Insight & Analysis

Bitcoin blues: cryptocurrency users lack confidence in transactions

Physical bitcoin standing up on ground

Cryptocurrency holders are not having a great time transacting with their digital currencies at the moment but a consortium of blockchain wallets and exchanges is aiming to come to their rescue and, in the process, help accelerate adoption of crypto assets.

Billionaire bitcoin investor Tim Draper recently predicted all of us would be buying coffee using the cryptocurrency by 2021 and that by 2023 baristas would be “laughing” at those who tried to use fiat currency to pay for their purchases. A new survey of crypto users, however, pours water on such exuberant predictions and begs questions about the commercial potential of blockchain, at least as currently configured, in driving wider adoption of crypto assets.

For the study by the Foundation for Interwallet Operability (FIO), a consortium of leading blockchain wallets, exchanges and payments providers, reveals that 75% of crypto users are less than confident that their transactions will proceed as planned. That percentage jumps to a hefty 81% when only newer crypto users – ones who have held crypto for three years or less and are likely to be less tech savvy than the earliest adopters – are considered.

FIO also reveals that of those that had sent an amount of crypto at least once during the year, 55% experienced issues that prevented one or more transactions from going as planned. Eighteen percent of this cohort had actually lost funds or had a failed transaction due to a user error in sending or receiving but not due to malicious actors such as hackers, scammers and phishers. Just over the third said they had questioned whether the public address they were sending to was accurate while 6% had been a victim of a phishing or man-in-the-middle crypto attack.

Anxious crypto users

The randomised survey of over 200 individuals that actively held some crypto throughout 2018, also found that only about 25% of respondents who sent crypto to someone else in 2018 generally felt “very comfortable” with transactions immediately after sending. The majority of users, about 58%, felt only “cautiously optimistic”, while the remaining 17% of users felt a general level of anxiety regarding a sent transaction.

FIO’s mission is to accelerate blockchain adoption by reducing the risk, complexity and inconvenience of sending and receiving crypto assets. To support that cause, the consortium is developing the “FIO Protocol”, a decentralised open-source blockchain protocol that it believes will enable greatly enhanced user experience inside the FIO enabled wallets, exchanges and applications of their choice. With the FIO Protocol enabled, the consortium believes “sending and receiving of crypto tokens and coins from any blockchain on any wallet or exchange will be come easy and error free” and so adopt enable their much greater future adoption.

The consortium includes eight of the world’s leading wallets and exchanges including ShapeShift.io, Mycelium, Coinomi and Edge, and more wallets, exchanges and crypto payment processors are expected to join soon.

Better than fiat

David Gold, founder and CEO of Dapix, which has been tasked with building the FIO Protocol, says that the risk involved in crypto transactions contributes to the current low utilisation of crypto in actual commerce. The FIO survey found that just 11% of recipients made a crypto purchase or transfer at least once a week. Over a quarter (27%) of respondents did not make one in an entire year and nearly half (43%) made only a few during that time.

“For all the hype there is about how ordinary people will be using cryptocurrencies to make daily purchases in the near future, our latest survey data shows that core usability issues must be solved for this to occur, says Gold.”

“The FIO Protocol will have the ability to overcome these usability issues by removing the risk, complexity and inconvenience of sending and receiving tokens and coins, so that people become comfortable with using crypto for day-to-day purchases. The user experience of sending and receiving crypto, with its immutable transactions, must be better than using fiat – not worse.”

With blockchain in its current form only having come into being in 2008, it’s still arguably early days for the technology and cryptocurrencies that ride on it. Indeed, Gold likens blockchain’s current drawbacks – as revealed by the FIO survey – as not unlike the growing pangs that the world wide web experienced.

“In the early days of the web, internet connections were horribly slow, web browsers were clunky and there was only text and hyperlinks. Similarly, blockchain technology has a number of key areas that will need to improve – and will improve – to enable greater adoption and usability by consumers and businesses including the financials.

“One of those areas is the actual usability of moving value on a blockchain. The FIO Protocol, which will go through alpha and beta testing this year, is an industry-driven initiative to solve many of these core usability issues by creating a decentralised Service Layer that sits quietly beside the underlying blockchain transactions.”

As a Service Layer, FIO will connect with user endpoints such as wallets, exchanges and crypto payment processors. This enables a layer of usability that is in a way analogous to how the HTTP protocol which governs the data packaging used by browser and web servers belies the complexities of the other underlying protocols that enable the WWW to work (such as TCP/IP, which is responsible for getting bits of data from one computer to another). For Gold, when it comes into being, the FIO Protocol will enable decentralised value on every blockchain to be sent and received as easily as using Venmo or Paypal but without a centralised third party involved in the transaction”.

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