Usability in the crypto world (or my experience as an ICO participant)

Today, for the very first time, I decided to participate in an ICO. Taylor is an app that promises to help normal people, as well as seasoned traders, profit from crypto trading, through automation. Looks like a very interesting project, about which several in the community I respect are excited, so I decided to dip my toes into the world of ICO investing.

To participate in the Taylor ICO, you have to:

  1. Register.
  2. Inform them of the Ethereum address from which you will purchase your TAY tokens.
  3. Verify your identity through their KYC/AML process.

For the uninitiated, the above step 2 could be the first roadblock. You see, most ICO tokens actually live on the Ethereum network, as an Ethereum-compatible token created according to the “ERC20” standard. So to receive your ERC20 token (“TAY” in this case), you need an Ethereum wallet that provides a user interface to manage ERC20 tokens.

My two wallets, a Nano S hardware wallet and the Exodus desktop wallet for Mac, didn’t seem to support manually adding ERC20 tokens. I did find one, though, “Edge” for iOS, which does.

OK, using Edge, I need to add the TAY token to its Ethereum wallet. To do that, you need some information:

  1. The token name
  2. The token symbol
  3. The token’s “contract address” on the Ethereum network
  4. The number of decimal places (for whatever reason)

Unfortunately, the Taylor people didn’t expect folks on the website to need this information. Fortunately, they did expect that people on Twitter would.

So, after adding the TAY coin to the Ethereum wallet in Edge, I’m ready to purchase some TAY (YAY!). But just above the QR code that you scan to send off some Ether, there’s this ominous warning:

Gwei

This is where some significant knowledge and technical assumptions are being made (you need to understand what gas price is, and have the ability to manage it), and a very narrow gate is being put up for your everyday Ethereum user. The “gas price” relates to the fee that is going to be added to your transaction to incentivize Ethereum miners to process the transaction. It’s also something 99% of all Ethereum users don’t think about when sending transactions.

Fortunately, my Edge wallet has a “Change Mining Fee” action item, in which we find three options: High, Standard and Low.

Well, I tried all three, and all three transactions were rejected with a “ran out of gas” error. Ran. Out. Of. Gas. WTF?

Fortunately, again, the Edge wallet also provides a “Set Custom Mining Fee” button, and so I set off to create a new transactions with the price bumped up close to the warned limit of 50 Gwei (whatever a Gwei is).

So here’s what the Set Custom Mining Fee screen looks like:

Fees

See any problem here? THERE ARE NO UNITS DISPLAYED!

Well, since the good people at Taylor said not to exceed a price of 50 “Gwei”, I’m assuming that Gwei must be the standard unit, and so I type in “40” (just to be on the safe side) as the Gas Price, and fire off my transaction.

Waiting a few minutes, I go to Etherscan, to check on the status of my transaction, and see that it’s expected to be processed…

“In a very long time…” Sigh.

And on that same transaction status screen, I see that the fee I set on the transaction was 0.00000004 Gwei, or about $0.000001. So as it turns out, the price unit in Edge is “Wei”, and a “Gwei” is 109 Weis—that’s nine zeros!—which means that instead of typing “40” into Edge, I should have typed the very-error-prone number, “40000000000”.

Heavy, heavy sigh.

OK. So I configure another transaction—the fifth of the day!—carefully typing in all those zeros, and sent it off. I then waited a while, checked the transaction, and see this error:

“There is an earlier pending transaction in the network, that must process first before this one.”

OMG.

So before my correctly configured transaction can process, my near-zero-fee transaction has to process first, which is expected to complete in…that’s right, “A Very Long Time”.

Head off to Google. “Can I cancel an Ethereum transaction?”

Turns out you can not. What you can do though, is re-broadcast a new transaction using the same “nonce” (whatever that is), with a higher fee. The miners will see both, and pickup the higher-fee transaction, discarding the other.

So that’s a solution, but unfortunately the Edge wallet doesn’t provide the UI necessary to modify the “nonce” of a transaction.

I could ask Taylor to whitelist a new Ethereum address, so I could start over from a new wallet. But the problem there is that eventually these two pending transactions will/might get processed from an address perhaps no longer associated to me. And if I do nothing, by the time these transactions process, the ICO might be over.

So I guess I’m screwed. But here’s the point of all this…

If you’re reading this, and actually understand what happened, chances are you’re (a) more technically involved in this space than me, and (b) snickering because this is something that’d never happen to you.

But here’s the thing. you probably are more technically involved than me. But, I know enough to have developed a Ruby-based software application that does my trading over APIs, which makes me more technically involved than 99{ad274ad889bc1e297d0fa7a0471c34c41541cb748ff9f79b10160b1d4544149a} of the mainstream out there who we need involved in this space if this industry is going to grow and prosper.

And for that to happen, things like empathy, usability and user experience design have to become priorities of those early creators in this space, such as wallet makers like Edge (who, to be honest, have created an overall really nice UI/UX), builders of applications, as well organizations running ICOs.

If you agree with that, then help sound the trumpet for usability whenever you can!

(By the way, if you’ve done your diligence, are interested in the Smart Taylor ICO and feel some sympathy for me 🙂 you might signup using my referral link.)

Update:

The CEO of Taylor contacted me, and let me know that with MyCrypto or MyEtherWallet, I could access the Edge wallet (using its seed), and then create an offline transaction with the same nonce, and broadcast it. The details are documented here. I used MyCrypto to try it, and it worked!

Prism-based crypto investing

In a previous article, I noted some initial thoughts about the currently-in-beta, smart-contracts-based Prism investing platform. In this article, I’m going to discuss some of the ideas that are forming around how I will use it when it’s launched.

