The Evolution of Peer-to-Peer Payments

The landscape of peer-to-peer (P2P) payments has undergone significant transformation in recent years, with cryptocurrency emerging as a potential game-changer in this space. Ben Mills, co-founder of Meso and former head of product at Venmo, recently shared his insights on the Lightspeed podcast about the evolution of P2P payments and the role crypto could play in shaping its future.

Mills' journey from traditional fintech to the world of cryptocurrency offers a unique perspective on the challenges and opportunities in this rapidly evolving sector. His experience at Venmo, one of the most successful P2P payment apps, provides valuable context for understanding the potential of crypto-based payment solutions.

The Venmo Success Story

Venmo's rise to prominence in the P2P payments space was not accidental. Mills attributes the app's success to several key factors that set it apart from competitors. One of the most significant was its approach to user experience, particularly in addressing the often awkward nature of money-related interactions between friends.

"I think what Venmo did very smart early on is it's all phone numbers," Mills explained. This simple decision made it easier for users to find and pay their contacts without the need for complex usernames or account numbers. But perhaps more importantly, Venmo recognized the emotional aspect of money transactions between peers.

Mills elaborated on this point: "When we do use a research and use our interviews, I think that a recurring theme we heard over and over again is like, Venmo really helped me make it less awkward to get my friends to pay the back." This insight into the social dynamics of money exchange proved crucial in Venmo's design and user adoption strategy.

The Power of Transaction Notes

One of the most distinctive features of Venmo is the requirement for users to add a note to each transaction. While this might seem counterintuitive from a traditional UX perspective, which typically aims to reduce friction, Mills argues that this feature was instrumental in Venmo's success.

"Venmo, you have to note. You cannot create the payment without entering a note," Mills explained. This requirement served multiple purposes. First, it added a layer of context and personality to each transaction, making the experience more engaging and social. Second, it helped address the awkwardness of money exchanges by shifting the focus from the amount to the shared experience or reason for the payment.

Mills noted, "I think the idea of getting people to describe what the payments for accidentally solved this taboo problem because it forced both the sender and the receiver to be like, 'What was this payment for? What were we doing?'" This reframing of transactions as shared experiences rather than mere monetary exchanges contributed significantly to Venmo's growth and user retention.

Crypto's Potential in P2P Payments

As the conversation shifted to the potential of cryptocurrency in the P2P payments space, Mills highlighted several key advantages that blockchain technology could bring to the table. The most significant of these is the ability to facilitate instant, final transactions.

"If all payments today were instant, we could probably remove 80% of the FinTech that exists today," Mills asserted. This is because much of the current fintech infrastructure is built around managing the delays and risks associated with traditional payment systems. Crypto's ability to settle transactions instantly and irrevocably could dramatically simplify many financial processes.

However, Mills was quick to point out that this same feature also presents new challenges, particularly in terms of fraud prevention and consumer protection. The finality of crypto transactions means that there's often no recourse for reversing fraudulent or mistaken payments, which necessitates more robust front-end security measures.

The Challenge of Crypto On-Ramps and Off-Ramps

One of the most significant hurdles facing crypto adoption in P2P payments is the difficulty of moving money between traditional financial systems and cryptocurrency networks. This is where companies like Meso, Mills' current venture, come into play. Meso focuses on providing on-ramps and off-ramps for crypto transactions, essentially bridging the gap between fiat and digital currencies.

Mills explained that one of the biggest challenges in this space is managing fraud risk. "The on and on ramping specifically is like one of the only examples of a time where like you have to make a fraud decision and you basically have one chance," he said. This is in contrast to traditional payment systems like Venmo, where there are multiple opportunities to detect and prevent fraudulent activities.

The high fraud risk in crypto on-ramps contributes to higher fees and more stringent verification processes, which can be a barrier to adoption. Mills revealed that according to data from banking and payment partners, "the average kind of fraud rate in crypto is about five X higher than what we would see in trad buy."

Regulatory Challenges in Crypto Adoption

Throughout the discussion, Mills repeatedly emphasized the impact of regulatory uncertainty on crypto adoption, particularly in the realm of P2P payments. He argued that unclear or overly restrictive regulations are holding back businesses from fully embracing crypto solutions, which in turn limits consumer adoption.

"Regulation is holding the businesses back," Mills stated. "It's like, I don't think it's necessarily directly holding consumers back. But because it's holding built of businesses back, it's also holding like businesses that have yet to be created back."

