Can they overcome the product limitations of blockchain and deliver the world-class experience that consumers expect?submitted by mickhagen to genesisblockhq [link] [comments]
This is the second part of Crypto Banking Wars — a new series that examines what crypto-native company is most likely to become the bank of the future. Who is best positioned to reach mainstream adoption in consumer finance?
While crypto allows the world to get rid of banks, a bank will still very much be necessary for this very powerful technology to reach the masses. As we laid out in our previous series, Crypto-Powered, we believe companies that build with blockchain at their core will have the best shot at winning the broader consumer finance market. We hope it will be us at Genesis Block, but we aren’t the only game in town.
So this series explores the entire crypto landscape and tries to answer the question, which crypto company is most likely to become the bank of the future?
In our last episode, we offered an in-depth analysis of big crypto exchanges like Coinbase & Binance. Today we’re analyzing non-custodial crypto wallets. These are products where only the user can touch or move funds. Not even the company or developer who built the application can access, control, or stop funds from being moved. These apps allow users to truly become their own bank.
We’ve talked a little about this before. This group of companies is nowhere near the same level of threat as the biggest crypto exchanges. However, this group really understands DeFi and the magic it can bring. This class of products is heavily engineer-driven and at the bleeding-edge of DeFi innovation. These products are certainly worth discussing. Okay, let’s dive in.
Users & AudienceThese non-custodial crypto wallets are especially popular among the most hardcore blockchain nerds and crypto cypherpunks.
“Not your keys, not your coins.”This meme is endlessly repeated among longtime crypto hodlers. If you’re not in complete control of your crypto (i.e. using non-custodial wallets), then it’s not really your crypto. There has always been a close connection between libertarianism & cryptocurrency. This type of user wants to be in absolute control of their money and become their own bank.
In addition to the experienced crypto geeks, for some people, these products will mean the difference between life and death. Imagine a refugee family that wants to safely protect their years of hard work — their life savings — as they travel across borders. Carrying cash could put their safety or money at risk. A few years ago I spent time in Greece at refugee camps — I know first-hand this is a real use-case.
Or imagine a family living under an authoritarian regime — afraid that their corrupt or oppressive government will seize their assets (or devalue their savings via hyperinflation). Citizens in these countries cannot risk putting their money in centralized banks or under their mattresses. They must become their own bank.
These are the common use-cases and users for non-custodial wallets.
Products in MarketLet’s do a quick round-up of some of the more popular products already in the market.
Web/Desktop The most popular web wallet is MetaMask. Though it doesn’t have any specific integration with DeFi protocols yet, it has more than a million users (which is a lot in crypto land!). Web wallets that are more deeply integrated with DeFi include InstaDapp, Zerion, DeFi Saver, Zapper, and MyCrypto (disclosure: I’m an investor and a big fan of Taylor). For the mass market, mobile will be a much more important form-factor. I don’t view these web products as much of a threat to Genesis Block.
Mobile The more serious threats to Genesis Block are the mobile products that (A) are leveraging some of the powerful DeFi protocols and (B) abstracting away a lot of the blockchain/DeFi UX complexity. While none get close to us on (B), the products attempting this are Argent and Dharma. To the extent they can, both are trying to make interacting with blockchain technology as simple as possible.
A few of the bigger exchanges have also entered this mobile non-custodial market. Coinbase has Wallet (via Cipher Browser acquisition). Binance has Trust Wallet (also via acquisition). And speaking of acquisitions, MyCrypto acquired Ambo, which is a solid product and has brought MyCrypto into the mobile space. Others worth mentioning include Rainbow — well-designed and built by a small indy-team with strong DeFi experience (former Balance team). And ZenGo which has a cool feature around keyless security (their CEO is a friend).
There are dozens of other mobile crypto wallets that do very little beyond showing your balances. They are not serious threats.
Hardware Wallets Holding crypto on your own hardware wallet is widely considered to be “best practice” from a security standpoint. The most popular hardware wallets are Ledger, Trezor, and KeepKey (by our friends at ShapeShift). Ledger Nano X is the only product that has Bluetooth — thus, the only one that can connect to a mobile app. While exciting and innovative, these hardware wallets are not yet integrated with any DeFi protocols.
StrengthsLet’s take a look at some of the strengths with non-custodial products.
WeaknessesNow let’s examine some of the weaknesses.
Wrap UpOne of the great powers of crypto is that we no longer depend on banks. Anyone can store their wealth and have absolute control of their money. That’s made possible with these non-custodial wallets. It’s a wonderful thing.
