Onboarding and Offboarding
The fundamental flaw in blockchain adoption lies in the challenges of onboarding and offboarding users. The current financial and political infrastructure makes it difficult for people to enter and exit crypto ecosystems easily.
This limitation, coupled with regulatory hurdles and public skepticism, presents a significant barrier to widespread adoption.
Onboarding to and offboarding from a blockchain is challenging for first-time users.
An estimated 30 million developers work worldwide1, representing less than 0.5% of the global population, meaning 99.5% lack formal technical training in computer science. Blockchains are advanced implementations of concepts in advanced computer science categories, so it's difficult to explain their safety and utility concerns to non-technical individuals. Even technical individuals have their pushback due to ideological differences or disinterest.
But the problems go deeper than this.
Many ideas are in progress, but only two well-adopted methods exist for funding a blockchain account: using a centralized exchange (CEX) or a third-party integration. A CEX presents multiple complications and requires a Know Your Customer (KYC)-verified bank account connected to a KYC-verified centralized exchange that has yet to go under.
Third-party examples include companies like Moonpay and Flexa, which integrate with CEXes and over-the-counter (OTC) desks to provide users with a quick way to fund their blockchain accounts. These options come with relatively high fees and wide trading spreads, not to mention the censorship built into the flawed and risky KYC/AML procedures that we all must abide by.
I'm not including the option to fund it with another wallet because that wallet would have had to be funded via one of the two options above, which creates a chicken-and-egg problem. Validator and miner rewards may be an exception to this rule, but when you offboard, you run into the same issues listed below that affect everyone else.
Let's say you onboarded correctly and have USDC in a digital wallet. Now you're financially free and scouring DeFi Telegram channels with the word 'Ape'2 in their names to find the highest yield for your tokens.
Non-custodial digital wallets embody two concepts we're familiar with—investment and checking accounts. This account you just funded is your investment account, and you collateralize your entire portfolio to leverage long on Dogecoin (DOGE). Elon goes back on SNL and says you can buy a SpaceX rocket with it. Shortly after, DOGE's market cap exceeds Bitcoin (BTC), and you sell at the top. You've increased your money tenfold, and now you must withdraw. Once you do, your work life will become optional—achieving Financial Independence, Retire Early (FIRE).
If all goes well, you withdraw from your CEX and then to your bank from the CEX. Your bank happily accepts the transaction because it feels comfortable working with crypto companies like CEXes, given their history of good behavior.
Many things can go wrong during the above process, even if everything goes right on-chain. The on-chain capital is largely inaccessible unless you're spending out of your blockchain account, which is impossible for most purchases yet. Maybe you could get an in-person loan collateralized by on-chain assets, pseudonymously purchase gift cards, or do an in-person peer-to-peer exchange in a crypto-friendly Special Economic Zone (SEZ), but that won't be realistic for most people.
If you understand the financial plumbing behind both of the above options, you can appreciate how limited the idea of monetary sovereignty is from a censorship perspective. Suppose the US wants to significantly restrict crypto traffic within its borders. In that case, it could block all bank transactions with centralized exchanges and prevent individuals from transacting with vendors like Moonpay and Flexa. That is a significant problem for those who believe in the ethos behind blockchain technology, and there is no clear or scalable solution.
In a world where all blockchains are made illegal by the US and other major economies, there will likely be fringe blockchain users and governments that are not trying to compete with first-world capital controls. The industry has a disproportionately high percentage of technical people—an estimated 5-10% of blockchain users have technical backgrounds3, compared to approximately 0.5% in the general population mentioned above. Blockchains want to be like cockroaches, but it's a case-by-case basis regarding how decentralized they are. It's unrealistic to think the technology goes away, but its implementation is not straightforward in the scenarios I'm describing.
The reality is that DeFi's value depends on your location. If you're not one to care about self-sovereignty or permissionless markets, can trust your banks, and are not trying to speculate, DeFi likely isn't for you. Currently, the risks likely far exceed the benefits for people in that position. Blockchain products may still be helpful and fun, but they're only necessary if your location requires them and you prefer a self-custodial alternative to manage your finances—such is the case for many in Argentina, Venezuela, and elsewhere experiencing hyperinflation or strict capital controls.
