Cryptocurrency adoption: Lessons from Binance, Brave and privacy tech
Even now we can still look forward to a timeline of years on cryptocurrency mass adoption.
"I think there are certainly a lot of people who care about their privacy very deeply," Binance CEO Changpeng "CZ" Zhao said to Finder.
"There are a large number of people who don't have a choice, who actually have not been attuned to it, but for anybody who's actually researched what people do with the data, and what kind of data tracking is happening in the traditional sort of products, I think most people would be very alarmed."
But privacy is not the same thing as cryptocurrency, he added.
Other than them literally being two completely different concepts, one of the big differences is that getting cryptocurrency means actually spending money, while getting privacy is practically free.
"Whereas, investing in cryptocurrency means taking money to buy the fluctuations, et cetera, protecting privacy has no downside," CZ said. "There's really nothing you will lose from protecting your privacy – there's only upside."
"And I think most people will if given a choice. You could choose to protect your privacy, or you could choose to have like a gazillion companies all have your data, and know where you are each day, know what you spend money on, know what you browse."
"I think almost 100% of people will choose to have the privacy."
Not so for cryptocurrency. The vast majority of people can't and won't default to crypto in everyday life.
Privacy and cryptocurrency are two completely different things and crypto is in many ways a much tougher sell than privacy.
Tor, first launched in 2002, is the world's best-known and probably most effective online privacy project.
On a technical level, Tor and Bitcoin are both cut from the same cloth.
Cryptography puts the crypt in encryption and the crypto in cryptocurrency. Bitcoin's first public appearance was on a cryptography mailing list and both Bitcoin and Tor were designed around a decentralised network in order to facilitate exchanges without letting third parties spy on or censor them.
Something else Tor and Bitcoin have in common is that they're not companies or products. They're open source technologies being orbited by various non-profits and commercial entities. Anyone can go around evangelising them, building related applications and projecting various moral standards onto them, but there's no concerted organised push for growth.
If Bitcoin and Tor were businesses, neither would be doing very well.
Overall, both Bitcoin and Tor are still relatively little used.
Where the action is
There are only 2 million or so daily Tor users, but that's the deep end of online privacy.
Both are dwarfed by VPNs though. There are an estimated 1 billion regular VPN users according to Statista, with more than a quarter of the world's over-4 billion Internet users popping on a VPN at least once a month.
Roughly 500 times more people use VPNs than use Tor.
And although fuzzy, it's also interesting to note the vague correlation between interest in VPNs and crypto.
Cryptocurrency and privacy aren't the same thing, but they seem to rhyme.
In both cases, one of the keys to growth may be working out how to distill more abstract concepts like privacy, sound money or disintermediated transactions into something that's easy to use and more directly valuable for the everyday consumer.
This is what VPNs are doing.
They're created by for-profit companies, they're designed for ease of use and they couch the concept of online privacy in practical terms that make people want to go out and buy some privacy.
They talk about security and how hiding one's location can protect against identity theft. They talk about how you can access content that's not available in your country, how concealing your search history can help you find cheaper flights and they talk about why their products are the fastest/easiest/best.
By contrast, the Tor Project is offering something a little more abstract.
Our mission: To advance human rights and freedoms by creating and deploying free and open source anonymity and privacy technologies, supporting their unrestricted availability and use, and furthering their scientific and popular understanding. – The Tor Project
It's important and world-changing. Tor is a vital tool for whistleblowers, journalists and many more, but it's not wrapped in a package that will resonate with too many people.
To be clear, this is not to suggest that the Tor Project should start buying ads or trying to appeal to consumers. Mass adoption is not really what it's all about.
Cryptocurrency as a whole and Bitcoin in particular are aiming for mass adoption though.
Unfortunately, its benefits often aren't communicated very effectively.
Money without masters.
Rules without rulers.
Freedom without fiat.
— Bitcoin (@Bitcoin) April 1, 2020
Everyone agrees that Bitcoin equals freedom (or Lambos, whatever floats your boat), but no one can give you the exact Bitcoin-to-freedom exchange rate.
Even the gold narrative, where Bitcoin is a hedge against fiat currency debasement, is fairly niche. It's probably no coincidence that roughly the same number of Americans own Bitcoin as own gold. It's believed to be in the 7–10% ballpark for both, although no one really knows for sure in either case.
It's often taken as self-evident that with everything going on in the world today, Bitcoin is going to achieve mass adoption.
But as we can see from the gradual uptake of online privacy techniques and the user base disparities between them, it might not be that simple.
So, through the lens of privacy technology uptake and its similarities and differences compared to cryptocurrency, what kinds of practical observations can we make about the potential road to cryptocurrency mass adoption?