I believe that the most knowledgeable and experienced crypto people (including myself) will always be active users of these applications. And as mentioned in this post, there will certainly be circumstances where these apps will be essential & even life-saving.
However, I do not believe this category of product is a major threat to Genesis Block to becoming the bank of the future.They won’t win in the broader consumer finance market — mostly because I don’t believe that’s their target audience. These applications simply cannot produce the type of product experience that the masses require, want, or expect. The Weaknesses I’ve outlined above are just too overwhelming. The friction for mass-market consumers is just too much.
The winning bank will be focused on solving real user problems and meeting user needs. Not slowed down by rigid idealism like censorship-resistance and absolute decentralization, as it is with most non-custodial wallets. The winning bank will be a world-class product that’s smooth, performant, and accessible. Not sluggish and slow, as it is with most non-custodial wallets. The winning bank will be one where blockchain & crypto is mostly invisible to end-users. Not front-and-center as it is with non-custodial wallets. The winning bank will be one managed and run by professionals who know exactly what they’re doing. Not DIY (Do It Yourself), as it is with non-custodial wallets.
So are these non-custodial wallets a threat to Genesis Block in winning the broader consumer finance market, and becoming the bank of the future?
No. They are designed for a very different audience.
Other Ways to Consume Today's Episode:
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Bitcoin News: Crypto ransomware payments are skyrocketing, while Binance announces its own blockchain and FinCEN has penalized a P2P virtual currency exchanger. In 2013, FinCEN issued the 2013 VC Guidance which described what CVC is (it’s everything under the blockchain umbrella). That guidance initiated the terms “exchanger” (for example, when you turn fiat currency into bitcoin through Coinbase ) , “administrator” (any token created and put into circulation — when the administrator has the power to withdraw it from circulation. FinCEN Slaps Bitcoin Mixing Service with $60 Million Fine . By David Hundeyin. 20 October 2020, 07:58 GMT+0000 . Updated by Kyle Baird. 26 October 2020, 13:23 GMT+0000. Share Article. Share Article. In brief. FinCen has slammed Larry Dean Harmon, founder of Coin Ninja and Helix with a $60 million penalty for violating the Bank Secrecy Act. Harmon had earlier appealed for donations from the ... On May 9, the US Financial Crimes Enforcement Network (FinCEN) issued a 30-page guidance detailing the regulatory scope of its cryptocurrency AML requirements for businesses and its expectations for compliance. 1. In light of FinCEN’s cryptocurrency guidance, we have identified three key steps to success for your crypto business - including how to obtain transactional transparency and manage ... E.g. you are trading on Binance, which is an offshore site and your account is worth at least $10,000, you are required to disclose your account value to the United States Treasury under FBAR (Foreign Bank Account Reporting) guidance on a FinCEN (Financial Crimes Enforcement Network) Form 114, if you meet the filing thresholds. Failure to do so can result in serious monetary penalties and/or ... On Thursday (May 9, 2019), the U.S. Financial Crimes Enforcement Network (FinCEN) published new guidelines showing how anti-money laundering (AML) laws FinCEN recently unveiled a new guideline showing how anti-money laundering (AML) laws apply to Bitcoin and the rest of the cryptocurrency. The US Financial Crimes Enforcement Network recently clarified its stance towards cryptocurrencies.In a conference last week, FinCEN Director Kenneth A. Blanco discussed how his agency is approaching cryptocurrencies – and why future regulations may be necessary.. Blanco’s statements took place during the 2018 Chicago-Kent Block (Legal) Tech Conference at the Chicago-Kent College of Law at ... Even though FinCEN did not issue a guidance saying that cryptocurrency needs to be reported under FBAR, the agency also did not issue any statement saying that you will not be implicated for FBAR violations in the future if you don’t report cryptocurrency on your FBAR now. In other words, FinCEN can look back and penalize you in the future, and there is no way for you to go back to change ... A question I often receive is whether clients holding Bitcoin or other cryptocurrency are required to file Form FinCen 114 (colloquially called the “FBAR”).. Unfortunately, as with many cryptocurrency tax issues, the answer isn’t fully clear. FBAR reports are required of all “United States persons” who have an account with a foreign financial institution. It is vital to be aware that, despite the latest FinCEN guidance, Bitcoin tax regulations are likely to continue fluctuating. In its own words, FinCEN remains “in consultation with the IRS… to evaluate the value of incorporating virtual currency held offshore into the FBAR regulatory reporting requirements.” In other words, FinCEN and the IRS seem to still be considering a different ...
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