Multicoin Capital Sequel: The Eternal Narrative in the Crypto World

Source: Multicoin Capital

已編譯 經過 歐日報 行星 日常的 ( @Odaily中國 )

譯者｜ 東 ( @azuma_eth )

Two days ago, Multicoin Capital published an article entitled 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, translated by Odaily Planet Daily.

Amazon founder Jeff Bezos has a famous quote.

What will change in the next 10 years? This is a very interesting question and a very common one. But I am almost never asked this question – what will not change in the next 10 years? In my opinion, the second question is actually more important, because knowing what will not change means that you can build business strategies around those certain events. In our retail business, we know that customers want lower prices, and I know that they will still be the same in 10 years; they want faster shipping; they want more product selection… Obviously, no matter how many years it takes, no user will come and say Hey, Jeff, I like Amazon, but I want higher prices and slower shipping… It will never happen. Therefore, we need to invest energy in these things and do them better. We know that the energy we invest today will still bring positive feedback to our customers in 10 years. When you know something is valuable in the long run, you can invest a lot of energy in it.

Earlier this week, we published a typical VC article about the new opportunities that the Multicoin Capital investment team expects to see in 2025. Based on Bezos logic, we think it is also necessary to highlight the trends that we often take for granted, but are still developing. This provides us with a stable opportunity on which we can continue to invest.

Unchanging narrative 1: The relentless pursuit of capital efficiency

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

DeFi was initially capital inefficient. Uniswap’s xy=k curve is notorious for being capital inefficient.

Over the past 5 years, capital efficiency in DeFi has improved in all aspects. CLOB, looping/multiply products, centralized liquidity, derivatives exchanges based on USDe, lending using derivatives collateral, using LP positions as derivatives collateral, etc. The market has been relentlessly pursuing capital efficiency.

That’s the beauty of DeFi. Permissionless innovation facilitates all of these capital efficiency gains.

We believe that Drift, the leading derivatives exchange on Solana, represents a certain direction of DeFis focus on the path of capital efficiency. A version of the logical end point. Spencer and David discussed these issues in their speech at the 2024 Multicoin Summit.

Unchanging narrative 2: A new type of financial game that is hard to stop

Narrator: Tushar Jain

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

Meme tokens are the next generation of gambling. Meme tokens are more volatile and therefore more fun than traditional casino or sports betting. Compared to other forms of gambling, Meme tokens offer higher maximum returns, greater excitement and risk than traditional casino games or sports betting, and potentially huge returns that far exceed existing forms of gambling, making them extremely attractive to those with greater risk tolerance. This potential for huge gains, combined with the inherent unpredictability of Meme tokens, creates an experience that is unmatched by traditional gambling.

Meme tokens also have a unique social dimension. Abstracting internet culture into a meme token provides a social attribute that other forms of gambling lack. They are often associated with online culture and online communities, promoting consensus among gamblers. This social attribute transforms the trading of meme tokens into a group activity where individuals can connect through common interests and experiences. This creates a sense of belonging and shared identity that other forms of gambling do not have.

Meme tokens represent a fusion of gambling, internet culture, and social interaction. They offer a high-stakes, high-reward experience that appeals to the human thrill-seeking nature while also tapping into the social and collective nature of online communities. As internet culture continues to grow, meme tokens will likely continue to be an important part of the gambling industry, providing a unique and engaging experience for those willing to take the risk.

The human urge to gamble is timeless, 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 3: Financial market transparency

Narrator: Spencer Applebaum

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

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

The challenge with Robinhood and E-Trade style payment for order flow is that it is opaque and bidding is limited to market makers working with the broker. In addition, there are multiple layers of intermediaries such as clearing houses, exchanges, brokers, etc., all of which charge hidden fees to the end user and these fees are usually included in the spread.

Regarding the opacity of PFOF, one research article noted: Robinhoods agreements with wholesalers have increased PFOF at the expense of slippage – exactly the conflict of interest that SEC Chairman Gensler is concerned about…If consumers can easily tell the difference in execution quality between different brokers, then this is not a problem in itself. But these differences cannot be inferred from the current disclosure system.

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. The concept stipulates that liquidity can only be matched when the matchmaker is recognized as non-malicious by the front-end application (or the matchmaker can obtain better pricing from the market maker through the algorithm). 市場 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 matchmakers.

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

Unchanged narrative 4: Value capture models will continue to be split and bundled

Narrator: Shayon Sengupta

Last year, I published an article on “Attention Theory of Value ” in which I described how the core approach to introducing 加密貨幣currencies in consumer applications is to enable permissionless issuance and exchange of assets in arbitrary interfaces and environments.