The case study: Binance and Brave
An excellent place to look is the recent partnership between Binance and the Brave browser, because it's simultaneously an intersection of two of the largest crypto companies, of cryptocurrency and privacy and of cryptocurrency and real-world applications.
Binance is the world's largest cryptocurrency exchange by volume and Brave is a privacy-oriented browser that's integrated the Basic Attention Token (BAT) cryptocurrency for payments between advertisers, publishers and users.
The idea is basically that instead of all the ad revenue being siphoned off to middlemen like Google and Facebook, even as publishers starve, advertisers get gouged and users are hounded and harvested, the ad revenue remains inside the ecosystem to create a win-win-win for all participants.
Users can opt into viewing ads if they want and get paid to do so. Publishers get a larger piece of the pie and advertisers can reach a more receptive and relevant audience.
"The current ad tech ecosystem on the Web is criticised by users and creators alike because it plunders user data and robs publishers of much-needed revenue, as well as enabling ad fraud and malware distribution (malvertising, mostly ransomware)," explained Brave CEO Brendan Eich to Finder.
"Privacy and crypto solutions have the potential to put control back in users’ hands and to reconnect publishers with their audiences directly, without toxic conflict-of-interest-ridden intermediaries, so it’s vital to promote solutions that are easy to use in order to move the needle."
The Binance-Brave partnership is aimed at allowing more straightforward conversions between BAT and other currencies, making this solution that much easier to use.
"When you start a new Brave browser tab, there's a default blank page. It shows up on that page," CZ explained. "And that's it. That's also the same page where you see your Brave token rewards, so I think a lot of users are going to see that very easily, but it's not intrusive."
"This is one of several steps Brave is taking to normalise crypto for more users and to make it usable by most people over time," Eich noted.
1. Give people a reason
In this way Brave is a perfect example of how high-level cryptocurrency features, such as the ability to make disintermediated payments, can be manifested as practical, desirable and easy-to-use benefits for end users.
It's analogous to the way VPNs have seen dramatic uptake by translating features like "hide your location" into benefits like "watch The Daily Show online in Australia".
As a result, Brave is one of the world's most-used cryptocurrency projects.
"As far as I understand, Brave has three key features that are very attractive," CZ said.
"Number one is it's very privacy-driven, so your data is not uploaded to different servers, kept in the cloud and then a bunch of algorithms run on you, and stuff like that. They [also] have very minimal ads, so when you use the Brave browser it blocks ads, so you don't get a lot of distraction with lots of ads. Some websites are not usable without Brave now."
"The third really important thing is Brave browser is one of the more successful products in the crypto space, especially in terms of large number of users," CZ said. "They have, I think, a few months ago they reached like 12 million monthly active users which is probably the largest user base [in cryptocurrency]."
"Granted, it's browser users. So compared to like Chrome, it's still a very small number. But it's gaining traction, it has a large number of users and it's crypto driven," he said.
While only a fraction of Brave users have signed up for the BAT crypto rewards, it's a very sizeable fraction.
"Out of our over 12 million monthly active users, over 1.6 million Brave users have opted into Brave Rewards and are active in the last month, possibly earning BAT and contributing it to creators or otherwise redeeming it," Eich said.
Brave also receives many testimonials from crypto users that use Brave, but don't use BAT rewards, Eich noted.
The takeaway here might be that genuine, demystified value propositions, a la Brave and VPNs, are important.
That's how you reach new users rather than just preaching to the choir.
2. Frictionless onboarding is key
As CZ said, people can get into online privacy with zero downsides as simply as flicking a switch or using a different browser. Most people have an underlying preference for privacy.
You'd think browsers like Brave, paired with VPNs, would be the default by now after years of privacy scandals and rampant identity theft.
But they're not. Whatever incumbent people have in front of them, whether it's Microsoft Edge and Bing or fiat currency and their 401 (k), is the default. Before someone changes browsers or buys Bitcoin they have to make a conscious decision to do so, which is often triggered by some kind of event.
In the case of Brave, these events are often privacy scandals that bring in new waves of users. Coronavirus was a similar event, bringing Brave over a million new users in March alone.
Reducing friction helps bring in more new users during these waves, Eich said.
"Every time a privacy scandal is in the news, users seek new solutions to protect their data. Ease of use is key for adoption, and reducing friction brings in new layers of users," he said. "At the same time, lead users tend to influence markets and to pave the wave towards the adoption of innovative solutions."
"The main thing is to keep reinforcing that users can and should be in charge of their data in order to rebalance the system, and to make products that put the user first so that every experience they have leads to retention and more active users."
One of these experiences is to start using BAT in addition to Brave. This is another decision for users, with new frictions for users to overcome, some of which are endemic to blockchain technology.
It's largely up to the cryptocurrency exchanges and providers like Brave to help solve these. That's what the integration of the Binance widget into Brave is for.
