Bitcoin challenge – won’t Bitcoin complexity stand in the way of mass adoption?

I recently answered a question over on Reddit that I felt might be useful here, on SteveSpeak blog, as I begin to write about Bitcoin.

One will often hear challenges regarding Bitcoin adoption by broader society (vs investors, traders, and of course Bitcoiners). This particular challenge is around Bitcoin’s complexity in terms of all the things an end-user needs to know and/or consider.

Here is my response (based on my Reddit response), which I have edited and expanded upon.

Maybe the following example will do more to ‘change your mind’ then my Bitcoin arguments below, but I have also worked most of my life in IT. I’m old enough to remember going to homes and businesses to configure TCP/IP stacks on people’s computers to get them on the Internet. Many will forget that Internet access was once relatively rare and complicated.

Similar points were made about how hard it was in regard to average person usage and popularity. Most people accessed bits of the Internet via AOL (America Online) or CompuServe. Look at where we are with Internet access today!

That said, I agree there is a level of complexity and especially responsibility involved with controlling our Bitcoin that is completely foreign to most people when it comes to money management. This does go beyond technical.

For example, a fraudulent purchase on one’s credit card… call the credit card company… boom, fixed. With Bitcoin, if you sent SATs to the fraudster, they have your SATs. End of story. Could Bitcoin services one-day replicate these credit card anti-fraud practices? Sure, if the person is OK with a custodial solution. (note: Custodial means someone else has custody of your funds, while non-custodial means you have complete control. These terms are a bit confusing when you first get into Bitcoin.)

As for multiple networks, Bitcoin concepts aren’t that dissimilar to fiat (fiat is money declared by the government, ex: USD). People currently think of wire transfers, bank transfers, checks, ATMs, credit cards, etc. It is the same money being spent or moved via different networks and methods. This is simply a matter of familiarity and terms.

On-chain is more secure/certain/permanent, but has a higher fee. Lightning is more like cash that’s been pulled out of the ATM. It’s now less secure, but a bit easier and cheaper to do things with. Underlying technology aside, most people are currently familiar with a broader range of methods when they utilize with fiat, than exist in the Bitcoin world.

If I need to buy a coffee and doughnut, I’m not going to do an on-chain transaction, especially if the fees are $10 worth of BTC, or even if the fees were $0.50. If I know I can do Lightning and the fees will be $0.0001, I’m certainly going to use that option. The only thing you really need to know is that there are these two networks, and that you do have to move BTC between on-chain and Lightning at some point to use it. (ie. You do have to pay that on-chain fee at some point to take them off-chain into the Lightning network… so if fees are $10 worth of BTC, you’re probably going to move a couple hundred worth of BTC at a time, minimally, to make it worth it and/or watch the rates for a good opportunity, often $1 to $2, sometimes less. This is similar to the high-fee ATM at the mall. You don’t take out $5 for the coffee when the ATM fee is $3.)

Neither of these concepts are that hard. People watch rates on their mortgages, or refinance them if rates get good. People know about high ATM fees and plan around that, unless they are in a pinch. They know when they buy that new computer on the 23% credit card (or hopefully know), that they’ll be paying a lot of interest pain unless they come up with the cash quickly to pay it off.

I agree with you, to a point, on wallets and securing Bitcoin (or especially things like estate planning, or even sharing amongst family members). In my opinion, this will likely be solved by various custodial solutions for average/typical use. Like was mentioned above, there are all sorts of ‘financial comforts’ people are used to these days, which will need to be replicated in the Bitcoin space. The ‘average Joe’ will trade some of the self-sovereignty, at least for that portion of their Bitcoin (it doesn’t have to be all or nothing!!!), for the protection/management of that particular custodial service. We’re still VERY early!

Yes, properly securing your seed phrase (& hopefully passphrase) is a burden in both thought and physical process, which most aren’t familiar with, or may be comfortable with. This is partly why we’ll see things like the current ETFs, or Bitcoin-backed investments of various kinds. Some will want Bitcoin ‘hard money’ protection against inflation , but not want the responsibility. That’s not optimal, but it is OK. It is better to have Bitcoin/gold backed funds (even if the potential is not fully realized), than rapidly devaluing fiat funds.

I have seen a lot of ingenuity in the space. And while there is some complexity, you can learn quite a bit about Bitcoin in a few hours (if presented properly organized information). Would something as important as your financial well-being be worth investing a few hours of time? I think so, yet sadly for most, that has yet to happen in the fiat world, either. This is the ‘high bar’ in the Bitcoin world, though. You’ve correctly identified that!

This situation, also, is not an ‘all or nothing.’ If you’re dealing with a few hundred dollars worth of initial stack, or spending Bitcoin, a Lightning wallet, or simple hot-wallet is probably fine. They are pretty easy to use, and even if the person doesn’t properly store their seed, etc. it isn’t a crazy big deal. If they have their life savings involved, on the other hand, then yeah: cold hardware wallet and proper procedures. The point is, most people will have both and more, and you can start with the easy, and move towards more advanced as your stack grows.

UTXOs? OK, now you’re into the tougher stuff. I’ll admit I did not understand them until recently, and I’ve been a Bitcoiner for a couple years now. Again, with some good analogy and basic training, you can know what you need to about UTXOs in an hour or two. They really only become super relevant in some future where the fees get crazy high, and stay there (so high, that the fees for the little chunks are more than those little chunks are worth to move/spend).

It isn’t something you need to know initially, aside from privacy issues if you are dealing with large amounts of money. You can consolidate in low fee times so long as fees haven’t become permanently high. It is more a theoretical problem, which may very well become reality, someday when Bitcoin is the standard and primarily used for big transactions between financial institutions. By then, if you’re an individual HODL’r, you’ll know about and be prepared for such things, or you’ll be a pleb user of BTC-backed (instead of fiat-backed) alternate technologies for managing your funds.

Just like my opening example of the Internet, it started quite complex, and not people end up on the Internet without really knowing anything about the mechanics. They still need to learn some on-line best behaviors, or danger lies ahead. But, this is true with most things in life.

Many smart people are hard at work on all kinds of solutions in the Bitcoin space. Interfaces and tools will continue to advance. One day, you’ll still need to know good money management, privacy, how to safely backup/secure things, like private keys/seed phrases, but the rest will be simple.

Thanks for reading! If you need some help understanding Bitcoin concepts, or getting setup, I’m considering offering consulting services. Until I have something formalized, please use the contact form to reach out, and I’ll get in touch. We’re all on a learning journey, but I now have considerable experience in core Bitcoin concepts, including mining. I’d love to share that knowledge to help you more quickly advance on that journey, and avoid costly mistakes.