What are Web3's Biggest Challenges?

We interviewed web3 users in various customer journeys to answer this question. See the age demographics breakdown below.

Users were segmented based on how often they do a blockchain transaction to understand their needs better.

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Curious Users: They prioritise convenience over self-custody and cold storage as they have relatively low crypto holdings. This segment is more inclined towards platforms like Revolut and Coinbase due to its user-friendly experience. They engage with web3 during market hype or out of curiosity, but their involvement remains limited to only buy and sell crypto assets.

‍Occasional Users: This user segment recognises the need for self-custody but finds current solutions inconvenient. Many feel intimidated by the technical hurdles; some bought hardware wallets and never set them up because of their complexity.

‍Power Users: They are willing to take the extra steps to be self-custodial. Understand the importance of web3 and what it stands for. This segment focuses on themes such as decentralised governance, unlocking new web3 use cases, and creating sophisticated DeFi models.

Using the interview question format below, we gathered feedback from these users with different needs, skills, security preferences, and risk tolerance. From here, we analysed the data and identified six recurring themes: Usability, Complexity, Accessibility, Regulation, Security, and Education.

Usability

1. Wallet Creation: The current web3 onboarding process remains challenging and complex, requiring multiple steps to set up.
2. User Interface and Experience: The user interface and experience are not as intuitive as they should be, especially for curious and occasional users. Current user journeys are created in a different environment than what they were used to in web2.
3. Seed phrases: Using seed phrases is widely disliked among all users; curious users don’t even know why this exists and why this is important. They feel that setting up a self-custodial wallet is very technical, intimidating and time-consuming.
4. Self-custody: Curious and Occasional users prefer not to bear the sole responsibility for their assets and prefer more user-friendly options.
5. Custodial: Convenience outweighs the desire for self-custody and decentralisation, leading many curious and occasional users to opt-in for custodial solutions like Revolut or Binance and FTX, which are susceptible to attacks.
6. Social Recovery: Occasional users often trust their parents with their seed phrases, while power users appreciate the idea of social recovery and delegating keys to trusted guardians.

Complexity

1. Pre and Post conditions: Curious and Occasional users don’t need to see this. They want to find a way to make web3 transactions without feeling lost or afraid.
2. Terminologies: Web3 terminologies are difficult to understand. An average user doesn’t know what web3 is or its difference with cryptocurrencies. We need to use terms that are more familiar with current user demographics.

Accessibility

1. Easy access to funds: Power users want convenient access to their web3 funds anywhere and anytime.
2. Movement Between Wallets: Whether new or experienced, users appreciate the ease of transferring funds or easily moving assets between hot and cold wallets. They prefer a trusted network or family of wallets.
3. Geographic Locations: Power users split their seed phrases into various locations to protect their assets. They would prefer a more convenient solution.

Education

1. Holding Amount: When considering a self-custodial solution, holdings play a significant role. Users who are new or curious about crypto often have minimal holdings and may not see the immediate need for self-custody. As a result, they tend to opt for centralised and convenient solutions.

Security

1. Wallet Type Combination: Power users employ a mix of hot and cold wallets for optimal asset security.For security-conscious power users, it is the go-to choice for self-custody.
2. Level of security: This is the main de-facto for power users opting for self-custodial solutions. How secure are these solutions?

Regulation

1. Reputation: The industry still lacks proper regulations and legislation, contributing to its negative perception.

Based on these findings, it is clear that there are significant opportunities for improvement in the web3 space. Users expressed the need for improved wallet creation processes, intuitive user interfaces, and reduced technical complexity. Easy access to funds and seamlessly moving assets between wallets were important factors for power users. Education played a role in users' decisions, with holdings and the perceived need for self-custody influencing their choices. Considering these insights, the battle for the best software and hardware wallet to be the best entry point for mainstream adoption is on.

If you’re looking for convenience and security in accessing Web3, join the #ryde.