Multicoin Capital 2025 Vision Part II: The Everlasting Narrative of the Crypto World

Original Title: Some Things Never Change, Even In 2025

Original Source: Multicoin Capital

Original Translation: Azuma, Odaily Planet Daily

Two days ago, Multicoin Capital published an article titled "Multicoin Capital's 2025 Vision: DePIN Robot Explosion; On-chain Securities Take Off", outlining the most uncertain yet imaginative narratives for 2025.

Today, Multicoin Capital has once again published an article, this time focusing on the most certain "eternal narratives."

Below is the full text from Multicoin Capital, translated by Odaily Planet Daily.

Amazon founder Jeff Bezos has a famous saying.

"The question I get most often is: 'Jeff, what's going'to change in the next 10 years?' But that's not the right question. The right question is: 'Jeff, what's not going to change in the next 10 years?' I can tell you that, the customer's desire for a lower price will never change. Their need for fast delivery will never change. They always want more selection … It's human nature. People will not say, 'Jeff, I love Amazon, but I wish the prices were a little higher.' It's impossible. Therefore, we need to put our energy into these things and make them better. Our energy investment in these things will pay off in 10 years. When you have something you know is true, even over the long term, you can afford to put a lot of energy into it."

Earlier this week, we published a typical VC article mainly about the new opportunities that the Multicoin Capital investment team expects to see in 2025. Following Bezos's logic, we also believe it is necessary to highlight trends that are commonly taken for granted but are still evolving. This provides us with a stable opportunity on which we can continue to invest.

Immutable Narrative 1: The Relentless Pursuit of Capital Efficiency

Presenter: Kyle Samani (Co-Founder, Multicoin Capital)

DeFi started with low capital efficiency. Uniswap's xy=k curve was infamous for its low capital efficiency.

Over the past 5 years, DeFi's capital efficiency has improved in various aspects. CLOB, looping/multiply products, concentrated liquidity, USDe-based derivative exchanges, borrowing against derivatives collateral, using LP positions as derivative collateral, and so on... The market has always relentlessly pursued capital efficiency.

This is the charm of DeFi. Permissionless innovation has driven all these improvements in capital efficiency.

We believe that Drift, a leading derivatives exchange on Solana, represents a focal point in DeFi's exploration of capital efficiency. A version of the logical endpoint. Spencer and David discussed these issues in their 2024 Multicoin Summit keynote.

Immutable Narrative 2: The Insatiable Novel Financial Game

Presenter: Tushar Jain

Humans always like to gamble, but the game is always evolving.

Meme tokens are the new generation of gambling games. The volatility of meme tokens is greater, making them more interesting than traditional casinos or sports betting. Compared to other forms of gambling, meme tokens offer a higher potential return, with their extreme volatility providing a level of excitement and risk exceeding that of traditional casino games or sports betting. The potential for huge returns, coupled with the inherent unpredictability of meme tokens, creates an experience that traditional gambling cannot match.

Meme tokens also have a unique social dimension. Abstracting internet culture into a meme token provides social attributes lacking in other forms of gambling. They are often linked to online culture and communities, fostering "consensus" among gamblers. This social aspect transforms meme token transactions into a communal activity, where individuals can connect through shared interests and experiences. This fosters a sense of belonging and shared identity, qualities that other forms of gambling lack.

Meme tokens represent a fusion of gambling, internet culture, and social interaction. They provide a high-stakes, high-reward experience that caters to the human desire for excitement, while also leveraging the social and communal nature of online communities. As internet culture continues to evolve, Meme tokens are likely to remain a significant part of the gambling industry, offering a unique and appealing experience for those willing to take risks.

The impulse for human gambling is eternal, but the games we play are ever-changing. Meme tokens represent the next step in this evolution, but they will not be the last.

Immutable Narrative Three: Financial Market Transparency

Narrator: Spencer Applebaum

In the TradFi trading market, brokers are able to offer retail investors zero-cost trading services because Citadel Securities, Susquehanna International, Wolverine Trading, and other high-frequency trading (HFT) firms competitively execute these orders. This is known as Payment for Order Flow (PFOF).

These firms are willing to competitively bid for large orders at the mid-price/near the mid-price. There is ample literature available on why PFOF is advantageous to the world rather than evil (though it often carries negative connotations).

The challenge with payment for order flow models like Robinhood and E-Trade is that they are opaque, with bidding limited to market makers working with the broker. Additionally, there are multiple layers of intermediaries such as clearinghouses, exchanges, brokers, all of which charge end users hidden fees often embedded within spreads.

About the opacity of PFOF, a research paper pointed out: "The agreements Robinhood made with wholesalers traded off price improvement for PFOF growth – precisely the conflict of interest SEC Chair Gensler worries about.… if consumers could easily discern differences in execution quality across brokers, this wouldn't be an issue. However, these differences are not inferable from current disclosure regimes."

The allure of DeFi is that it compresses settlement, exchange, custody, and execution into a single API, and all of it is transparent. This naturally presents a favorable condition for DeFi as markets always value transparency.

