This is part 4 of a seven parts series by Dr Ken Alabi, who has a Doctorate in Engineering from Stony Brook, a masters in Computer Aided Engineering from the University of Strathclyde, and is an IT professional, programmer, and a published researcher with over twenty publications in various fields of technology.
This is part of a series looking at issues that need to be solved in the next few months and years for digital currencies to grow to reasonable size compared to the tiny segment of the global economic system that they currently occupy. This segment focuses on ease of use. This one probably seems a little cliché compared to some of the other issues highlighted earlier in these series. Ease of use is a phrase that comes up often with any new technology. For digital currencies this is even more poignant considering how cryptic using them can be; literally.
This article advocates digital currencies need to go beyond the regular ease of use paradigm required of any new technology, and actually revolutionize how easy it is to use money, in general. This is because digital and thus programmable money actually provides a new slate upon which human-ergonomic features can be introduced that exceed what was previously possible. In short, digital currency could be poised to not only revolutionize money but also how easy it is to use it and make it work for its owner.
First, let’s start off with a top-level description of the characteristics of an ideal digital currency, to position it for more general adoption:
Using digital currencies should be so easy to use virtually everyone’s grandparent could use it.
This statement simply means that digital currency should be made easier to use than the processes and alternatives it is replacing.
Transformative Technologies usually also Come with Transformative User Interfaces
The history of technology has almost always had transformative change accompanied by relatively new, innovative, and convenient ways for people to interact with them. The personal computer is an example. Starting with a DOS character based screen in the early 80s, graphic user interfaces were soon developed and integrated with the technology and soon helped position it into a household and ubiquitous item. Similar is the role the web browser, HTML, dynamic web interfaces, AJAX, in progressive order, played on the Internet. Innovation in that area is still ongoing. We see similar transformation to mobile communications with smart phone interface and apps continuing to bring features to users in simpler and more intuitive ways. The point is that for transformative technology, in order to gain mass adoption, there usually has to be easy, simple, and comfortable ways for users to interact with the technology.
For digital currencies, it appears we are still kind of in the DOS phase of things, comparatively. Digital currencies and organizations that introduce transformative convenience features could have more impact on its future, as much as solutions to any of the prior issues raised in this series could.
Current Challenges with Using Digital Currencies
The following are the current challenges with digital currencies:
Obtaining a digital wallet, buying, selling, and moving digital currencies is still quite challenging. Even though the wallet address is pretty much just akin to an account number, its hexadecimal and long length is intimidating to new adopters of the technology.
It is very easy to lose digital currency funds. I know many who actually have been able to negotiate the process of opening a wallet account and have been using digital currencies for a while only to mistakenly send their money to a wrong address or worse to a contract and pretty much lose valuable funds. It truly is currently easier to lose digital currency in handling errors more than with fiat accounts.
It is still challenging to obtain digital currencies. Since most jobs do not yet pay salaries in digital currencies, to obtain one usually means exchanging it for fiat. The currently available ways include either finding someone locally to purchase from, or using an exchange or service. These services can take over seven days, and charge high fees. The challenge is even worse for most people in rural communities, and the unbanked or insufficiently banked that could most benefit from the technology.
There are a lot of scams and phishing activities in digital currencies that result in loss of funds. Fake clone sites of legitimate exchanges, services, and digital currency sites or of initial coin offerings (ICOs) sites, and ads on search engines that ensnare people to phishing sites all contribute to the ease with which users lose funds or have them stolen.
Digital currencies are based on cryptographically signed electronic messages that ensures that only the owner of an asset can sign a message modifying or moving it. This is done via a private-public key mechanism, where only the owner of private keys can modify or sign messages related to the public key. Much of all money, even fiat money is now digital, what separates digital currencies as referenced in this series is that the money can only be modified via encrypted signatures, whereas fiat digital money is managed by trusted entities on behalf of its owner. This advantage does come with a downside in that loss of private keys pretty much means loss of the digital asset. This happens quite frequently to digital currency assets.
Current and Ongoing Solutions to the User Interface Issues
As stated earlier, solutions to the user convenience and accessibility aspect of digital currencies are at their nascent stages. Much effort currently focuses on some of the other challenges such as scaling issues, navigating regulations, anonymity issues, and consensus algorithms. However, some of the initiatives and technologies that will bring digital currency into mass usage as it relates to user convenience, are already proposed, in development, or already developed and slowly percolating through the system. Some of these are listed here.