While crypocurrency is broadly considered an emerging asset class on its own, I like to further consider use-case based sub-classes, for example:

  • Value
  • Utility
  • Privacy
  • Distributed Exchanges
  • Prediction Markets

With Prism, investors will be able to conveniently implement use-case or sub-class-based investment strategies. For example, I might define:

  • Value — Bitcoin (60%), Bitcoin Cash (20%), and Litecoin (20%)
  • Utility — Ethereum (60%), Ethereum Classic (20%), and Stellar (20%)
  • Privacy — Dash (30%), Monero (30%), Zcash (30%) and Pivx (10%)
  • Distributed Exchanges — EOS (40%) and 0x (60%)
  • Prediction Markets — Augur (50%) and Gnosis (50%)

So rather than trying to predict the individual winners in these use-case categories, I could instead create and invest in diversified “Prisms” built around each, leaving me only with the task of identifying the most promising technologies/protocols in each class, regardless of how many there are, and allocating according to the success probabilities I would assign to the constituents.

And at the highest level, I would fund these categories in proportion to the relative values I assign those use cases long-term. For example:

  • Value — 40%
  • Utility — 40%
  • Privacy — 10%
  • Distributed Exchanges — 5%
  • Prediction Markets — 5%

Acquiring and holding all of these currencies would be quite inconvenient, and possibly insecure, but implementing the above strategy could be done in a few clicks and half an hour on the Prism platform!

Thoughts on the Prism portfolios product

The makers of ShapeShift have a new product in beta, called Prism, that sets out to address a number of challenges to investing in a diversified portfolio of cryptocurrencies. Such challenges include:

  • Acquiring the coins you want to you may require creating accounts on several exchanges, and going through the tedious KYC/AML processes for each.

  • Given that it’s a bad idea to leave your coins on exchanges as part of a long-term hold strategy, self-custody of your coins, especially obscure ones, can present technical difficulties around identifying and installing multiple wallets, and securing them.

  • Most of the services that offer investible indexed or managed baskets of cryptocurrencies require SEC accreditation for access, or are geographically restricted. These include Grayscale, Bitwise, MetaStable and Iconomi.

Prism solves the problems in the following way: The product (when launched) will be accessible to anyone holding Ethereum. Users of the platform will be able to create portfolios of cryptocurrencies—i.e. a list of currencies and the percentage allocation to each—and then fund those portfolios with a deposit of Ethereum, which is then used as collateral to back the contract.

(Interesting, ShapeShift will initially take on the risk of matching your collateral, although they plan to make collateral matching its own investment opportunity for liquidity providers in the future.)

Upon funding of the contract, Prism will deploy a smart contract on the Ethereum network that tracks the performance of the coins and allocation defined in the contract. At any time, the contract owner can “rebalance” the portfolio and/or cancel it. Upon cancellation, the contract owner will have their Ethereum collateral returned, plus or minus the gains or losses that the portfolio realized with respect to Ethereum, minus a fee charged by the Prism platform for providing the service (currently anticipated to be around 2.5%.)

This is a fascinating and exciting product, and following are some random thoughts having read the announcements (but not yet having received access to the beta):

Convenience. The Prism product makes it extremely convenient to invest in a basket of currencies. No more having to install wallets like Monero, that require downloading and syncing the entire blockchain.

Security. It seems there are both pros and cons here. On the one hand, there’s less for the individual user to secure. Instead of securing coins held in local wallets (hardware or software), you only need to secure access to your Prism account and the source wallet of the funding Ethereum, which is where Ethereum would be returned upon contract cancellation. On the other hand, you’re at the risk of the quality of contract implementation and the security of the Ethereum network. As we discovered in the DAO hacking, this is a real concern.

Ethereum denomination. One should keep in mind that the portfolio performance is referenced to Ethereum, and not USD. If the portfolio increases in value with respect to USD, but not Ethereum, you’ll receive back less Ethereum than you provided in funding. That’s to be expected, of course, but might come as a surprise to people who think of everything in terms of USD.

Taxation. If tax authorities (at least in the United States) are already behind in terms of clarifying issues around crypto taxation, who known when it would become clear how participating in something like a Prism will be taxed. Will funding a Prism contract be considered a taxable event, i.e. as if you sold Ether for USD and then virtually purchased the underlying coins? Will rebalancing of a Prism be taxable, i.e. the selling of certain coins in the portfolio to buy others? Or will the taxable event simply be the gain or loss of Ether when terminating a contract?

In my experience, first movers in a space like this often bear a disproportional amount of the pain when it comes to frontier taxation issues. The cost of having a tax advisor figure out how something should best be declared, and then potentially having to defend that position to the IRS can easily consumer any gains that one earns.

Having said that, though, I’m sure I’ll anyway give it a try when getting access to the product, as I always do. You later movers can thank my sacrifice in paving the way. 🙂

Social opportunities. Given that Prism already publishes a leaderboard, one can easily imagine a future when it will be possible to “follow” the portfolio managed by another user, such that anyone in the world, based only on their merits, can become a successful “fund manager”.

Tokenization of all securities. Looking further out, one can imagine a day when through a platform like Prism, it will be possible to invest in portfolios constructed of both crypto assets, and traditional assets like stocks, bonds, ETFs, real estate and precious metals. That would certainly be disruptive to the brokerage and financial industries.

Regulation. This is another in a long-line of frontier products created by ShapeShift founder and libertarian advocate Erik Voorhees, and he’s no stranger to having to deal with behind-the-times regulators after-the-fact. It’s hard to imagine a platform like Prism growing too much before catching the attention of the SEC, and it’s hard to imagine them not wanting to regulate the service somehow in the interest of investor protection. It will be interesting to see how that plays out. I would guess at minimum we might expect to see KYC/AML processes for user accounts.

So those are my initial thoughts about Prism, and I’m really looking forward to giving it try, and will post a review as soon as I have direct experience.