For most of crypto’s history, the requirement to truly own your digital assets was to buy a cold wallet, and receive a 12 or 24-word seed phrase that you had to write down, store safely, and never lose.
While very secure, this was an intimidating process for less tech-savvy users.
For crypto to truly reach mass adoption, the seed phrase must not be a requirement for entry. Ana Jacobson, brand campaigns lead at Tangem, sat down with TheStreet Roundtable to discuss how wallets are simplifying the user experience in order to drive adoption.
The problem with seed phrases
Seed phrases, or private keys, were designed to be secure, but the security came with a steep usability cost that most retail users were not equipped to manage.
Jacobson explained that “it was too hard for people to get into crypto. They had 12 or 24 words. Let’s narrow it down to just three units and they still can’t do it.”
This complexity remains as one of the biggest barriers to mainstream self-custody adoption. Recently, one of my uber drivers told me that the reason he never bought any Bitcoin was due to his fear that he would lose his seed phrase.
Tangem’s 3-card backup system
Tangem has not eliminated seed phrases entirely, just the human-readable version of it. Instead, the key is generated and stored on a physical device’s chip, always invisible to outsiders including Tangem.
Users can back up to a maximum of three physical cards that each hold the key.
“It’s less that we’re eliminating seed phrases. It’s that we want to give people more functionality to have their own choices. So in the spirit of self custody, self sovereign, it’s important for people to have the option to choose for themselves,” said Jacobson.
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The redundancy model is straightforward. Lose one card, use the backup. Lose two, start reevaluating your storage method. Lose all three and neither Tangem nor anyone else can help you. True self-custody means no third-party recovery option.
Tangem is also experimenting with wearable wallets, such as a ring. These wallets come with 2 backup cards with the private key.
Seed phrases have been a vital part of crypto wallet since they were created almost 20 years ago, but for the next phase of adoption they cannot be the primary way to self-custody if the space wants new people to jump in.