binance Scam Chain" stuff needs to go!
Finally, we need to find more ways for people to earn crypto. Everyone starts in traditional fiat finance and then moves to crypto. We need to create a world where everyone starts in crypto and never even needs traditional fiat. Let's make it a reality!
