Multicoin Capital Sequel: The Eternal Narrative of the Crypto World

Original title: "Some Things Never Change, Even In 2025"

Source: Multicoin Capital

Compiled by: Azuma, Odaily Planet Daily

Two days ago, Multicoin Capital published an article " Multicoin Capital: 2025 Frontier Narratives ", which outlined the most uncertain but also the most imaginative frontier narratives in 2025.

Today, Multicoin Capital published another article, but the focus was on those “eternal narratives” with the highest certainty.

The following is the full text of Multicoin Capital, compiled by Odaily Planet Daily.

Amazon founder Jeff Bezos has a famous saying.

What will change in the next 10 years? This is a very interesting question and one that is often asked. But I almost never get asked this question -> What won't change in the next 10 years? In my opinion, the second question is actually more important, because knowing what won't change means you can build your business strategy around those deterministic events. In our retail business, we know that customers want lower prices, and I know that will be true in 10 years; they want faster shipping; they want a wider selection of merchandise...obviously, no matter how many years from now. There will be users coming up and saying, "Hey, Jeff, I like Amazon, but my prices are higher and my delivery is slower." That's never going to happen. Therefore, we need to invest energy in these things and do these things better. We know that the energy we invest today will still bring positive feedback to our customers 10 years from now. When you know something is going to be valuable in the long run, you can invest a lot of energy into working toward it.

Earlier this week, we published a typical VC article about the new opportunities the Multicoin Capital investment team is looking forward to seeing in 2025. Based on Bezos’ logic, we feel it’s also important to highlight trends that we often take for granted, but are still evolving. This provides us with a stable opportunity upon which we can continue to invest.

Unchanging narrative one: the unremitting pursuit of capital efficiency

Narrator: Kyle Samani (Co-founder of Multicoin Capital)

DeFi is very capital efficient to begin with. Uniswap’s xy=k curve is notorious for being capital inefficient.

Over the past five years, DeFi’s capital efficiency has improved in every aspect. CLOB, looping/multiply products, centralized liquidity, USDe-based derivatives exchanges, using derivatives collateral for lending, using LP positions as derivatives collateral, etc... The market is constantly pursuing capital efficiency.

This is the charm of DeFi. Permissionless innovation drives all of these capital efficiency gains.

We believe that Drift, the leading derivatives exchange on Solana, represents the focus of DeFi in a certain direction in exploring capital efficiency. A version of logical endpoint. Spencer and David discussed these issues in their presentations at the 2024 Multicoin Summit.

Unchanged Narrative 2: A new financial game that you can’t stop playing

Narrator: Tushar Jain

Humans have always wanted to gamble, but the game is constantly changing.

Meme tokens are a new generation of gambling games. Meme tokens are more volatile and therefore more interesting than traditional casinos or sports betting. The Meme Token offers higher top returns than other forms of gambling, and its extreme instability brings a level of excitement and risk that exceeds that of traditional casino gaming or sports betting, as does the potential for huge returns. Existing forms of gambling that are extremely attractive to those with a greater risk tolerance. This potential for huge gains, combined with the inherent unpredictability of Meme tokens, creates an experience unmatched by traditional gambling.

Meme tokens also have a unique social dimension. Abstracting Internet culture into a Meme token provides social attributes that other forms of gambling lack. They are often associated with online culture and online communities, promoting a "consensus" among gamblers. This social attribute turns the trading of Meme tokens into a group activity where individuals can bond over shared interests and experiences. This creates a sense of belonging and shared identity that is not found in other forms of gambling.

Meme tokens represent 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, Meme tokens are likely to continue to become an important part of the gambling industry, providing unique and engaging experiences for those willing to take the risk.

The human urge to gamble is constant, but the games we play are constantly changing. Meme tokens are the next step in this evolution, but they won’t be the last.

Unchanged Narrative Three: Financial Market Transparency

Narrator: Spencer Applebaum

On the TradFi trading market, brokers are able to offer zero-fee trading services to retail investors as Citadel Securities, Susquehanna International, Wolverine Trading and other high-frequency trading (HFT) firms bid to execute these orders. This is called Pay for Order Flow (PFOF).

These companies are willing to bid for large orders at/near the mid-price. There is a vast literature on why PFOF is good for the world, rather than evil (despite its often negative connotations).

The challenge with Robinhood and E-Trade type paid order flow is that it is opaque and bidding is limited to market makers that work 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, and these fees are often included in the spread.

Regarding the opaqueness of PFOF, a research article pointed out: "Robinhood's agreement with wholesalers has increased PFOF at the expense of slippage -this is the conflict of interest issue that worries SEC Chairman Gensler... .If consumers could easily tell differences in execution quality between brokers, this would not be a problem in itself, but 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, all of which is transparent. This brings a natural advantage to DeFi, because the market always values ​​transparency.

DFlow, a project invested by Multicoin, is pioneering a concept called "conditional liquidity". This concept stipulates that liquidity can only be matched when the matchmaker is recognized by the front-end application as non-malicious (or the matchmaker can obtain better pricing from market makers through algorithms). Market makers can provide liquidity on on-chain CLOBs like Phoenix, or on-chain AMMs like Orca, and provide better slippage performance for retail orders while avoiding being exploited by malicious matchmaking parties.

The entire stack is open and transparent, leveraging "conditional liquidity" on which PFOF can be built. It elegantly combines the best features of traditional finance and DeFi: the ability to segment order flow and provide better quotes to retail investors, while possessing the openness, transparency and auditability provided by DeFi.

