Tokens and NFTs are already unfamiliar for many people, and there is a theoretical limit to how far the average person is willing to go to explore new experiences. In a purely non-custodial environment, most people will take one look at the screen where they are prompted to write down a 24-word “seed phrase” (the randomly generated phrase that constitutes their “private key,” or password) and decide it isn’t worth it.
If the goal is to onboard first-time crypto users, the experience must be custodial — at least to start.
This chart shows a pathway toward more widespread adoption of the full web3 experience — and the streamlined user journey that it will take for people to comfortably move from a custodial system to a non-custodial one.
Below we go into more detail about each of these steps, why they are important, and how they build on each other to promote confidence and excitement in emerging web3 activities.
Step 1: Onboard first-time crypto users seamlessly through familiar Web2 constructs (e.g., logging in with your email address). Many web3 apps that exist today invite users to log in by connecting their wallet.
This will likely be a default option for many applications in the future — wallet logins are extremely convenient and secure. But first time crypto users may be confused, overwhelmed, or even suspicious if they don’t recognize what they’re looking at. For many first-time crypto users who don’t have wallets, traditional login methods are the only option they’re willing to use when experimenting with a new app.
This is an especially important step of the user journey forcreators who are increasingly seeking to use web3 technologies to create new forms of fan engagement. Fans who support an artist early in their career might receive benefits in the form of creator access, recognition, and perks. (The design space here is almost infinite, and waves of innovation and experimentation are just beginning.)
Most fans will not be crypto-native, however, and asking them to obtain hardware wallets and create security systems is asking too much. A fan should be able to sign up, pull out their credit card, buy their favorite creators’ token, and see it in their account — it has to be intuitive and it must mirror familiar web2 experiences in order to see the user through their whole journey. No crypto wallet, key management, “gas” (transaction) fees, stuck transactions, or any other foreign user experiences.
In this way, creators can build shared digital economies with fans that they could take with them anywhere on the internet, but in a way that isn’t too intimidating or cumbersome for fans to join.
Step 2: Give the option to start engaging with the product in a simple, fully custodial experience. Managing private keys or seed phrases is part of everyday life for experienced crypto users, but most users that are encountering crypto for the first time will immediately give up when they see a message like this: “These 12 words are the only way to restore your accounts. Save them somewhere safe and secret: exhaust turtle silly pretty fog midnight enact throw journey nephew animal reward. Write this down.”
Instead of greeting users with this experience, it’s crucial to set them up with a familiar experience and then offer them the non-custodial option further down the user journey. Their initial signup flow should go more like: sign up, create username/password, agree to terms, start buying crypto. And then once they’re in the app and making transactions, they should have the option to self-custody and enter the broader web3 ecosystem.
Some projects have tried other solutions like embeddable iFrames that store the users’ seed phrases via their Google Drive. This is a tempting solution – super easy for the user and no need to write down their seed phrase. But the crypto community was quick to point out that this creates dangerous user habits, doesn’t adequately educate users on the risks they face, and makes their Google accounts hack targets. Rather than a halfway measure, it’s better to keep the experience clean for the user: start with the custodial experience they’re used to and then help them graduate to full self-custody when ready.
Step 3: Educate the user in the product and off platform. This is particularly important when it comes to security – most users don’t even use current day best practices (e.g. password managers, 2FA, etc) in Web2 apps and products. Introducing new experiences requires more education. Metamask does a good job providing their users with the content they need to stay safe.
As wallets build out more “first-time crypto user” features, expect to see wallets integrate this kind of education and content directly into the product.
Step 4: Create pathways to web3 wallets. Once users previously unfamiliar with crypto have been onboarded, web3 products can seek to move them along a path toward self-custody. An accessible web3 product has to make sure users can exit the system, such as by converting their assets to other forms of currency, or by taking them outside a given ecosystem into the wider web3 world. As users become more familiar, it should become easier for them to participate in creator economies seamlessly and not be beholden to a given platform. Coinbase, for example, makes it simple for users to move their assets to a non-custodial wallet. This means they can sign up, experiment with buying crypto, and then send their assets to a web3 wallet and interact with an entire ecosystem of apps.
At Rally, a social token community that I co-founded, users have the freedom to convert creator tokens to $RLY, the community’s native token, which they can then transfer to an ERC-20 (Ethereum-compatible) wallet that enables them to convert it to any cryptocurrency or interact with other communities (while the creator social tokens themselves are fully custodial right now, the ability to bridge out the tokens is coming soon).
The key to educating non-crypto-native users is to create an experience where fans can get onboard easily and participate in a highly functional product experience around social tokens, but still retain the flexibility to trade assets, liquidate, and pull value out as needed.
Of course, different consumer products necessitate different approaches. For Rally, we were already building on a sidechain, so it made sense to start out with a custodial approach. Just as we envisioned progressive decentralization for the RLY ecosystem, we decided the best approach for Rally would be to begin with a familiar experience for end users and build out capabilities to expand mainnet and self-custody capabilities over time. But other products would make different decisions; for example, decentralized trading, daily fantasy sports, or hardcore games that cater to higher spend users may be better suited for a non-custodial experience from the start. The sophistication of these user bases and increased need for trustlessness warrants a non-custodial user journey from the beginning.