The icon for the default notes app on an iPhone is a little picture of a legal pad. The legal pad was invented in 1888, about 120 years before the launch of the iPhone. Why did, does, the most twenty-first-century invention of them all, use this nineteenth-century invention as an icon? To make it relatable and obvious to users as to what function it serves.

This is ‘skeuomorphism’, where you replicate old-school ways of doing things to help people understand the new-school way of doing things. The not-yet-terminally-online audience of the early noughties knew what legal pads were and what you used them for — note-taking. When they saw the icon on their new smartphone, they knew that this was where they’d write their notes.

Sometimes new technologies need to look like something already used by the mass market for adoption to increase.

Mass adoption happens in the late majority, but we won’t get there with crypto as it is now. Crypto is just too complex and too unsafe for the mass market. RIPEMD160(SHA256({KEY})) and “not your keys, not your crypto” are never going to be day-to-day concepts for hundreds of millions of people.

The Bitcoin/crypto adoption curve(Source: Osprey Funds. Are we really there?)

Take this story from Vitalik Buterin, the founder of Ethereum.

“We ordered tea and snacks, and we asked if we could pay in ETH. The coffee shop owner obliged, and showed me the QR code for his Binance deposit address, to which I sent about $20 of ETH from my Status wallet on my phone.“

Digital payments should be easy. But he goes on:

“The one issue with my coffee transaction is that it did not really make pragmatic sense. The fee was high, about a third of the value of the transaction. The transaction took several minutes to confirm: I believe that at the time, Status did not yet support sending proper EIP-1559 transactions that more reliably confirm quickly.”

Compare this with paying with a debit or credit card. You just have to swipe your watch now and the payment and confirmation are instant. Fees are certainly less than gas fees on Ethereum right now.

Current crypto solutions are oriented towards traders and early adopters, like Buterin. They revel in their technical complexity. That won’t work for a mass market of millions.

So crypto needs a “legal pad,” a skeuomorphic version that millions can immediately understand and cuts through the complexity inherent in the system.

Most people have a bank account. You have a checking account and a savings account. You might have a separate investment account as well with the same bank or a different institution. But basically, they are all the same — you put money in, you take money out.

If crypto looked and acted like a regular bank account, it would remove the complexity of crypto for end users. No longer worry about ‘blockchains’, ‘wallets’, ‘private keys’ and gas fees to manage.

All the end user will see is an account like all their others, transfers happening at the press of a button, and investments being easy to track. Crypto becomes an option alongside fiat, instead of something completely separate. It is the old-school way of doing things, but it’s the way everyone understands.

Embedding crypto within existing Financial Institutions (FIs), and treating crypto accounts as the same as bank accounts, increases the security and safety for end customers. Banks and fintechs know how to do compliance. They have the infrastructure and processes in place to comply with the increasing regulatory requirements.

Banks have been safe custodians of fiat money and assets for hundreds of years. They have invested billions of dollars into security technology and operations over the last couple of decades. This makes them well suited to be the safe custodians of crypto assets as well.

However, for this to happen, existing FIs need to adopt crypto. This is a problem. Why?

There is still a lot of fragmentation and complexity in the crypto ecosystem that needs to be solved for to enable mass adoption by FIs. Just a few of the things FIs have to abstract away from their end users:

– Custody to create crypto wallets, settlement

– Exchange to trade different cryptocurrencies or convert fiat currency to crypto

– Crypto networks to get notified on blockchain events, and manage gas fees

– Compliance to perform KYC/KYB, transaction monitoring, and sanction checks

– Lending and Staking integrate partners to generate and distribute crypto yield

– Ledger to maintain the core book of record for accounts and transactions

– Workflow to orchestrate complex transactions

– Reconciliation to ensure that all transactions are correct, and accounts have the appropriate balances

A disparate and complex crypto infrastructure ecosystem

Any one of these is a huge headache for a dev team. You can end up losing money, paying exorbitant fees, or sending money to a regime on a watchlist.

Additionally, none of these infrastructure components provide any competitive differentiation to the FIs. They should be focused on building differentiated end user experiences and unique products that work in harmony with the rest of their offering.

What is needed is a Crypto as a Service infrastructure similar to a fiat core banking platform. The Platform will handle all of the complexity of integrating with various regulated crypto & fiat partners. The platform will help clients perform compliance activities, maintain the core book of record, manage all the blockchain operations such as gas & wallet management, orchestrate workflows to create easy to use banking and payments products.

Crypto as a Service Platform

The platform will provide one straightforward API that the FIs will use to:

– Create and manage customers, including KYC and compliance

– Open deposit, payment accounts for multiple cryptocurrencies

– Safely custody crypto with regulated banks and trusts

– Transfer funds between accounts

– Exchange funds between different currencies

– Deposit funds from and withdraw funds to external accounts

– Accept payments from customers

– Earn yield

By abstracting away the complexity, Financial Institutions can focus on creating great experiences for their customers. Customers don’t have to worry about finding a trustworthy place to manage their crypto. They can manage their crypto in an account right next to their checking account in their day to day bank.

Crypto is just like another type of bank account after all.

Layer2 Financial is a Crypto as a Service infrastructure that makes it easy for fintechs, banks, and neobanks to launch fully compliant crypto products, in a matter of days. Layer2 provides seamless access to compliant custody, trading, payments, fiat ramps, and yield; all through one user-friendly API. Click here to learn more.