Most people today know what the internet is. But I’d wager only a few know what an “intranet” is.
During the internet’s early days, you saw major corporations create their own internal internets… called “intranets.”
These were private networks used to disseminate information to employees about projects and customers. They were all the rave when I was a young Wall Street executive.
C-Suite big shots dismissed the public internet as a “fad” and sunk hundreds of millions of dollars into their internal intranet projects.
They believed the public internet was not secure enough to house their data. They also believed corporate intranets would increase worker productivity.
Well, here we are 20 years later… and nobody uses intranets anymore. According to one study, 90% of corporate intranets failed within three years.
There are a number of reasons corporate intranets failed. They are huge cost- and time-sinks. They suck up valuable resources that could be used elsewhere. Worst of all, they actually decreased employee productivity.
In the end, corporate intranets failed because it was faster, easier, and cheaper to use public internet applications you and I use every day.
Everything from Facebook to Amazon Web Services to Slack delivers much better results than intranets at far lower costs.
In turn, these apps created huge value for their companies’ shareholders. Today, Facebook’s market cap is $752 billion. Amazon is worth $1.6 trillion. And Slack now has a market cap of $15.8 billion. Meanwhile, the intranet is mainly a thing of the past.
Here’s why I’m telling you about the failure of intranets…
We’re seeing a similar shift from company-specific protocols to open-source apps in the traditional financial space.
And these projects will disrupt the entire industry the same way Facebook, Amazon, and Slack disrupted the intranet.
Crypto’s Next Leap Forward
In the traditional financial world, every firm has its own protocols that it develops itself.
Every firm has its own trading system… its own custody system… its own anti-money laundering system… and its own trade settlement system.
They have to build these systems from scratch. And then they have to keep them maintained. It’s an inefficient and expensive process.
That’s one of the reasons why the traditional financial system sucks so much value out of the global economy. These firms rake in an estimated $8.5 trillion per year in fees. It’s crazy.
But today, we’re seeing cheaper and more efficient solutions coming along. It’s called decentralized finance (DeFi). We also refer to it as “crypto finance.”
DeFi attempts to do for finance what the internet has done for so many other businesses: remove the middleman. It uses cutting-edge blockchain technology to prevent manipulation without relying on trusted third parties.
Eventually, crypto finance will make banking, borrowing, lending, and investing more accessible and cheaper for billions of people.
The reason DeFi shows so much promise is because it’s built on interoperable protocols. That means each individual component of crypto finance can work with one another.
Compare this to traditional financial firms… in which each firm has to create its own lending, trading, and risk management software.
This creates huge inefficiencies, because each financial firm has to replicate the same type of software development (trading, lending, etc.). With DeFi, the protocols are open source. So you don’t have to keep reinventing the wheel.
You see, DeFi protocols are all built on the same programming language and use smart contracts… which means they can “talk” to one another. So programmers can easily write software that interacts with different protocols.
And since they’re open source, you can spin up a financial firm very quickly and “plug and play” all these different pieces together. You can’t do that in the traditional financial world.
But remember, DeFi is still unchartered waters…
There is no playbook for crypto finance. We’re in completely brand-new, virgin territory. And like with any new technology, there’s a lot of fraud and scams going on in DeFi.
But it would be a mistake to confuse bad players with the long-term trajectory of the decentralized finance trend.
Not Just a “Flash in the Pan”
Sure, there are a bunch of garbage DeFi projects out there just attempting to fleece people out of their money.
That’s made it easy for some people to think, “Oh, this DeFi thing is a flash in the pan.”
But the more I examine this trend, the more I realize just how massive it will be.
For example, in July, the Office of the Comptroller of the Currency (OCC) gave banks the green light to get involved in crypto.
And just in September, the OCC gave banks approval to hold assets that back stablecoins. A stablecoin is a crypto that’s tied to a fixed asset, like the U.S. dollar or gold. This is important because DeFi apps use stablecoins.
Most people have probably never heard of the OCC. But it regulates all U.S. banks. So it’s one of the most powerful federal agencies in the country.
So these announcements are tremendous. Eventually, banks will have to dive into the crypto finance space like their competitors – or they’ll die.
Already, we’ve seen about $11 billion locked up in DeFi apps. That’s a staggering sum for such an early-stage application of blockchain tech.
Friends, we’re seeing the type of development and the type of applications I’ve forecasted − and written about − for several years.
Just like how early investors made a fortune investing in internet companies like Amazon and Facebook… early investors will also create life-changing wealth by buying into the right DeFi projects.
So it’s clear to me. The DeFi trend is far more than a flash in the pan. And I’m doing everything in my power to discover what those opportunities are and bring them to you.
Let the Game Come to You!
Editor, Palm Beach Daily