Blockchains and what they enable are amazing feats of engineering, but the political and financial infrastructure surrounding them requires significant improvement. A blockchain and everything it enables is only as strong as its weakest link, and until further notice, onboarding and offboarding remain its fatal flaw. Until public sentiment shifts, governmental policies evolve, and UX/UI improvements occur (a whole different discussion), it will be difficult to onboard the first billion users that everyone talks about on slide 5 of their pitch decks next to the Total Addressable Market (TAM) of whatever market they are trying to disrupt.
There's a certain level of speculation involved with every cryptocurrency. It's a technology backed by cryptography whose price follows surface-level factors and whose markets are underdeveloped. Lower-cap coins are manipulated constantly, and due to Bitcoin's mainstream popularity, it's roughly correlated to what the Federal Reserve announces, just as every other high-beta risk asset is. However, blockchains offer legitimate solutions, and their value is clear to many industries, but it's more than an uphill battle to convince the adversaries.
In any case, blockchains need to be better understood by the masses. They address problems many don't even know exist and can create a future that aims to give individuals and businesses better opportunities at securing capital, managing transactions, and much more.
Despite the challenges outlined above—including onboarding friction, regulatory uncertainty, scam risks, and the persistent speculative nature of crypto markets—the underlying technology continues to evolve and may eventually overcome these barriers.
The actual percentage may vary significantly by blockchain platform and geographic region.
Evans Data Corporation (2022). Global Developer Population and Demographic Study. Estimated 26.9 million professional developers worldwide. Stack Overflow Developer Survey (2022) provides similar estimates of 30+ million including hobbyists. ↩
"Ape" or "Aping in" is crypto slang referring to buying into a cryptocurrency or NFT project quickly without thorough due diligence, often based on hype or fear of missing out (FOMO). ↩
This estimate is based on industry observation and conference demographics rather than formal survey data. ↩
Onboarding and Offboarding
The fundamental flaw in blockchain adoption lies in the challenges of onboarding and offboarding users. The current financial and political infrastructure makes it difficult for people to enter and exit crypto ecosystems easily.
This limitation, coupled with regulatory hurdles and public skepticism, presents a significant barrier to widespread adoption.
Onboarding to and offboarding from a blockchain is challenging for first-time users.
An estimated 30 million developers work worldwide1, representing less than 0.5% of the global population, meaning 99.5% lack formal technical training in computer science. Blockchains are advanced implementations of concepts in advanced computer science categories, so it's difficult to explain their safety and utility concerns to non-technical individuals. Even technical individuals have their pushback due to ideological differences or disinterest.
But the problems go deeper than this.
Many ideas are in progress, but only two well-adopted methods exist for funding a blockchain account: using a centralized exchange (CEX) or a third-party integration. A CEX presents multiple complications and requires a Know Your Customer (KYC)-verified bank account connected to a KYC-verified centralized exchange that has yet to go under.
Third-party examples include companies like Moonpay and Flexa, which integrate with CEXes and over-the-counter (OTC) desks to provide users with a quick way to fund their blockchain accounts. These options come with relatively high fees and wide trading spreads, not to mention the censorship built into the flawed and risky KYC/AML procedures that we all must abide by.
I'm not including the option to fund it with another wallet because that wallet would have had to be funded via one of the two options above, which creates a chicken-and-egg problem. Validator and miner rewards may be an exception to this rule, but when you offboard, you run into the same issues listed below that affect everyone else.
Let's say you onboarded correctly and have USDC in a digital wallet. Now you're financially free and scouring DeFi Telegram channels with the word 'Ape'2 in their names to find the highest yield for your tokens.
Non-custodial digital wallets embody two concepts we're familiar with—investment and checking accounts. This account you just funded is your investment account, and you collateralize your entire portfolio to leverage long on Dogecoin (DOGE). Elon goes back on SNL and says you can buy a SpaceX rocket with it. Shortly after, DOGE's market cap exceeds Bitcoin (BTC), and you sell at the top. You've increased your money tenfold, and now you must withdraw. Once you do, your work life will become optional—achieving Financial Independence, Retire Early (FIRE).