Unchanged narrative four: The value capture model will continue to be

split and bundled

Narrator: Shayon Sengupta

Last year, I published an article on the “Attention Theory of Value ,” in which I described how a core approach to introducing cryptocurrencies in consumer applications would be permissionless implementation in arbitrary interfaces and environments. Asset issuance and trading.

In 2024, asset issuance is concentrated in a few venues - with pump.fun being the most prominent. These venues dominate asset issuance, but importantly, assets are traded elsewhere — on the Telegram bot, on aggregators like DexScreener and Birdeye, within the Phantom wallet... Assets are issued and traded and It is not carried out in the same "issuing platform/trading platform", but carried out in a series of dispersed venues. As long as crypto capital markets have existed, the issuance and trading of assets have been decoupled. Bitcoin was originally launched on a crypto mailing list called metzdowd.com, but today it is traded on Nasdaq (via an ETF). The tokens launched during ICOBench in 2017 are traded on major CEXs.

Therefore, although pump.fun won the issuance segment last year, the trading segment was won by Telegram bot and retail aggregation products (new sources of order flow). In the long run, I think being able to own an exchange or order flow is a more profitable business.

This is just the beginning of the issuing platform/trading platform. The issuance and trading of assets will be split and bundled a thousand times in a thousand venues, because attention on the Internet is not limited to a single application, it exists in forums, live video platforms, chat tools and our interactions with them on other interfaces, everywhere.

More importantly, I hope these apps will realize more clearly that with attention comes the opportunity to own order flow, and order flow is a very profitable industry. Get ready to see wallet and transaction functionality embedded into more consumer applications in 2025.

Unchanged narrative five: Funds seek returns

Narrator: Eli Qian

Everyone is looking for ways to earn money, preferably in simpler and clearer ways.

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 0.01% APR (and Bank of America will loan your money back at 10%!). Only by purchasing money market funds can you obtain more reasonable returns. But the need for yield remains, and products like ETFs (which abstract away individual stock selection) and robo-advisors (which can manage your entire portfolio) make it easier for non-experienced market participants to access previously blocked yields.

The situation is similar with cryptocurrencies, where earning income from staking or borrowing is not easy and requires a certain level of expertise on the part of the user. Products that simplify the way to obtain income will continue to emerge, thus ending the knowledge arbitrage situation that leaves retail investors passive. Nowadays, with just a few simple clicks, you can log into a wallet or app with your cryptocurrency and earn staking or lending benefits without much knowledge. Fuse Wallet, StakeKit, etc. can all do this. In the future, wallets and DeFi applications will automatically allocate and rebalance assets between validators, lending protocols, and liquidity pools to provide users with the best returns around the clock.

Constant narrative six: Use innovation to reduce costs in the banking

industry

Narrator: Vishal Kankani

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, $0 cost banking.

No matter how advanced financial instruments become, the need for banking services will always remain. The genesis of Banking as a Service (BaaS) is that no matter how innovative the application layer is, it is difficult to build basic financial building blocks on TradFi tracks; 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 service providers allow technology companies to focus on customer experience and products, while BaaS is responsible for handling "boring but critical" back-end business, including compliance, risk management, and capital flow.

The BaaS stack in the pre-blockchain era included banking infrastructure, KYC/AML compliance, payment processing, card issuance and data aggregation. The system works, but it is complex and inefficient because it is still rooted in traditional banking infrastructure built in the 1970s (SWIFT/ACH), is expensive, is not 24/7, capital inefficient, and is not global.

Blockchain will subvert modern BaaS because blockchain represents transformation and innovation. By using blockchain-based assets and protocols, we can build a new BaaS model that is simpler, cheaper, faster, more global, and more transparent.

The BaaS stack in the post-blockchain era will include: self-hosted wallets such as Squads, enhanced on-chain KYC and compliance protocols such as zkMe, stablecoin payment infrastructure such as Bridge, and for lending (Kamino) and trading (Drift) DeFi protocol.

The evolution of BaaS towards 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-backed project that at its core provides a banking-as-a-service protocol on Solana, allowing businesses, individuals and developers to create a secure account that can store value and be used for programmatic trading. Squads is the first formally verified protocol on Solana and has currently processed transactions of more than 1 billion stablecoins. The assets secured using the Squads protocol are growing exponentially. We predict that Squads will lead the development of BaaS in 2025.

Invariant Narrative Seven: Eliminate friction and increase usage

When you make things easier by reducing cost and friction, people will naturally use it more. 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 buy things online; and social media has made sharing content smoother.

Obviously, making it easier to trade and send money would have the same result. Stablecoins may be one of the biggest financial changes of this era. 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 ordinary people in a way that Treasury auctions cannot. It will make business activities more efficient, with no more downtime on nights, weekends or holidays. It will reduce working capital requirements and significantly reduce the cost and time of cross-border transactions. The supply of stablecoins has reached new highs, stablecoin trading volume has also reached new highs, and as regulation becomes clearer, stablecoin acceptance will increase.

The development 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 on these assets and gravitate toward platforms like Kamino and Drift that autonomously match borrowers and lenders by reducing friction. Once on-chain, stablecoin holders can access returns from money market funds (such as Blackrock’s BUIDL) and decentralized exchanges (such as Drift, Jupiter, Raydium and Uniswap) with just a few clicks. 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.