This regulatory uncertainty affects various aspects of crypto businesses, from partnering with traditional banks to implementing privacy features. Mills expressed frustration with the current regulatory approach, which often tries to force crypto to conform to existing financial frameworks rather than recognizing it as a fundamentally new paradigm.

The Importance of User Experience in Crypto

While discussing the barriers to mainstream crypto adoption, Mills emphasized the critical role of user experience (UX) in making crypto applications accessible and appealing to a broader audience. However, he cautioned against oversimplifying the concept of UX in the crypto space.

"UX is something that I think is like massively misunderstood in crypto," Mills explained. "It's like, I think a lot of people think of this as like a nice to have. It's like UX is like how you make the product like feel really easy and simple to start. And it's like UX is everything."

He argued that good UX in crypto goes beyond just making interfaces sleek and easy to use. It involves deeply considering the entire user journey, including aspects like risk management, privacy, and education. Sometimes, Mills noted, the best UX might actually involve adding friction to ensure users understand what they're doing and why.

The Balance Between Simplicity and Transparency

One of the challenges in designing crypto applications for mainstream use is striking the right balance between simplicity and transparency. Mills expressed a desire to simplify the user experience by abstracting away some of the complexities of different cryptocurrencies and blockchains.

"I would love to get to a point where we could just say like, Hey, it's USD. Like it's a, there's a stable coin backing it. You shouldn't have to care about which stable coin it's like you have USD," Mills said. However, he acknowledged that regulatory requirements and the need for transparency currently make this level of abstraction difficult to achieve.

At the same time, Mills cautioned against oversimplifying to the point where users lose sight of important details or risks. He emphasized the importance of finding ways to give users control and custody of their digital assets while still providing safety nets and support mechanisms.

The Role of Infrastructure in Crypto Adoption

Throughout the conversation, Mills highlighted the importance of robust infrastructure in enabling the next wave of crypto applications. He expressed excitement about recent developments in wallet infrastructure and other foundational technologies that are making it easier for developers to build user-friendly crypto applications.

"It's been awesome to see kind of infrastructure like what, like, wallet as a service, you know, products like turnkey, privy, others actually start to get real adoption because now we're seeing apps that have, you know, the ease of use that you would see in web two, but not actually sacrificing things like self custody, which is phenomenal," Mills enthused.

This improved infrastructure, according to Mills, is not only making it easier to build crypto applications but is also enabling a new class of builders to enter the space. He argued that as the infrastructure continues to improve, it will lead to more innovative applications and ultimately bring more consumers into the crypto ecosystem.

The Myth of Mainstream Adoption

Despite his optimism about the potential of crypto, Mills expressed skepticism about the current discourse surrounding "mainstream adoption" in the crypto space. He described the concept as "pretty much a meme" and cautioned against grandiose claims about onboarding billions of users.

"Let's focus on onboarding like the next 10 users. Like let's start small and we'll get there eventually," Mills advised. He argued that the industry's focus should be on building practical, useful applications rather than constantly talking about mass adoption.

However, Mills also emphasized the importance of continually examining the barriers to wider adoption. He identified regulatory clarity as a key factor, arguing that without it, the industry will always be limited in its ability to innovate and grow.

The Privacy Conundrum in Crypto

One of the most challenging aspects of crypto adoption, according to Mills, is the issue of privacy. While privacy is often touted as one of the key benefits of cryptocurrency, regulatory requirements and the need for fraud prevention often conflict with this ideal.

Mills expressed frustration with the current state of affairs, where interaction with privacy-focused protocols can lead to users being flagged as high-risk by blockchain analysis firms. "If you've interacted with anything that looks even remotely like a privacy protocol, like chain analysis, tier around like all the blockchain security companies are going to flag you as high risk, no matter what," he explained.

This situation, Mills argued, is stifling innovation in the privacy space and preventing crypto from reaching its full potential. He called for a fundamental shift in how regulators approach crypto, urging them to view it as "the right next step for us foundationally for the internet" rather than trying to force it to conform to existing financial paradigms.

The Future of Crypto Payments

Looking ahead, Mills expressed cautious optimism about the future of crypto in the P2P payments space. He believes that as infrastructure improves and regulatory clarity increases, we'll see more innovative applications that leverage the unique properties of blockchain technology.

However, he also emphasized the need for patience and realistic expectations. Building truly user-friendly, secure, and compliant crypto payment systems is a complex challenge that will take time to solve. Mills stressed the importance of focusing on solving real problems for users rather than chasing the idea of mass adoption for its own sake.

