New UX’s (user experience) of financial assets unearth new functionalities , perceptions and user bases. This is true for the average consumer while of course there are outliers in earlier iterations of experience that achieve similar outcomes through brute force , dedication or ingenuity.
Lets look at the evolution of UX for a few assets and consequent changes in their nature. Many aspects affect the UX of an asset but here we will focus on transacting ,storage/custodialness and cost.
Transact = In person -> Open cry -> Exchange Mainframe -> Internet based site -> Robinhood on mobile -> Tokenized stocks on Ethereum ?
Store = Physical paper -> Exchange server -> Broker server -> Self custody
Cost = High -> Medium -> Low -> Zero
The digitization of the UX led to expansion of access introducing un-savvy retail customers. The gamified always available UX of mobile apps like Robinhood made the gambling aspect of trading stonks seamless. With the possibility of tokenization on public networks like Ethereum we could see interesting innovations in combining them with exciting financial primitives being built in the open. Tokenization will likely lead to decreased value capture to the financial industry and more surplus to retail holders and corporations.
- Government Currencies
Transact = Coin -> Banknote -> Cheque -> Card -> Mobile app / QR code ( Venmo, Square cash, Retail CDBC)
Store = Purse -> Wallet / suitcase -> Thin wallet / Phone holder -> Smartphone
Cost = Low -> Zero
The ability to store high denomination banknotes turned the reserve and stable currencies more into stores of value then previously due to the practicality of storing and transporting large amounts. The card reduced cognitive overhead of change and reduced carrying requirements. It also enabled internet based ecommerce heralding a new era. With the added benefit of internet transactions came loss of privacy , card theft and complete failures ( bad network for card readers , problems with visa network). Cards also enabled impulsive large purchases and spending not previously possible. Mobile payment apps like square cash and others made currencies more social as bills could be split and loans between friends settled easily.
Retail CDBCs can be built on different points on the spectrum of privacy, speed, portability and permissionlessness. The analysis below is based on a CDBC that is surveillable , censorable and has limited permissionlessness.
Using a CDBC for the average citizen actually doesn’t change the user experience of interacting with money. The experience with interacting with cash app or a CDBC on a mobile will remain similar. In fact incase governments mandate CDBCs use to government built apps the UX is unlikely to match cash app and other top UX payment apps if one compares to technological attempts by governments.
CDBCs can potentially improve the UX by removing the interaction with bank branches which cannot be done online. This also maybe a degradation if the central bank has to take the responsibility of customer service. Fintech neo banks are also working and succeeding on this aspect of the UX by making physical operations digital.
Based on UX CDBCs make little sense from the citizen perspective. If citizens are unhappy with dealing with a bank branch they have an option to completely sovereign with the crypto ecosystem or use fintech neo banks.
CDBCs will disintermediate private banks allowing governments to fine tune interest policies , welfare and stimulus packages but in the process they will entail increased surveillance , censorship ability and likely degraded customer service.
- Ether / Crypto
Transact = Command line / Desktop client -> CEX -> Browser plugin -> DEX -> Mobile wallet -> Payment Bots -> Hardware (Kong, Opendime )
Store = Paper wallet -> CEX -> Hardware wallet -> Social multisig , Implants ?
Cost = High -> Medium -> Low
The early UX of transacting and storing crypto currency required greater technical knowledge hence limited the user set. As centralized exchanges introduced trading and custody new avenues of speculation were opened up. Browser plugins enabled convenient interaction with decentralized applications expanding the set of adopters and the era of frequent interaction rather than just occasional transfers and holding. DEX’s enabled a new class of value creators social / personal tokens, permissionless funding/ liquidity. DEXs permissionlessness also encourage a deluge of scams. Hardware wallets enabled safe convenient longterm storage getting a new base of users with lower risk tolerances or technical knowledge. Mobile wallets enabled the more social culture of transfers through QR codes , displaying portfolios + NFTs to friends. Am interesting UX is transaction bots which complete payments automatically reducing cognitive burden of payments. Brave ads abstractly functions like this completing micropayments to publishers and creators without intervention.
In the future we may see a proliferation of low cost easy verifiable smart physical money like kong increase real life use and velocity.
As augmented and virtual reality enter usability crypto payments and assets fit very natively. We already see traction in VR / virtual worlds with non fungible tokens (NFTs) and likely to see many new interaction paradigms.
Transact = Coin, Bars -> Etf -> Tokenized gold
Store = safe , vault -> exchange -> self custody possible
Cost = High
ETFs decrease the barrier to access the price aspect of gold but the major properties of censorship resistance are sacrificed. Tokenized assets can increase the velocity and lower the transaction costs for hard to transact but valuable stores of value like gold. One can easily imagine a network of gold atms where gold is deposited and gold tokens are minted correspondingly. Similarly tokens are deposited and gold is received. Furthermore these can be executed by robotic like vending machines to minimize trust in the whole process.
Developers and designers will keep creating new interesting UX’s for financial assets. This process is accelerated by crypto composability and we can expect exciting new use cases and user bases.