In only thirteen years, blockchain technology has created an ecosystem worth over $1.4 trillion. However, mass adoption of cryptocurrency remains a dream until some significant hurdles are overcome. We focus on three problems:
- There are too many ways to irreversibly lose digital assets
- Exchanges are either custodial or expensive
- Loss of assets
It is too easy for crypto users to lose their digital assets, and it is a common occurrence.
To give a sense of scale: in 2018, digital forensics company Chainalysis estimated that there were 2.3-3.7 million lost bitcoins, worth $147– 236 billion at the time of writing. And that’s just Bitcoin, which although the most valuable cryptocurrency is but one of thousands. And this was several years ago. In short, the true value of lost assets is far higher.
Ways to lose money include entering the wrong destination address when making a transfer (by mistake or by fraud), by losing the private key to a wallet, and by not making arrangements prior to death.
Losses are final because blockchain technology is by definition immutable. Erroneous transactions cannot be reversed. In addition, the pseudonymity of blockchain technology means that it is very difficult to identify malicious actors.
As a result, many cryptocurrency users seek safety in centralized solutions. But custodial applications create a different kind of risk – theft by hackers. In addition, centralization is contrary to the purpose of cryptocurrency: a world in which people have complete control of their own money.
The majority of market trading volume takes place on centralized exchanges because they are easy to use and offer high liquidity. However, centralized exchanges are custodial and require KYC data, creating a target for hackers.
Decentralized exchanges provide a non-custodial alternative but present a different issue: slippage. Users lose money when conducting swaps via a DEX because the act of making the deal alters the balance of the shared trading pool, and thus the price of the tokens. And the more that is swapped, the bigger the discrepancy.
Billions of dollars of cryptocurrency are traded on crypto exchanges of both types every day - there is a real market need for a better solution.