Crypto Is Doing to Finance What the App Store Did to Software

Before the App Store, building and distributing software was expensive and slow. Developers had to provision servers, land distribution deals, and manage core services like payments and authentication.

Then Apple changed the game. The App Store abstracted away distribution, hosting, payments, identity, and security. With just a few engineers, a value prop, and access to Apple’s rails, you could launch and distribute globally.

This shift unlocked an explosion of software startups. Barriers to entry collapsed. Capital efficiency soared. Tiny teams could build massive companies: Instagram had 13 employees when it sold for $1B; WhatsApp had 55 when it sold for $19B.

AWS and Stripe extended this abstraction, creating a full-stack environment where developers could go from idea to product with minimal fixed costs. Software was unbundled, and the era of the lean, high-leverage startup was born.

If the App Store unbundled software, banks have historically bundled finance. We’re seeing that start to change.

Banks as Financial Infrastructure Providers

The business model of a bank is straightforward: build financial infrastructure, acquire capital and customers, build trust and distribution, monetize it via financial products.

Traditional financial infrastructure is expensive to build and maintain. Large teams manage processes behind custody, settlement, reconciliation, compliance, and reporting. Systems are error-prone and siloed. Per a BCG report, financial institutions lose up to $50B annually ‘due to excessive operational complexity.’

Banks benefit from economies of scale. Massive financial infrastructure costs are amortized across a variety of products.

How? Banks take deposits to acquire capital and customer relationships. Banks then monetize customers and capital via financial products. Retail banks offer products for individuals like mortgages, credit cards, and personal loans. Investment banks offer products for institutions like asset issuance, prime brokerage, and structured products.

Financial Products as Captive ‘Startups’

Inside a bank, every new financial product is like a startup.

Here’s how it works. Someone identifies a market opportunity. It might be a new asset class (carbon credits, crypto), a client need (auto financing, oil hedging), or a customer expansion (geographic expansion, new demographics). This person becomes the ‘founder.’ They pitch the value prop and financial case internally. If the idea holds up under scrutiny – business case, risk, compliance – then the bank allocates capital, infrastructure, and headcount. The desk launches and operates like a business unit. It’s plugged into shared infrastructure and carries a P&L.

This model works because of high barriers to entry and operating leverage. Almost no one launches a product desk from scratch. Without the bank’s infrastructure, the cost would be too high.

Blockchains Abstract Financial Infrastructure

Crypto is beginning to do for finance what mobile platforms did for software: abstract away the infrastructure.

Blockchains already provide foundational infrastructure for building a financial institution. Custody is handled by wallets and programmable accounts. Settlement occurs instantly and is recorded on immutable ledgers, preventing the need for manual reconciliation. Liquidity is permissionless and composable. Solutions are being built to solve compliance, identity, and access control.

The closed platform of banking is opening.

Founders no longer need to go through a bank to launch a financial product. They can build directly on-chain. The result is leaner teams, faster cycles, and radically improved capital efficiency. Want to launch a new structured product? It can be built with a team of 3 developers. Launch the smart contracts on a blockchain with liquidity and compliance infrastructure, offer incentives to acquire customers and capital, and voila.

Mobile unbundled and gave way to app-native startups. Crypto is enabling the rise of protocol-native financial products. The barrier to launch and cost to scale have collapsed.

We are entering a golden age of financial innovation. Many DeFi applications will resemble financial products that previously could only be launched with the support of an existing financial institution.

Just as the App Store unlocked a new wave of mobile-native startups, blockchains are enabling a new wave of financial products.