Multicoin Capital: Predictions change again, these 7 crypto trends remain unchanged

Written by: Multicoin Capital Partner Team

Compiled by: Yangz, Techub News

Amazon founder Jeff Bezos’s discussion of future trends is often thought-provoking. Bezos believes that "what will change in the next 10 years" is an interesting but also very common question. On the contrary, in his view, "what will not change in the next 10 years" is more important.

Earlier this week, we published a “cookie cutter” venture capital article on the emerging areas our investment team is looking forward to seeing in 2025. In the spirit of Bezos's statement, we thought we'd also highlight some trends that we believe are generally immutable and are compounding and providing a stable foundation for our investments.

Kyle Samani, Managing Partner of Multicoin Capital: The unremitting

pursuit of capital efficiency

When DeFi first emerged, capital efficiency was very low. Uniswap has been criticized by many investors because of this problem.

However, in the past 5 years, the capital efficiency of DeFi has been improved in various aspects, such as CLOB, revolving/multi-products, centralized liquidity, using USDe as collateral on derivatives exchanges, using derivative collateral to facilitate lending, Use LP positions as derivative collateral, etc. The market will always relentlessly pursue capital efficiency.

This is the charm of DeFi. All of these capital efficiency improvements are facilitated by permissionless innovation.

We believe that DEX Drift, the leading derivative on Solana, represents a version of the logical endpoint of capital efficiency in DeFi. Spencer and David also talked about these issues in their speeches at the 2024 Multicoin Summit.

Multicoin Capital Managing Partner Tushar Jain: Unlimited desire for new

financial games

Everyone has a tendency to gamble, but the game will keep changing.

Memecoin is the next generation gambling game. Memecoin is more volatile and therefore more interesting than traditional casino or sports betting. Memecoin’s top returns are higher than other forms of gambling, and its extreme volatility brings a level of excitement and risk that exceeds traditional casino games or sports betting. In addition, its potential for huge returns is a huge attraction for those with a strong risk tolerance. This potential for huge gains, combined with Memecoin’s inherent unpredictability, creates an experience unmatched by traditional gambling.

Memecoin also has unique social properties. Tokenizing internet culture into Memecoin provides social attributes that other forms of gambling lack. They are often associated with online culture and online communities, promoting a shared experience among gamblers. This social attribute turns Memecoin trading into a group activity where individuals can connect through common interests and experiences. This creates a sense of belonging and shared identity that is not found in other forms of gambling.

Memecoin represents the fusion of gambling, online culture, and social interaction. They offer a high-stakes, high-reward experience that appeals to humans’ thrill-seeking nature while also leveraging the social and collective nature of online communities. As internet culture continues to evolve, Memecoin is likely to continue to become an important part of the gambling industry, providing a unique and highly engaging experience for those willing to take the risk.

The human desire to gamble has always existed, but the games we play are constantly changing. Memecoin is the next node in this evolution, but it won’t be the last.

Multicoin Capital Investment Partner Spencer Applebaum: The pursuit of

transparency in financial markets

In TradFi trading, brokers are able to offer zero-fee trades to retail investors as Citadel Securities, Susquehanna International, Wolverine Trading and other high-frequency trading firms compete to bid to execute order flow. This is called Payment for Order Flow (PFOF). These firms are willing to bid for large volumes of order flow at or near the mid-price because, by definition, order flow is not public. There is a vast literature on why PFOF is good for the world (despite its often negative connotations) .

The challenge with Robinhood and E-Trade type order flow payments is that it is opaque and the auctions are limited to market makers working with the broker. In addition, there are multiple layers of intermediaries such as clearinghouses, exchanges, brokers, etc., all of which charge hidden fees to end users, which are often included in the spread.

Regarding the opacity of PFOF, the research article states that “Robinhood’s agreements with wholesalers sacrifice PI (price improvement) in exchange for increases in PFOF. This is exactly the conflict of interest issue Gensler is concerned about… This would not be a problem in itself if consumers could easily tell the difference in execution quality between brokers. However, these differences cannot be inferred from the current disclosure regime.”

The beauty of DeFi is that it compresses settlement, exchange, custody and execution into a single API, and all of it is transparent. This gives DeFi a natural advantage because the market always values ​​transparency.

DFlow (invested by Multicoin) first proposed the concept of "conditional liquidity", which is only when the front-end application recognizes that the transaction recipient is harmless (or the recipient obtains better pricing from the sender through the algorithm) Only then can liquidity be obtained. Transaction senders can provide liquidity on on-chain CLOBs (like Phoenix) or on-chain AMMs (like Orca) and provide significant price improvements to private retail orders while avoiding being snatched away by harmful takers. The entire stack is open and transparent, and PFOF can be built on it using "conditional liquidity". This method combines the advantages of TradFi and DeFi, which can not only segment the order flow and provide better prices for retail investors, but also have the openness, transparency and auditability provided by DeFi.

Multicoin Capital Investment Partner Shayon Sengupta: Value capture will

always be unbundled and re-bundled across the stack

Last year, I published an article on "Value Attention Theory," which described the core way to unlock cryptocurrencies in consumer applications, namely permissionless asset issuance and trading in any interface and environment.

In 2024, asset issuance is concentrated in a few venues, with pump.fun being the most prominent. These venues dominate asset issuance, but importantly, these assets are traded elsewhere, such as Telegram group chat bots, aggregators such as DexScreener and Birdeye, or directly in Phantom. For as long as cryptocurrency capital markets have existed, the issuance and trading of assets has been decoupled. Bitcoin was launched on a crypto mailing list called metzdowd.com, and today it is traded on Nasdaq (via an ETF). In addition, tokens launched on ICOBench in 2017 continue to be traded on major CEXs.

