Wells Fargo, the fourth largest bank in the US by market capitalization, has released a special report titled “Understanding Cryptocurrencies,” which compares digital assets to the invention of “the internet, cars, and electricity.”
internet of value
Produced by its Global Investment Strategy Team, the report published in early August optimistically called digital assets “the building blocks of a new Internet.” A comment addressed to Wells Fargo investment clients indicated that the advancement of digital assets will bring “new investment possibilities and opportunities.”
“Many expect digital assets to be the building blocks of a new Internet, the Internet of Value…
The Internet of Value is likely to be as disruptive to the world of finance as the original Internet was to communications and information. What it can mean for investors”.
The term “internet of value” is not new; Speaking to CryptoSlate’s Akiba at Paris Blockchain Week in March, Binance’s Head of NFT and Fan Tokens, Helen Hai, referred to an Internet of Value as the cornerstone of her approach to crypto. However, it is a term that makes a lot of sense when defining the difference between web 2.0 and web3. The following image compares the two.
Onboarding of new cryptocurrency users
Interestingly, Wells Fargo identified a major trend in the crypto industry of focusing on technology rather than the “big picture.” The user experience within crypto and web3 is notoriously poor, with overly complicated dApps and wallet management. New users face an exceptionally high barrier to entry; Seed phrases, passphrases, tokens, blockchain, and token transfers are totally foreign to newcomers.
Wells Fargo stated that its series of special reports on crypto aims to “make sure newcomers see the big picture before they get buried in detail.” It cannot be understated how important this is to the advancement of crypto and web3. A household name in banking publishing a pro-crypto special report to educate non-crypto users about the long-term benefits of digital assets packs a lot of weight.
While many embedded investors in the crypto industry do not trust traditional banks, a larger subset of the general US population still relies on household name banks. The support of such an institution, aside from simply promoting the purchase of Bitcoin as part of strategic diversification, goes a long way towards establishing the legitimacy of digital assets in the general population.
The report stated that it would refer to all cryptocurrencies, smart contracts, and other tokens as “digital assets.” In itself, this use of language is a concrete step in improving the user experience by removing preconceptions about terms like cryptocurrency, NFTs, and tokens.
With the last six pages of the report, Wells Fargo drew comparisons between how today’s version of the Internet reinvented post offices, music stores, landlines and local news. He used these comparisons to try to create a yardstick to explain how the “Internet of Value” will reinvent local currencies, payment networks, securities, property, and contracts.
The report described real-world examples of payment processing, remittances, and other uses of digital assets before attempting an explanation of the Bitcoin Lightning Network. The image in the description echoed Jack Maller’s demo on using the Lightning network to send fiat currencies. Wells Fargo stated that “early movers can take advantage of open network effects and gain economies of scale, while late movers stand to lose.”
Wells Fargo concluded the report by stating “
The main risks facing the industry are additional regulation, technology and business failures, operational risks with the handling and storage of digital assets, price volatility, and limited consumer protections.”
This is the fifth in a series of Wells Fargo cryptocurrency special reports. The next report will continue the theme of the risks associated with investing in early-stage technology.