In 2013, Vlad Tenev and Baiju Bhatt, two physics students from Stanford, sat together at a SF kitchen table jamming on their vision for a stock trading social network. This new trading platform was designed for a younger demographic. Trades would be free. Charts would be clean and simple. The platform would be mobile-only.

They would call it Robinhood.

Five years after the 2008 financial crisis, banking and financial institutions had made little progress bridging old world financial services to millennials and Gen Z. Poor UX, costly commissions, and desktop-only experiences kept young people emerging out of 2008’s rubble from meaningfully participating in U.S. equity markets.

By March 2015, just one month before Robinhood’s public launch, over 700,000 people had signed up for the app’s waitlist. The demand was palpable.

Robinhood’s design decisions had struck a nerve. Six years later, the firm is valued at $40 billion dollars.

The average account size is only $3,500.

Switching Costs

When trading in and out of Gamestop requires just a few taps of the finger on your phone, it’s easy to get the impression that the world’s financial rails have evolved. But the reality is that our banking, payment, and trading platforms still operate on legacy networks.

Earlier this year, Robinhood halted $GME trading at a time of exceptional volatility, leading to class action lawsuits and drawing the ire of regulators, legislators, and their own users. It was a stark reminder that many of the world’s most popular fintech apps are simply a veneer over old infrastructure, where financial information, identities, and assets are trapped in centralized silos and subject to the frictions imposed by decades of tech debt.

Throughout history, the siloed centralization of our data, particularly financial assets, has imposed high switching costs for consumers. Switching costs are best understood as the monetary, psychological, or time-based costs incurred by switching services or products, and it can include stuff like the time it takes to set up a new bank account, or tax and transaction costs imposed when you sell securities and repurchase them with a new broker. Banks and trading brokerages are known to enjoy high switching costs. Their platforms are sticky, not because they’re better, but because they’re just good enough to beat bearing the switching costs.

But a new era is upon us, one of trust-minimized infrastructure for finance, culture, gaming, organizations, and much more — known as Web3. Importantly, the decentralized nature of Web3 poses some challenges to traditional switching cost models.

Take Ethereum wallets, for example. Unlike legacy TradFi firms, which operate by referencing the siloed assets within their control, Ethereum wallet owners are always in control of their financial assets. We’ve referred to this concept previously as digital sovereignty. By using a Web3 wallet to manage blockchain-based assets, consumers can enjoy stronger ownership guarantees over their financial assets, and more control over the contracting environment as it relates to those assets.

This primitive has led to fascinating second order effects.

We have far more degrees of freedom to direct assets as we choose in a Web3 wallet. If we want to swap our ETH for an ERC-20 asset, we can connect our Ethereum wallet to any number of Web3 trading applications: Uniswap, SushiSwap, Balancer, AirSwap, Bancor. These trading venues enjoy no user lock-in and no meaningful switching costs. They compete on price and depth. We have the freedom to interact with any pool of liquidity, at any given moment.

This concept doesn’t just apply to applications. It also applies to the interfaces we use to access our wallets and connect to all these applications.

MetaMask is an example of browser plug-in that you can use to create and manage an Ethereum wallet. Let’s say you think MetaMask provides a good enough desktop experience, but you believe Rainbow Wallet provides a superior mobile experience. What should you do? Send all of your Ethereum assets in MetaMask to your new Rainbow wallet?

Nope.

By simply importing your wallet into Rainbow, you instantly have access to the same assets in your Rainbow mobile app. No lock in. No switching costs. Your same wallet in a beautiful mobile interface. The reason this works is because MetaMask doesn’t own your wallet, you do. You can easily use MetaMask to access the wallet on your desktop and Rainbow to access the same wallet on your iPhone.

This is a drastic shift from the legacy financial system. Robinhood controls your account. You can’t just decide one day that “I like the Schwab interface better” and instantly import your Robinhood assets into Schwab. If you want to move your assets from Robinhood to Schwab, you need to sell everything on Robinhood and repurchase it on Schwab, or fill out paperwork to transfer stock certificates. Not to mention that you need to go through an entirely new onboarding process at Schwab. These switching costs discourage change and keep users locked in to these services. They are an impediment to interface competition.

In Web3, the UI layer has been unbundled from the asset layer, which will give rise to a new era of interface meritocracy.

This brings up an interesting question, and one we talk about a lot at Collab+Currency: How will projects competing at different parts of the stack retain users over time, knowing that there’s no lock in and low switching costs? And what does it mean specifically for the future of mobile-first interfaces, as global consumers spend more time using smartphones than ever before.

We think the answer is killer design.

More specifically, killer design narrowly tailored to the new kinds of behavior unlocked by Web3.

Christian, Mike, and Jin

While Vlad and Baiju were designing their breakthrough mobile trading app in 2015, three teenagers were just getting their start in the world of design and computer engineering.

