Is onboarding too hard? Crypto adoption still faces major obstacles
Web3 has been the subject of speculation for many years now, and predictions about what will spur mass adoption are frequent, as are possible obstacles slowing the onboarding process.
Some, like Web3 gaming execs, have speculated crypto market hype, and several highly anticipated blockchain games could be the key to mass onboarding.
According to a Feb. 22 survey report from key management network Web3Auth, which had 3,378 responses from Web3 users, developers and decision-makers worldwide, respondents think there are still several issues that need ironing out before mass adoption can become a reality.
Speaking to Cointelegraph, Robert Hoogendoorn, the head of content at blockchain analytics platform DappRadar, said he thinks two obstacles in particular need to be overcome: a “simplified interface and user experience” and an increase in general consumer knowledge about cybersecurity.
“One of these has been improved heavily in the past few years, while the other could use some work. Did you know 60% of American consumers use the same password across multiple accounts?” he said.
“That’s the same audience you want to onboard into Web3, and who will act surprised that MegaPepeBitcoinToken turned out to be a rug pull? That’s just one of the major challenges ahead of us.”
At the same time, Hoogendoorn says it’s not uncommon for “technological advancement” to come with onboarding challenges. He thinks the Web3 industry has made “significant progress” in this area, though.
“Onboarding in Web3 is a challenge. Insiders praise the technology, but for the end-user, it’s all about the experience,” he said.
“Only now we’re reaching a point where Web3-powered financial services or video games reach a level of sophistication that could potentially onboard millions,” Hoogendoorn added.
Respondents in the Web3Auth survey claim the top hurdle holding people back from adopting Web3 is concerns about security and risks to people’s assets.
According to Hoogendoorn, the wider crypto industry has been “labeled a wild west for a decade, and that’s not something that goes well with the general public.” He thinks this perception of poor cybersecurity is an obstacle holding back users from Web3.
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Cases such as the mainstream coverage of the FTX collapse and the subsequent Sam Bankman-Fried trial, where he was sentenced to 25 years in jail for fraud, have done little to help with this perception.
Other high-profile crypto company collapses, such as the $10 billion Singapore-based crypto hedge fund Three Arrows Capital in 2022, have also contributed to the negativity that might be holding back mainstream users from onboarding into Web3.
Rug pulls and hacks are also a thorn in the side of Web3. Over $200 million worth of crypto has been lost to hacks and rug pulls in 32 individual incidents so far in 2024, according to a Feb. 29 research report by blockchain security firm Immunefi.
Education and positive PR may be the answer
Hoogendoorn believes the negative perception of Web3 will need to change to incite mass adoption of the tech, and that will likely require “lots of positive PR” from within the industry.
A change is also required for the general public, with better education about best security practices.
“In general, people are notoriously bad at managing their account names and passwords, as most of them don’t use 2FA and a big number uses the same password all the time,” Hoogendoorn said.
“People value safety but don’t act responsibly. In Web2, this can cause issues, but in Web3, this can result in your money being stolen instantly. And when this happens, it — again — rubs off negatively on our industry.”
Speaking to Cointelegraph, the BNB Chain Core Development Team said “multiple hurdles could act as blockers” when onboarding people into Web3. The most prominent are a lack of education and accessibility to unfamiliar user experiences or a lack of incentive mechanisms.
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“Mass adoption of Web3 will likely be facilitated by several key factors, including user-friendliness, secure and reliable infrastructure and education,” they said.
According to the team, Web3 can be difficult to navigate for those new to the space, so it’s important to “offer fun and engaging ways” to get involved, such as meme campaigns that offer incentives and rewards.
Overall, the BNB Chain Core Development Team says robust infrastructure, user experience and performance are all critical for onboarding more Web3 users.
“The path to mass adoption of Web3 will likely be gradual and multifaceted, involving innovative technology, user-friendly interfaces, and education,” they said.
“The priority should remain on improving the usability of existing technology rather than relying solely on breakthroughs to aid the transition from Web2 to Web3.”
Complex tech and uncertain regulations slow Web3 adoption
Pavel Salas, the chief growth officer at the Gear Foundation — the organization behind the Gear Protocol — said onboarding into Web3 is complex and hard to understand for non-technical users.
He told Cointelegraph Web3 applications are not always user-friendly, which poses a considerable barrier to adoption and can keep new users away.
“Take playing an on-chain game as an example. Initially, users need to download a wallet and acquire the necessary tokens — these could be specific to the game or a general protocol token like Ethereum or Solana,” he said.
“After setup, they face the ongoing requirement of paying for gas with each transaction.”
Sami Start, co-founder and CEO of developer integration toolkit Transak, told Cointelegraph that onboarding from fiat to crypto is at a critical bottleneck.
He says, “Less than 10% of global internet users own cryptocurrency, reflecting significant entry barriers.”
According to a market sizing report from cryptocurrency exchange Crypto.com, the global number of crypto users increased by 34% in 2023, growing from 432 million to 580 million people. Online data platform Statista estimates that as of April 2024, there were 5.44 billion internet users worldwide.
Start says regulatory complexities and the varied integration with existing financial systems make the transition into Web3 daunting for new users as well.
In May 2023, the European Council adopted the first comprehensive legal framework for the crypto industry.
However, other countries and jurisdictions have been slower to create a framework for crypto, with some outright banning its use.
Start also thinks because the Web3 space is fragmented with many blockchains and protocols, this can confuse users and limit the potential network effects that drive adoption.
“As an industry, it’s imperative to streamline these processes, ensuring that converting fiat to crypto is as simple as any traditional online payment,” he said.
“By addressing these challenges, we can make the blockchain’s transformative potential accessible to a broader audience and significantly increase adoption rates.”
Speaking to Cointelegraph, Ken Timsit, managing director at Web3 startup accelerator Cronos Labs, said that for most crypto users, onboarding takes place on a custodial crypto exchange platform first.
He says, “This step works very well nowadays because the top exchanges are regulated and implement KYC [Know Your Customer] controls.”
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KYC is a set of steps crypto exchanges take during onboarding to verify customer identity and perform due diligence to understand financial activities and risks.
Timsit says, “We would all like to onboard more mainstream users,” but he thinks an issue that needs to be addressed is how the tech is being developed; specifically, it needs to be geared toward mainstream users, not those experienced in crypto.
“Many of the recent success stories, such as liquid restaking, modular scaling protocols and memecoins, have been driven by an experienced user base,” he said.
“As a result, projects are currently incentivized to build primarily for OGs, whales and degens. At the same time, some mainstream users are still turned off by the lack of regulatory clarity.”