Although pump.fun dominated asset issuance last year, it was not as good as Telegram robots and other aggregation platforms in asset trading. In the long run, I think being able to master trade or order flow is a more profitable business.

Of course, this is just the first round of competition for asset issuance and trading. They will be bundled and unbundled a thousand times in a thousand venues, because the attention on the Internet is not limited to a single application. It’s everywhere in forums, live video platforms, chat tools, and other interfaces we interact with.

More importantly, I hope these apps will realize more clearly that with attention comes the opportunity to own order flow. In 2025, more consumer applications are expected to launch embedded wallet and transaction capabilities.

Eli Qian, Investment Partner of Multicoin Capital: Funds seek income

If you are a rich person, you will look for simple and efficient ways to make money.

Until recently, most revenue streams were only available to established market participants and investors. For example, if you deposit your money in a savings account with Bank of America, you'll earn only 0.01% APR (whereas Bank of America will lend your money out at 10%!). Only by buying money market funds can you get more reasonable returns. However, the need for yield remains, and the emergence of products such as ETFs (which abstract away individual stock selection) and robo-advisors (which can manage portfolios) has made it easier for non-experienced market participants to obtain yields that were previously impossible.

The situation is similar with cryptocurrencies, but earning income from staking or lending is not easy and requires a certain level of expertise on the part of the user. Products that simplify the way to earn income will continue to emerge, thereby ending the situation where knowledge arbitrage puts retail investors at a disadvantage. Nowadays, we can earn staking or lending income with just a few simple clicks in the wallet or app where we hold cryptocurrencies (knowledge of staking and lending is optional). Fuse Wallet, StakeKit, etc. can all do this. In the future, wallets and DeFi applications will automatically allocate and rebalance assets among validators, lending protocols, and liquidity pools to provide users with the best returns around the clock.

Vishal Kankani, investment partner at Multicoin Capital: Innovation has

significantly reduced the cost of banking services

The Medici family led the development of modern banking in the 14th century. Banking back then was slow, physical, expensive, and required a lot of trust. Over time, the cost of accessing financial services has fallen dramatically. With blockchain, we can clearly see 24/7, global, zero-dollar cost banking.

No matter how advanced financial instruments become, the need for banking services will always remain. The reason for the rise of Banking as a Service (BaaS) is that it is difficult to build basic financial building blocks on TradFi no matter how innovative the application layer is; naturally, this implements modularity in the software, resulting in the separation of front-end and back-end. Today, the backend is called BaaS.

BaaS providers license their infrastructure to fintech companies, enabling companies to launch digital banking, business card and lending products with minimal time and cost. By providing these services through APIs, BaaS providers allow technology companies to focus on customer experience and unique products, while BaaS providers handle the "boring but critical" back-end, namely compliance, risk management and fund flow.

In the pre-blockchain era, a hypothetical BaaS stack included banking infrastructure, KYC/AML compliance, payment processing, card issuance, and data aggregation. The system works, but is complex and inefficient because it is still rooted in traditional banking infrastructure (SWIFT/ACH) built in the 1970s.

Blockchain represents transformation and innovation and will subvert modern BaaS. By using blockchain-based assets and protocols, we can build a new BaaS model that is simpler, cheaper, faster, global and more transparent. The BaaS stack in the post-blockchain era will include self-hosted wallets (e.g. Squads), programmable enhanced on-chain KYC and compliance protocols (e.g. zkMe), stablecoin payment infrastructure (e.g. Bridge), and services for lending and borrowing (e.g. Kamino ) and DeFi protocols for transactions (such as Drift).

The evolution of BaaS to a blockchain-based model is inevitable. As the infrastructure matures, we will see blockchain protocols replace every component in today's BaaS stack, creating a leaner, more efficient, and more transparent model for financial services.

Squads is a Multicoin-invested company that at its core provides a BaaS protocol on Solana, allowing businesses, individuals and developers to create secure accounts that can store value and be used for programmatic trading. We predict that Squads will firmly lead the development of BaaS in 2025.

Matt Shapiro, Partner at Multcoin Capital: Eliminating friction to

increase usage

When cost and friction are eliminated, usage naturally increases. Email has changed the way we communicate; the iPhone has made it easier to take photos and record our lives; Amazon has simplified the way we shop online; and social media has made sharing content seamless.

Obviously, the same results would occur if transactions and money transfers also became easier. Stablecoins could trigger one of the biggest financial transformations of our time. The ability to send money around the clock, with near-instant settlement, will have far-reaching consequences. It would allow dollars to penetrate new markets and get into the hands of real people in a way that Treasury auctions cannot. It will make business activities more efficient with no downtime on nights, weekends or holidays. It will reduce working capital requirements and significantly reduce the cost and time of cross-border transactions. Currently, the supply and trading volume of stablecoins have reached new highs, and as regulations become clearer, the acceptance of stablecoins will also increase.

The growth of stablecoins will further catalyze the concept of open finance. When transactions become easier, more transactions will occur. Those who own stablecoins will seek yield from these assets and gravitate toward platforms like Kamino and Drift. Once on-chain, stablecoin holders can access the benefits of money market funds (such as Blackrock's BUIDL) and DEXs (such as Drift, Jupiter, Raydium and Uniswap) with just a click of the mouse. As on-chain assets continue to grow, there will undoubtedly be more and more assets that stablecoin holders can choose to own and participate in. Stablecoins are a Trojan horse for the on-chain economy, which will grow into a more inclusive and open global financial system.