Ethereum, Solana, Arbitrum… These are just three of the well established blockchains in decentralised finance supporting a panoply of projects.
And yet Big Tech is poised to shun them all and build their own blockchains. So, too, are fintechs.
“They could run their own,” said Juan Lopez, a general partner at the venture arm of VanEck, the asset management firm.
“The likes of Apple or Meta should know they have enough distribution such that they don’t need to pay rent to any given underlying infrastructure,” Lopez told DL News.
Lost opportunity
Lopez’ analysis is looking ahead as Robinhood, Revolut, Stripe, eToro, and PayPal expand further into crypto.
Robinhood, the online brokerage, recorded a whopping 700% jump in crypto-related revenue in the fourth quarter.
With the fintech industry projected to grow to $1.5 trillion by 2030, servicing their crypto needs presents a massive opportunity for DeFi players.
And yet the fintech industry’s desire to control their own chains could mean the chance slips between DeFi’s fingers.
But why would fintechs go to all of the expense and trouble to build their own solutions?
Profits, is the short answer.
By controlling their own chains, companies could keep more of their earnings, Lopez argued.
‘We’ll see fully-fledged product rollouts from fintechs.’
Juan Lopez, VanEck
Moreover, they would have more control over their technology stack, which is industry parlance for a collection of technologies used to build and run a product.
Some native firms have already started to do just that, which could provide a blueprint for fintech firms, Merlin Egalite, co-founder of decentralised lending protocol Morpho, told DL News.
In 2023, Coinbase launched Base, its own Ethereum layer 2 blockchain.
It has grown to become the biggest layer 2 in crypto, with $3.8 billion worth of deposits, and has generated over $112 million in revenue for Coinbase since its launch, according to DefiLlama data.
Rival exchange Kraken launched its own layer 2 called Ink in December.
Established user base
This approach, however, only works for bigger fintechs with established user bases, Lopez said. Smaller firms will likely still tap into existing DeFi infrastructure so they can benefit from its established user base.
He compared using blockchains like Ethereum or Solana to an open source distribution mechanism, where a new product can instantly gain access to a pool of millions of potential users.
Solana, the second biggest blockchains by deposits, has over 81 million monthly active wallets, per Token Terminal data.
Arbitrum, the second-biggest Ethereum layer 2 behind Base, has 4.8 million monthly active wallets.
Startup explosion
Some users may rotate between several wallets simultaneously, so there’s no way of knowing if these figures represent the number of individual users, however.
Small and medium sized fintechs “will greatly benefit from just plugging into what’s out there,” Lopez said. “There’s going to be an explosion in the startup ecosystem.”
Even some bigger firms are taking this approach.
In November, a group of fintech and crypto firms including Robinhood and crypto exchange Kraken launched their own stablecoin network, which will leverage existing blockchains including Ethereum and Solana.
Other firms, such as Revolut, the British neobank, are expected to follow suit.
Few details are known about the firm’s stablecoin project. But with a valuation of $45 billion and a UK bank licence, Revolut’s move will pack a punch.
“Over the next 12 to 24 months, we’ll see fully-fledged product rollouts from traditional fintechs offering stablecoin payments,” Lopez said.
“Once everyone sees that they’re processing billions of dollars in volume per month, I don’t think anybody’s going to care about what this is for,” he said.
“They’ll just jump on the train.”
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com. creator solana token