Digital Currency Address Aliasing
End users should not really need to be typing the long and cryptic account addresses that represent a public address on the blockchain. This is so unnecessary. The digital currency could implement an aliasing system such that when that friendlier name is used, the digital currency internally converts it to the actual public address; using like a hash or look up table. This is similar to what Domain Name System (DNS) does for web sites. Imagine if we had to type IP and port address, such as http://169.800.89x.88x:80/ to reach websites rather than something easier like http://ken.alabi.com, and how far Internet websites could have gone without that simple innovation.
An address aliasing could use the name of the account holder, as desired. Or it could use email addresses. Using email addresses is similar to what Paypal did to make sending and receiving money easier. We also see similar convenience now with services such as Ezelle or Venmo, where phone numbers could be used as an alias to an account. This simple idea implemented for digital currencies would go a long way. It might seem that this could simply be implemented at the off-chain level such as on upcoming side chains, prepaid debit card digital currency to fiat side-chain networks, and exchanges; as listed in Part 3 of this series. For instance, Coinbase does allow users to send digital currencies between each other using email aliases when they have account in the exchange. However, this would be best if implemented on the chain so that the alias carries over regardless of the service or channel a transaction is initiated from.
Greater Liquidity and Less Wait Times Converting to Fiat Currencies
This is important enough that the title “Digital currencies need greater liquidity” almost got its own segment in this series. Currently, it takes several days to move fiat currencies to an exchange to convert to digital currencies. There are similar long wait times for the reverse. For those who choose to buy and sell digital currencies locally, they need to endure potential meeting with strangers to complete the transaction. In all these instances, the issue is that digital currencies are not yet sufficiently liquid.
Several developments are already taking place that will significantly change this situation. One such development is the increasing embrace of digital currencies by liquidity providers and the established financial industry. Recently, the CME group, a prominent derivatives trading group on Wall Street designated Bitcoin as an asset class and revealed plans to set up futures trading in the currency. We also expect upcoming prepaid debit card digital currency to fiat side-chain networks to also serve as liquidity provider and offer instant digital currency to fiat conversion.
Greater Security of End User Products and Services
Incidence of phishing of user private keys, and outright scams can negatively impact adoption. When people lose their funds to scams, not only will they have fewer funds to participate in using digital currencies, their reports of the same to others will delay even further adoption. There are improvements here as well. Digital currency websites are beginning to make greater use of the highest-grade site certificates that display the organization name on the website (Extended Validation SSL) so that users recognize they are on the intended site rather than a phishing one.
Earlier on a larger proportion of digital currencies transactions were due to dark web activity where people go to conduct illicit or outright illegal transactions. As digital currencies mature, the percentage of transactions that are of those types is becoming less. The expectation is that this issue will improve with time. Regulations are also expected to be incrementally introduced, that will additionally have an effect of reducing activities that negatively impact user adoption.
Password Security Services
These are services that will help secure user private keys from loss, and resulting loss of valuable funds. However, the technical details of this is slightly involved and belongs in a different forum.
Future Innovation to the User Interface Issues
Everything listed above would no doubt enhance the use of digital currencies. However, the above listed solutions are more reactive than transformative. The amalgamation of biometrics, digital identity, and digital currencies is more likely to represent the transformative user features of the type imagined here. Biometric data as the alias to private keys represents a huge leap forward in the handling of digital currencies. It not only makes using them several times easier, it solves the problem of password loss and loss of accounts and funds associated with it. The impact of biometrics on digital currency is so much stronger than its impact on fiat currency account applications since for digital currency there is no third party to help mediate or manage accounts for the owner. Biometric systems using finger print access, voice and facial recognition are already here and being incorporated into centralized and decentralized applications and user interfaces built for digital currencies.
The Concept of Personal Digital Identity
This brings us finally to the concept of personal digital identity. Not only does digital currency change how money operates by merging the cryptographic signature of its owner into money itself, it also potentially allows the reverse; which is to bind economic activity to an identity. This allows the blockchain to provide accurate representation of an identity’s financial history and performance when authorized, say for activities such as credit and investments. Recalling that money, credit, and the accounting for the value of assets are intrinsically tied, the ideal digital currency needs to be formulated to serve the full function of money even when the dimension of time is introduced in its definition.
The views here are provided freely and could be freely used in whole or part, hopefully with a kind reference to the article. It is not intended as investment advice and should not be used in that capacity.