Only 30% knew what network nodes are, while just 25% understood crypto mining, 20% correctly identifying staking and a satoshi.
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The second annual CryptoLiteracy survey found that Americans are still overwhelmingly crypto illiterate.
Just 9% of the 1,000 respondents to the 30-question October survey from CryptoLiteracy.org received a passing grade of 60%, despite questions that were very basic.
And while that is more than double last year's 4%, it's still far below the 32% who said they own cryptocurrencies, and the 36% who said they plan to buy cryptocurrencies in the next six months.
However, the number of respondents who were crypto owners also nearly doubled from 17%, despite a nearly 70% drop in the price of Bitcoin — suggesting that the crypto winter hasn't deterred as many people from investing in digital assets as one might expect.
What crypto is not doing, however, is becoming more diverse, with the survey report arguing that crypto has a "country club problem" with ownership skewing wealthy and well-educated.
It remains far more popular with men than women too — 46% of men said they owned crypto, up from 22% last year, while women only grew from 12% to 18%.
Neil Bergquis, who leads the initiative, said:
"Now more than ever, it's vital we increase crypto literacy and help people understand the nuances of crypto, like how to self-custody and safely transact."
Describing the organization's goal as giving "consumers an educational guide to understanding risk and mitigating loss in a confusing environment," Bergquist added:
"Although these results suggest that we still have work to do to improve crypto literacy, the results are also encouraging as consumers are becoming more interested in learning about crypto and, therefore, more crypto literate."
Known Unknowns
Looking at the understanding of fundamentals, CryptoLiteracy found that there is "a jargon problem" — with education on the vocabulary of crypto in need of support.
Just 30% knew what network nodes are, while just 25% understood crypto mining, 20% correctly identifying staking and a satoshi, and decentralized finance, or DeFi, coming in at just 18%.
Non-fungible tokens, or NFTs, fared better than the broader crypto market, with 40% able to correctly answer: "What is a non-fungible token?"
(The "select all that apply" answers were: A) A token that represents a unique digital asset; B) A kind of cryptocurrency token that is non-fungible; C) An avatar used by a celebrity online; D) A cryptocurrency used by normal financial traders; E) I don't know.)
It's probably worth noting that along with the 40% who "correctly" answered A), 22% answered B) — which really isn't wrong.
Unknown Unknowns
Perhaps worryingly, there also seems to be a big gap in how many people understand how little they know: Just 31% said not knowing or understanding enough about crypto was a barrier to investment.
That's apparently worse among millennials, with 54% saying they own crypto and 59% planning to buy in the next six months — yet they scored just 1% higher on the quiz than Gen X and Gen Z, and just two points above baby boomers.
Trust Matters
It's worth noting that the survey took place before the FTX exchange blew up in a scandal that badly tarnished crypto's reputation as the second-largest exchange in the world was found to have loaned $10 billion worth of customers funds to its sister trading company, which lost at least $8 billion of it.
So it's quite likely that the 8% who called not trusting crypto companies a barrier to investment would have been higher.
Overall 35% had called the crypto industry "more" or "somewhat" trustworthy, while just 25% believed it to be "more" or "somewhat" untrustworthy.
However, the survey did take place after a string of crypto lenders collapsed into bankruptcy over the summer after having made large and unbacked loans to a hedge fund and very risky DeFi bets with customers' funds.
To say nothing of a massive string of hacks that saw DeFi particularly hard hit, with more than $3 billion lost to thieves.
The survey wrapped by asking: "Is the crypto industry still in the Wild West days?"
And while it didn't quite answer that yes or no, the conclusion was:
"This year has definitely demonstrated the risks associated with centralized cryptocurrency systems and companies. In less than 12 months, major crypto companies have gone from advertising during the Super Bowl to filing for bankruptcy after losing billions of dollars of customer funds."