Solana's Role in the Future of Crypto Payments

While the conversation didn't focus specifically on Solana, it's worth noting that many of the innovations and challenges discussed are particularly relevant to the Solana ecosystem. Solana's high-speed, low-cost transactions make it an ideal platform for building the kind of instant, frictionless payment systems that Mills envisions.

Several projects in the Solana ecosystem, such as Meso (Mills' company), are working on solving the on-ramp and off-ramp challenges discussed in the podcast. Additionally, Solana's focus on user experience and developer tooling aligns well with Mills' emphasis on the importance of good UX in driving crypto adoption.

The Importance of Building Trust

Throughout the discussion, Mills repeatedly emphasized the importance of building trust with users in the crypto space. This trust-building extends beyond just creating secure systems; it involves creating transparent, understandable experiences that give users confidence in the technology.

"I think if you make things just like easy, like you're going to build trust with users," Mills stated. This approach, he argued, is crucial for encouraging users to keep funds in crypto systems rather than immediately cashing out to traditional financial systems.

Bridging the Gap Between Traditional Finance and Crypto

One of the key challenges in the crypto space, according to Mills, is finding ways to bridge the gap between traditional financial systems and cryptocurrency networks. This involves not only technical solutions but also navigating complex regulatory landscapes and building partnerships with traditional financial institutions.

Mills' experience in both traditional fintech and crypto gives him unique insights into this challenge. He emphasized the need for crypto companies to work closely with regulators and traditional financial institutions to create solutions that can operate seamlessly across both worlds.

The Role of Education in Crypto Adoption

While not explicitly discussed in the podcast, the importance of user education in driving crypto adoption is implicit in many of Mills' points. As crypto systems become more user-friendly and abstract away technical complexities, there's a risk that users may not fully understand the implications of their actions.

Balancing simplicity with transparency and ensuring users have the knowledge they need to make informed decisions will be crucial as the crypto industry matures. This educational aspect ties closely with Mills' emphasis on building trust and creating positive user experiences.

The Potential of Smart Contract Wallets

Towards the end of the discussion, Mills touched on the potential of smart contract wallets to solve some of the current challenges in crypto UX. He expressed excitement about projects like Fuse and the general concept of smart contract wallets, seeing them as a potential solution to the custody and user support challenges in crypto.

"I still don't think we have figured out like the right shape of how to give users custody of digital assets. But still give them the ability to like call someone, something goes wrong," Mills said. Smart contract wallets, which can incorporate more complex logic and safety features than traditional crypto wallets, could potentially provide this balance.

The Need for Continued Innovation

Throughout the conversation, Mills emphasized the need for continued innovation in the crypto space. While acknowledging the progress that has been made, he argued that there are still many unsolved problems, particularly in areas like privacy, user experience, and regulatory compliance.

This call for innovation is particularly relevant to the Solana ecosystem, which has positioned itself as a platform for building high-performance, user-friendly decentralized applications. The challenges and opportunities discussed by Mills present a roadmap for developers and entrepreneurs in the Solana community to focus their efforts.

Conclusion: The Road Ahead for Crypto Payments

As the conversation with Ben Mills illustrates, the future of crypto in P2P payments is both promising and challenging. The potential for instant, borderless transactions could revolutionize how we think about money and financial services. However, realizing this potential will require overcoming significant hurdles in areas like regulation, user experience, and fraud prevention.

For the Solana ecosystem, which prides itself on high performance and developer-friendliness, these challenges present opportunities. By focusing on solving real user problems, building robust infrastructure, and working towards regulatory clarity, Solana-based projects could play a crucial role in bringing the benefits of crypto to mainstream P2P payments.

As Mills emphasizes, the key to success will be focusing on building trust, creating intuitive user experiences, and solving real problems for users. By doing so, the crypto industry can move beyond the hype of "mainstream adoption" and create truly transformative financial technologies.