The first was Christian Baroni, who at fourteen started publishing reskins for jailbroken iPhones on the internet. iOS interfaces, icons — nothing was off limits. On one occasion, he decided to create a digital version of the click wheel, a simple homage to previous generations of the iPod.

His work generated tens of thousands of dollars on Cydia.

The PM leading Microsoft’s Mac Office team came across Christian’s designs and recruited him. Christian started contracting twenty hours a week for Microsoft. He took meetings during recess, lunch, and sometimes during the middle of class.

Microsoft likely had no idea they were contracting with a high school student. Christian graduated early, and at 17 years old, moved to San Francisco to take a design job at an upstart fintech called Stripe.

The second was Mike Demarais, who around this same time began to immerse himself in computer design, website creation, flash games, computer camps. Mike became obsessed with digital products, and how people used them. He hacked and tinkered on anything he could find, and his interests began to converge around jailbroken hardware, free packages on Linux, and torrenting.

Mike broke things down and rebuilt them in new ways. He followed the career trajectory of app developers in the same way his peers would track Lebron stats. He listened religiously to the Diggnation Podcast with Kevin Rose.

During these formative years, Mike became convinced that when it came to app design, if you argued for the user, instead of the business case, magical things could happen. Mike left college a few months into his freshman year, jumping in headfirst to work as an engineer at a number of high-growth startups: building, shipping, and advocating for the user.

The third was Jin Chung, who left home for college having had zero previous technical experience. She took her first computer science class, and felt her brain rewiring, starting to view the world as an engineer would. She decided to major in computer science engineering. She fell in love with algorithms, discrete math, logic problems. She was hooked. Eventually, Jin would write trading tools for equity derivatives at UBS, and later algos for eBay’s recommender systems. In her spare time, she and a friend built a Leap Motion-controlled point-and-shoot Death Star that could build and destroy solar systems.

In 2019, Christian, Mike, and Jin began work on what would become the world’s best Ethereum mobile interface.

Meet Rainbow. 🌈

The Future of Mobile Web3

Today, the Rainbow team leverages their unique backgrounds and design experiences to create narrowly-tailored UI/UX to both on-ramp non-crypto users and facilitate new behaviors unlocked by Web3:

Easy Web3 On-Ramp. For newcomers and experienced Ethereum users alike, going from “no crypto” to navigating across Web3 can be a painful experience. Historically, the process involved getting set up with a crypto exchange, linking back to your existing banking rails, depositing fiat, purchasing ETH, then sending ETH out of the exchange to a browser wallet that can connect to Web3 platforms like Uniswap, Rarible, or RabbitHole.

What Robinhood did for onboarding casual investors into traditional equities, Rainbow does for onboarding casual users into Web3. The on-ramping process is dramatically streamlined with Rainbow, allowing users to rely on Apple Pay infrastructure to make quick purchases of ETH or other ERC-20 tokens directly into a Rainbow wallet.

On-ramping casual users into the Ethereum ecosystem now takes less than thirty seconds.

NFTs and Social Flexing. Information on the Ethereum ledger is public and timestamped, and the rise of NFTs has supercharged the social graph. NFTs representing art, music, collectibles, essays, and other cultural artifacts have experienced exponential growth.

The Rainbow team has been designing for NFTs since day one— we still remember the CryptoKitties in their first pitch deck! It’s already the wallet of choice for NFT collectors, but there’s so much more to come.

Rainbow has an eye towards a world where friends can follow each other’s on-chain journeys across the Metaverse. Squads, DAOs, and distributed communities will be pervasive. So will showcasing your on-chain history, your on-chain collectibles, and your on-chain access.

With Rainbow, you’ll be able to trigger notifications to your best friend about an upcoming Art Blocks drop. Flex your “early-ness” to CryptoPunks in your NFT showcase. Update an RAC audio layer on Async Art. Watch your Mom and Dad invest in blockchain-based socks.

If Web3 is a video game, Rainbow is designing for mobile multiplayer mode.

Decentralized Finance. Over the past year, it’s become clear that social technology and financial technology are converging at a faster rate than ever before. The future of finance will be borderless, sovereign, and operate on a trust-minimized ledger. Startups will stream vested equity to founders, investors, and collaborators as it’s earned in real time. On-chain credit facilities allow global asset holders to trustlessly collateralize their digital assets in a debt position, and mint synthetic stable assets without requiring an intermediary. Liquidity for all kinds of assets will pool on decentralized platforms, and be relied upon for everything from trading and prediction markets to gaming items and concert tickets.

Sounds complex? It is. But interfaces like Rainbow will be the control center, helping translate financial complexity into simplicity.

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Source: https://medium.com/collab-currency/designing-rainbows-moat-d29f05ddcf8?source=rss——-8—————–cryptocurrency