> But it's worth getting to the fundamental issue with the right half of this design space: dealing with user errors. By far the most important type of error is: what if a user forgets their password, loses their devices, gets hacked, or otherwise loses access to their account?
> Exchanges can solve this problem: first e-mail recovery, and if even that fails, more complicated forms of recovery through KYC. But to be able to solve such problems, the exchange needs to actually have control over the coins. In order to have the ability to recover user accounts' funds for good reasons, exchanges need to have power that could also be used to steal user accounts' funds for bad reasons. This is an unavoidable tradeoff.
> The ideal long-term solution is to rely on self-custody, in a future where users have easy access to technologies such as multisig and social recovery wallets to help deal with emergency situations.
Not to dismiss this out of hand, but isn’t that the central problem? Users want to use Coinbase for convenience as much as for any other reason.
Saying “we’ll make it easier to host your own coins” is a bit like saying “we’ll solve the #1 problem with mass crypto adoption”.
> Users want to use Coinbase for convenience as much as for any other reason.
> Saying “we’ll make it easier to host your own coins” is a bit like saying “we’ll solve the #1 problem with mass crypto adoption”.
That's the point: Coinbase & CEXes have it easy because they can centralize - Their development efforts can be honed in more effectively.
The ultimate long-term goal is to remove the need for such entities in the first place, and make it easier/safer/cheaper with the use of rollups, on-chain insurances, social recovery wallets, DEXes, & integrated crowdsourced filter/allow lists.
>The ultimate long-term goal is to remove the need for such entities
But replace with what? With people like Vitalik? He seems to be an influential figure and calling the shots. How is this in any way different than a "normal" company with a CEO and a board?
Ideally, open-sourced & audited smart contracts that are ERC-compliant & developed by the general public, with the internal mechanisms made viewable to anyone that wants to learn how such mechanisms work.
> With people like Vitalik? He seems to be an influential figure and calling the shots.
Vitalik can point at where focus could be targeted at, but the decision is ultimately up to the developers themselves. In fact, as far as I can remember, most of the efforts mentioned in the post & image below are not publicly mentioned at all, with other developers leading the charge on that front. (Danksharding being one example, with the development efforts led by Dankrad Feist, hence the name.)
> How is this in any way different than a "normal" company with a CEO and a board?
The main difference is that development is not wholly left to one party: Anyone can choose to develop the applications that they want to see & deploy them onto the platform. Even if you're external from the main development efforts, you can still contribute to the overall ecosystem with code contributions towards one of the various nodes of the entire system. This stands in contrast with a standard company, where external development's forbidden outside of a special area designated for the general public to interact with.
> Saying “we’ll make it easier to host your own coins” is a bit like saying “we’ll solve the #1 problem with mass crypto adoption”.
Sure, I mean, we're still in the "dial-up era" of crypto and a big part of that is wallet UX. But if you're following the space closely, you can see there's been some solid efforts on that front.
Rainbow Wallet (https://rainbow.me/) is an iOS & Android wallet that backs up your private keys to iCloud/Google cloud. I think for smaller sums of money and valuables, this is a pretty good solution.
Argent (https://www.argent.xyz/) is a smart contract wallet that has a "social recovery" feature that allows you to delegate account recovery to a circle of trusted parties.
Gnosis Safe (https://gnosis-safe.io/) is another smart contract wallet that many DAOs use for treasury management, which allows for arbitrary multisig settings to be configured (like requiring 3 out of 5 signers or what have you).
Some of these still need work on UX, but the core tech is there. Another factor is blockchain fees. Layer 2s like Arbitrum (https://arbitrum.io/) and Starkware (https://starkware.co/) have already dramatically reduced fees (by as much as 10-20x and will likely get to 1000x reduction by the end of the decade).
Once the layer 2s and layer 3s are more mature, it's conceivable that a Coinbase or Kraken could run their own auditable rollup, even if the order book was run on a centralized server, at least the net balances would be held on-chain (Dydx https://dydx.exchange/ works like this currently).
If your only business is being an exchange you might not run into any issues if you consider all the decentralized exchanges that are still operating.
The problem arises if you add market maker, trading house, hedge fund, market research, and learn2earn to the mix.
#greedisgood.
Decentralised exchanges only deal with virtual tokens. Centralised exchanges are needed because people need to be able to trade these tokens for real assets.
> Exchanges can solve this problem: first e-mail recovery, and if even that fails, more complicated forms of recovery through KYC. But to be able to solve such problems, the exchange needs to actually have control over the coins. In order to have the ability to recover user accounts' funds for good reasons, exchanges need to have power that could also be used to steal user accounts' funds for bad reasons. This is an unavoidable tradeoff.
> The ideal long-term solution is to rely on self-custody, in a future where users have easy access to technologies such as multisig and social recovery wallets to help deal with emergency situations.
Not to dismiss this out of hand, but isn’t that the central problem? Users want to use Coinbase for convenience as much as for any other reason.
Saying “we’ll make it easier to host your own coins” is a bit like saying “we’ll solve the #1 problem with mass crypto adoption”.