Facts + Figures

• Ben Mills is the co-founder of Meso, a company focusing on crypto on-ramps and off-ramps.
• Mills previously worked at Venmo, where he was head of product.
• Venmo was acquired by Braintree in 2012, which was then acquired by PayPal in 2014.
• By 2017, Venmo had millions of daily active users and was generating a significant percentage of PayPal's global net new users.
• Venmo makes money through instant withdrawal fees and value-added services like in-app purchases and the Venmo card.
• The average fraud rate in crypto is about 5 times higher than in traditional finance, according to data from banking and payment partners.
• Only about one-third of Venmo's transaction volume came from money already within the Venmo system.
• Mills joined Solana Labs in May 2021 or 2022 to work on Solana Pay before founding Meso.
• Regulatory uncertainty is seen as a major barrier to crypto adoption, particularly for businesses.
• Mills argues that good UX in crypto goes beyond just making interfaces sleek and easy to use, involving the entire user journey.
• Smart contract wallets are seen as a potential solution to balance user custody with the ability to provide support when things go wrong.
• Mills believes that making it easier to get money out of crypto systems can actually encourage users to keep more money in.
• Privacy in crypto is currently hampered by regulatory requirements and fraud prevention measures.
• Interaction with privacy-focused protocols can lead to users being flagged as high-risk by blockchain analysis firms.
• Mills sees the need for regulators to view crypto as "the right next step for us foundationally for the internet" rather than trying to force it to conform to existing financial paradigms.

Questions Answered

What made Venmo successful in the P2P payments space?

Venmo's success can be attributed to several key factors. Firstly, it simplified user discovery by using phone numbers instead of complex usernames. More importantly, Venmo recognized and addressed the emotional aspect of money transactions between friends, making it less awkward to request payments. The requirement for users to add notes to transactions also played a crucial role, turning simple money transfers into shared experiences and helping to overcome the taboo around discussing money.

How does crypto solve problems in traditional P2P payments?

Crypto offers the potential for instant and final transactions, which could eliminate many of the complexities in traditional financial systems. This instant settlement capability could remove the need for much of the existing fintech infrastructure that deals with delays and risks in traditional payment systems. Additionally, crypto has the potential to facilitate truly global P2P payments without the limitations of national banking systems, making cross-border transactions much simpler and potentially cheaper.

What are the main challenges for crypto adoption in P2P payments?

The main challenges include managing fraud risk, especially in on-ramps and off-ramps where crypto interfaces with traditional financial systems. Regulatory uncertainty is another significant barrier, holding back businesses from fully embracing crypto solutions. User experience is also a critical challenge, as crypto applications need to balance simplicity with transparency and security. Finally, privacy issues and the conflict between privacy-focused protocols and regulatory requirements present ongoing challenges for widespread adoption.

How important is user experience (UX) in crypto applications?

User experience is crucial in crypto applications, but it's often misunderstood. Good UX in crypto goes beyond just making interfaces sleek and easy to use. It involves considering the entire user journey, including aspects like risk management, privacy, and education. Sometimes, the best UX might actually involve adding friction to ensure users understand what they're doing and why. Balancing simplicity with transparency and ensuring users have the knowledge they need to make informed decisions is key to creating trust and driving adoption.

What role does regulation play in crypto adoption?

Regulation plays a significant role in crypto adoption, particularly for businesses. Unclear or overly restrictive regulations are holding back companies from fully embracing crypto solutions, which in turn limits consumer adoption. Mills argues that regulators need to view crypto as a fundamentally new paradigm rather than trying to force it to conform to existing financial frameworks. Regulatory clarity is seen as crucial for enabling innovation and growth in the crypto industry.

How can crypto solve the privacy issues in financial transactions?

While crypto has the potential to offer enhanced privacy in financial transactions, current regulatory requirements and fraud prevention measures often conflict with this ideal. Mills suggests that a fundamental shift in how regulators approach crypto is needed to unlock its full potential for privacy. He envisions a future where crypto is recognized as the next step for internet infrastructure, allowing for the development of privacy-preserving protocols that don't automatically flag users as high-risk. However, achieving this balance between privacy and regulatory compliance remains a significant challenge.

What is the importance of on-ramps and off-ramps in crypto adoption?

On-ramps and off-ramps, which facilitate the movement of money between traditional financial systems and cryptocurrency networks, are crucial for crypto adoption. These interfaces present unique challenges, particularly in terms of fraud prevention and regulatory compliance. Improving the user experience and reducing the friction in these processes is seen as key to encouraging more people to use crypto for everyday transactions. Companies like Meso are working on solving these challenges to bridge the gap between traditional finance and the crypto ecosystem.

How might smart contract wallets improve the crypto user experience?

Smart contract wallets are seen as a potential solution to some of the current challenges in crypto UX. They could provide a balance between giving users custody of their digital assets and offering support mechanisms when things go wrong. By incorporating more complex logic and safety features than traditional crypto wallets, smart contract wallets could potentially make crypto more accessible and user-friendly while maintaining the benefits of decentralization and self-custody.