If all goes well, you withdraw from your CEX and then to your bank from the CEX. Your bank happily accepts the transaction because it feels comfortable working with crypto companies like CEXes, given their history of good behavior.
Many things can go wrong during the above process, even if everything goes right on-chain. The on-chain capital is largely inaccessible unless you're spending out of your blockchain account, which is impossible for most purchases yet. Maybe you could get an in-person loan collateralized by on-chain assets, pseudonymously purchase gift cards, or do an in-person peer-to-peer exchange in a crypto-friendly Special Economic Zone (SEZ), but that won't be realistic for most people.
If you understand the financial plumbing behind both of the above options, you can appreciate how limited the idea of monetary sovereignty is from a censorship perspective. Suppose the US wants to significantly restrict crypto traffic within its borders. In that case, it could block all bank transactions with centralized exchanges and prevent individuals from transacting with vendors like Moonpay and Flexa. That is a significant problem for those who believe in the ethos behind blockchain technology, and there is no clear or scalable solution.
In a world where all blockchains are made illegal by the US and other major economies, there will likely be fringe blockchain users and governments that are not trying to compete with first-world capital controls. The industry has a disproportionately high percentage of technical people—an estimated 5-10% of blockchain users have technical backgrounds3, compared to approximately 0.5% in the general population mentioned above. Blockchains want to be like cockroaches, but it's a case-by-case basis regarding how decentralized they are. It's unrealistic to think the technology goes away, but its implementation is not straightforward in the scenarios I'm describing.
The reality is that DeFi's value depends on your location. If you're not one to care about self-sovereignty or permissionless markets, can trust your banks, and are not trying to speculate, DeFi likely isn't for you. Currently, the risks likely far exceed the benefits for people in that position. Blockchain products may still be helpful and fun, but they're only necessary if your location requires them and you prefer a self-custodial alternative to manage your finances—such is the case for many in Argentina, Venezuela, and elsewhere experiencing hyperinflation or strict capital controls.
Blockchains and what they enable are amazing feats of engineering, but the political and financial infrastructure surrounding them requires significant improvement. A blockchain and everything it enables is only as strong as its weakest link, and until further notice, onboarding and offboarding remain its fatal flaw. Until public sentiment shifts, governmental policies evolve, and UX/UI improvements occur (a whole different discussion), it will be difficult to onboard the first billion users that everyone talks about on slide 5 of their pitch decks next to the Total Addressable Market (TAM) of whatever market they are trying to disrupt.
There's a certain level of speculation involved with every cryptocurrency. It's a technology backed by cryptography whose price follows surface-level factors and whose markets are underdeveloped. Lower-cap coins are manipulated constantly, and due to Bitcoin's mainstream popularity, it's roughly correlated to what the Federal Reserve announces, just as every other high-beta risk asset is. However, blockchains offer legitimate solutions, and their value is clear to many industries, but it's more than an uphill battle to convince the adversaries.
In any case, blockchains need to be better understood by the masses. They address problems many don't even know exist and can create a future that aims to give individuals and businesses better opportunities at securing capital, managing transactions, and much more.
Despite the challenges outlined above—including onboarding friction, regulatory uncertainty, scam risks, and the persistent speculative nature of crypto markets—the underlying technology continues to evolve and may eventually overcome these barriers.
The actual percentage may vary significantly by blockchain platform and geographic region.
Evans Data Corporation (2022). Global Developer Population and Demographic Study. Estimated 26.9 million professional developers worldwide. Stack Overflow Developer Survey (2022) provides similar estimates of 30+ million including hobbyists. ↩
"Ape" or "Aping in" is crypto slang referring to buying into a cryptocurrency or NFT project quickly without thorough due diligence, often based on hype or fear of missing out (FOMO). ↩
This estimate is based on industry observation and conference demographics rather than formal survey data. ↩