Do We Even Need Bitcoin ETFs

HodlX Guest Post  Submit Your Post

After five years of drama and dozens of rejections, ETFs (exchange-traded funds) based on Bitcoin’s spot price have finally been approved.

A total of 11 ETFs are making their market debut, allowing US investors to gain exposure to Bitcoin (BTC) without directly owning the cryptocurrency itself.

While this could see billions of dollars flow into the market, it’s important to take a step back and consider the ramifications of traditional financial institutions getting involved in the space.

BlackRock, the world’s largest asset manager, is among those that has launched a Bitcoin ETF. This, when coupled with the centralization in current ETF systems, should ring alarm bells.

There should be a more decentralized approach — and the reason one is yet to materialize is simple: Web3 has been built with clunky infrastructure that’s difficult for newcomers to rely on.

Had Web 3.0 championed user-friendliness from the start and had been as easy to use as mainstream financial apps, we wouldn’t need ETFs in the first place.

Challenges hindering mainstream adoption

Cryptocurrencies are growing in popularity – there’s no doubt about it. Bitcoin surged by 150% in 2023, and with the halving looming, 2024 is shaping up to be equally bullish.

But despite this, the mainstream adoption of Web 3.0 technology is proceeding at a sluggish pace – especially when compared with established payment methods such as PayPal and Zelle.

New users are put off by the prospect of managing seed phrases and understanding long addresses made up of a random string of letters and numbers.

Hardware wallets are expensive too, meaning affordability is a big concern for consumers in emerging economies.

Right now, crypto users are mainly engaging with Web 3.0 through their wallets – but when it comes to usability, fiat-focused fintech platforms remain lightyears ahead.

Changes in user experience

It doesn’t have to be this way. Infrastructure that amplifies the user experience so that crypto transactions are as intuitive to make as PayPal transfers is the answer.

Features such as ‘send to name’ eliminate the need to understand long and daunting crypto addresses. Instead, funds can be transferred to human-readable contacts in a few taps.

Crucially, this eliminates the need for centralized databases.

On platforms such as Unstoppable Domains, users need to set up a separate Web 3.0 wallet and then paste addresses over – making it difficult to tell whether a party involved in a transaction is credible and verified.

This also increases the risk of phishing attacks, where wallets can be drained in a devastating exploit.

The payment solutions of the future will be more than a mere plug-in to Web 3.0 – they will be a versatile choice for users and B2B wallet developers alike.

Features including staking should be readily available within a wallet, eliminating additional, cumbersome steps that create friction.

What’s more, the addresses that users transact with should be verified through a cryptographic proof of identity – adding an extra layer of protection.

Such safeguards help make it practically impossible to fall victim to phishing attempts.

The path to Web 3.0 mass adoption

Next-generation Web 3.0 wallets need to champion accessibility and become more accessible to users who are already well-versed in fintech.

By ensuring security, speedier transfers and secure custody – covering on-chain transactions and DeFi – the Web 3.0 wallets that get it right have the potential to become crypto’s answer to PayPal.

Simplifying user experiences and ensuring the complexities of Web 3.0 are hidden behind the scenes is the way forward – meaning anyone can make the most of this technology without having to understand how it works.

By building a secure, user-friendly app, ETFs won’t be needed to participate in crypto trading. Instead, investing can become as easy as transferring funds from A to B.

Now that Bitcoin ETFs have been approved, attention must turn to how to decentralize them.

Ensuring consumers can gain crypto exposure easily and intuitively – without requiring an exhaustive education on the process – is the answer.

By addressing the challenges of current Web 3.0 adoption, we can pave the way for a future where cryptocurrency transactions are as simple and secure as traditional financial transactions.

Michal “Mehow” Pospieszalski is seasoned tech leader with a track record of pioneering innovative solutions in the crypto world. As the co-founder of SwissFortress and co-founder / co-inventor of MatterFi, Michal merges visionary strategy with hands-on tech know-how, propelling both companies towards defining the future of digital asset management.

Featured Image: Shutterstock/Kalleeck