"On specific challenges of key loss, bad sends, and other accidents all too easy with low-level or “raw” crypto, Brave can reduce or even eliminate risk," Eich said.
"We are adding non-custodial crypto wallet support for many assets... With partners starting with Uphold and adding Binance, Brave makes custodial account-based wallets easier and safer to use in specific ways: BAT you earn from Brave Rewards as a user or creator; BTC, ETH, etc via the Binance widget."
"As we add support for ENS (Ethereum Name Service) and possibly other name services, the risk of bad sends from the user’s Crypto Wallets drops dramatically."
"These are just some examples of how the unity and simplicity of browser integration helps crypto be easier to use, with lower education costs to get started and keep going."
It's also important to note that the idea of cryptocurrency exchanges as the primary "intake point" for new users could increasingly be a thing of the past.
As systems like Brave Rewards increasingly reach maturity, and as the functions of cryptocurrency increasingly move beyond just buying low and selling high, new
bagholders users will start onboarding into the crypto ecosystem in many more ways.
Binance is preparing for this by leaning into more of an open platform model, CZ said.
"So for the first couple of years we've been focusing on like a centralised exchange," he said. "But now we want to operate more like an open platform where different other ecosystem players, products and tools can integrate directly with our exchange, but without the user kind of feeling it, right?"
"So, this is a small step in that direction. We basically definitely want to push this out to more people and make Binance the sort of backend engine in this kind of structure," he said.
"I would say we collectively call this the Binance open platform initiative, where the DEX and chain is part of it."
3. It will take more time than you think
It's worth highlighting the sheer numbers involved in mass adoption. The world is just so big and billions of people is just so many that reaching a potential audience of a billion people simply takes time, even in ideal circumstances.
If a service starts off with a million users and hits that sweet hockey stick of exponential growth year after year, it will still take years before it reaches a billion users, assuming it's even capable of handling that level of growth.
This gives incumbents, whether those incumbents are Google or a central bank, many opportunities to respond and improve their products to remain competitive, whether that means releasing a central bank digital currency or paying lip service to privacy while lobbying for the right to harvest data.
Crypto mass adoption will involve a lot of time and a lot of not-yet-seen variables.
And looking at the trajectory of VPN and privacy browser adoption, it also looks like it will take many, many events over the course of many years for adoption to grow or perhaps just one continuously ongoing event.
Still, even in the event of economic collapse and total currency debasement, it probably doesn't pay to overestimate people's willingness to shift to crypto or the pace of the change.
Turkey is believed to have one of the world's highest Bitcoin ownership rates following massive economic upheaval in 2018, but its Bitcoin ownership rate is still only 18%.
Argentina, Venezuela and others have experienced similar troubles in recent years, resulting in small local spikes in Bitcoin interest, but nothing like mass adoption.
Even if Bitcoin is about to land in the most fertile conditions it's ever seen, which looks very possible, you're still looking at a timeline of many more years of ups and downs.
"I think right now, with the amount of money being printed, it really forces a positive narrative on cryptocurrency," CZ said. "Cryptocurrency is a limited supply, you cannot print it arbitrarily."
"I think the infinite quantitative easing is going to really push people into crypto."
"It's not an immediate process. It's not like it's going to suddenly push everyone," he mused. "But the force of pushing is definitely increased, and I think over time we'll see faster conversion rates going forward."
It may take time and there will probably be a lot more ups and downs in the coming years, but that's something many crypto people are used to now.
"I took a nosedive into cryptocurrency," CZ recalled. "I kind of jumped straight in. It took me about a half a year to fully understand it – so that was in mid 2013 – and by the end of 2013 I was pretty convinced... I sold my house converted all of that into Bitcoin back in early 2014."
"I sold the house and bought the Bitcoin at US$600 per Bitcoin. It dropped to US$200 very shortly after that, and then stayed there for about a year and a half, so it wasn't all smooth sailing!"
"For some stuff, you can use logic," CZ said. "But in the short term markets don't always follow logic because there's a lot of psychology and emotions. People are overreacting, mass psychology kind of stuff."
"But if you zoom out to like a 1-year, 5-year, 10-year horizon, logic comes into play. Bitcoin is in limited supply and inflationary currency keeps increasing. And right now it's increasing to infinity, it looks like. So the fundamentals do play out in the long term."
"So things have worked out quite well," CZ said. "At least for me personally."
Disclosure: The author holds BNB, BTC and a sense of general apprehensiveness at the time of writing.
- SEC crackdown on Binance, Kraken – What it means for Aussie investors
- Sam Bankman-Fried found guilty – what it means for Australian FTX victims
- Bitcoin’s price soars over 10% on ETF rumours – here’s why
- New regulations for Aussie crypto exchanges: What it means for investors
- Sam Bankman-Fried’s FTX trial starts tomorrow – what it means for FTX customers