In 2024, asset issuance is concentrated in a few venues – pump.fun is the most prominent. These venues dominate asset issuance, but importantly, assets are traded elsewhere – on Telegram bots, on aggregators such as DexScreener and Birdeye, in Phantom wallets… Assets are not issued and traded on the same issuing platform/exchange platform, but on a series of decentralized venues. For as long as crypto capital markets have existed, asset issuance and trading have been decoupled. Bitcoin was originally issued on a crypto mailing list called metzdowd.com, but it is now traded on Nasdaq (via an ETF). 代幣s launched during ICOBench in 2017 are traded on major CEXs.

So while pump.fun won the issuance game last year, the trading game was won by Telegram bots and retail aggregators (new sources of order flow). In the long run, I think owning an exchange or order flow is a more profitable business.

This is just the beginning of the issuance 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 everywhere on forums, video live broadcast platforms, chat tools and other interfaces we interact with.

More importantly, I hope these applications become more aware that owning attention gives them the opportunity to own order flow, and order flow is a very lucrative industry. Get ready to see wallets and trading capabilities embedded in more consumer applications in 2025.

Unchanging narrative 5: Funds seek returns

Narrator: Eli Qian

Everyone is looking for ways to earn income, preferably in a simpler and clearer way.

Until recently, most sources of yield were only available to sophisticated market participants and investors. For example, if you put your money in a savings account at Bank of America, you would earn 0.01% annual interest (and Bank of America would lend your money back at 10%!). You could only get a more reasonable yield by buying a money market fund. But the demand for yield remained, and products like ETFs (which abstracted away individual stock selection) and robo-advisors (which can manage your entire portfolio) made it easier for non-sophisticated market participants to access previously blocked yields.

The situation is similar for cryptocurrencies, where earning returns from staking or lending is not easy and requires users to have certain expertise. Products that simplify the way to earn returns will continue to emerge, ending the passive knowledge arbitrage situation for retail investors. Today, with just a few simple clicks, you can log in to your wallet or application with cryptocurrency and earn staking or lending returns without much relevant knowledge. Fuse Wallet, StakeKit, etc. can 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.

Unchanged narrative 6: Using innovation to cut banking costs

Narrator: Vishal Kankani

The Medici family led the development of modern banking in the 14th century. Banking at the time was slow, physical, costly, and required a great deal of trust. Over time, the cost of accessing financial services has dropped 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 exist. Banking as a Service (BaaS) was born out of the difficulty of building basic financial building blocks on the TradFi rails, no matter how innovative the application layer was; naturally, this led to modularity in the software, resulting in the separation of the front-end and back-end. Today, the back-end is referred to as BaaS.

BaaS service providers license their infrastructure to fintech companies, enabling them to launch digital banking, corporate 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 handles the boring but critical back-end operations, including compliance, risk management and capital flow.

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

Blockchain will disrupt modern BaaS because blockchain represents transformational 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 post-blockchain BaaS stack will include: self-custodial wallets such as Squads, enhanced on-chain KYC and compliance protocols such as zkMe, stablecoin payment infrastructure such as Bridge, and DeFi protocols for lending (Kamino) and trading (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-funded project that 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 processed over 1 billion stablecoin transactions. Assets secured by the Squads protocol are growing exponentially. We expect Squads to lead the development of BaaS in 2025.

Unchanging narrative 7: Eliminate friction and increase usage

When you make something easier by reducing cost and friction, people will naturally use it more. Email changed the way we communicate; the iPhone made it easier to take photos and record our lives; Amazon made it easier to buy things online; and social media made sharing content more seamless.

Obviously, making it easier to trade and send money would have the same result. Stablecoins could be one of the biggest financial revolutions of our time. The ability to send money with 24/7, near-instant settlement would have far-reaching consequences. It would allow the dollar to penetrate new markets and get into the hands of everyday people in a way that Treasury auctions cannot. It would make commerce more efficient, with no downtime on nights, weekends, or holidays. It would reduce working capital requirements and significantly reduce the cost and time of cross-border transactions. Stablecoin supply has reached new highs, stablecoin trading volume has 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 to platforms like Kamino and Drift, which autonomously match borrowers and lenders by reducing friction. Once on-chain, stablecoin holders can access the yield of money market funds (such as Blackrocks 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 the Trojan Horse for the on-chain economy, which will grow into a more inclusive and open global financial system.

This article is sourced from the internet: Multicoin Capital Sequel: The Eternal Narrative in the Crypto World