The project invested in by Multicoin, DFlow, is pioneering a concept called "conditional liquidity." This concept mandates that liquidity can only be matched when the counterparty is approved by the front end application as non-malicious (or the counterparty can get better pricing from the market maker through algorithms). Market makers can provide liquidity on on-chain Central Limit Order Books (CLOBs) like Phoenix or on-chain Automated Market Makers (AMMs) like Orca, offering better slippage performance for retail orders while avoiding exploitation by malicious counterparties.

The entire stack is open and transparent, leveraging "Conditional Liquidity" to build PFOF 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, while also having the openness, transparency, and auditability provided by DeFi.

Invariable Narrative Four: Value Capture Mechanism will continue to Unbundle, Rebundle

Presenter: Shayon Sengupta

Last year, I published an article on the "Attention Theory of Value," where I described the core way of introducing cryptocurrency into consumer applications is through permissionless asset issuance and transactions in any interface and environment.

By 2024, asset issuance is concentrated in a few places, with pump.fun being the most prominent among them. These places dominate in asset issuance, but importantly, the assets are traded elsewhere — on Telegram bots, on aggregators like DexScreener and Birdeye, inside Phantom Wallet, and so on... Asset issuance and trading do not happen on the same "issuance platform/trading venue" but across a series of disparate venues. As long as the crypto capital market exists, asset issuance and trading have always been decoupled. Bitcoin was initially issued on a cryptography mailing list called metzdowd.com, but today, it trades on Nasdaq (via ETF). Tokens launched during the ICO era in 2017 are traded on major CEXs.

Therefore, while pump.fun won the issuance game last year, the trading game was taken by Telegram bots and retail aggregation products (new order flow sources). In the long run, I believe having the exchange or order flow will be the more lucrative business.

This is just the beginning of the issuance platform/trading venue split. Asset issuance and trading will be unbundled and rebundled in a thousand places a thousand times, as attention on the internet is not confined to a single app; it exists on forums, live streaming platforms, chat tools, and other interfaces we interact with, everywhere.

More importantly, I hope these apps can better realize that owning attention gives the opportunity to own order flow, which is a very profitable industry. Get ready to see wallets and trading functions embedded in more consumer apps by 2025.

Invariable Narrative Five: Capital Seeking Yield

Presenter: Eli Qian

Everyone is looking for ways to earn returns, preferably in a more straightforward manner.

Until recently, most sources of revenue were only open to seasoned market participants and investors. For example, if you deposit money into a savings account at a U.S. bank, you will earn a 0.01% annual interest rate (while the U.S. bank lends out your money at a 10% rate!). Only by purchasing money market funds could you achieve a more reasonable return. However, the demand for yield persisted, and products like ETFs (which abstract stock selection) and robo-advisors (which can manage your entire investment portfolio) made it easier for non-sophisticated market participants to access previously inaccessible yield.

The situation with cryptocurrency is similar. Earning returns through staking or lending is not easy and requires users to have a certain level of expertise. Products that simplify the process of earning returns will continue to emerge, ending the era where retail investors were passive in knowledge arbitrage. Now, with just a few simple clicks, you can log into a wallet or application with cryptocurrency and earn staking or lending rewards without needing much relevant knowledge. Solutions like Fuse Wallet and StakeKit can facilitate this. In the future, wallets and DeFi applications will automatically allocate and rebalance assets between validators, lending protocols, and liquidity pools to offer users around-the-clock optimal returns.

Immutable Narratives VI: Reducing Banking Costs Through Innovation

Presenter: Vishal Kankani

The Medici family led the development of modern banking in the 14th century. The banking business at that time was slow to evolve, heavily physical, costly, and required immense trust. Over time, the cost of accessing financial services plummeted. With blockchain, we can clearly see a 24/7, global, zero-dollar-cost banking operation.

No matter how sophisticated financial instruments become, the need for banking services persists. The rise of Banking as a Service (BaaS) occurred because, no matter how innovative the application layer, it was challenging to build fundamental financial components on the TradFi track; naturally, this modularization was achieved in software, leading to a separation of front end and back end. Today, the back end is referred to as BaaS.

BaaS providers license their infrastructure to fintechs, enabling companies to launch digital banks, corporate cards, and lending products in the least amount of time and cost. By offering these services through APIs, BaaS providers allow tech firms to focus on customer experience and products, while BaaS takes care of the "boring yet critical" back-end operations, including compliance, risk management, and fund flows.

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

Blockchain will disrupt modern BaaS as blockchain represents transformative 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 era BaaS stack will include: self-custodial wallets like Squads, enhanced on-chain KYC and compliance protocols like zkMe, stablecoin payment infrastructure like Bridge, and DeFi protocols for lending (Kamino) and trading (Drift).

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 transparent model for financial services.

Squads is a Multicoin-backed project that focuses on providing 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 transactions. Squads is the first formally verified protocol on Solana and has processed over 1 billion stablecoin transactions. Assets collateralized using the Squads protocol are growing exponentially. We expect Squads to lead BaaS development in 2025.

Eternal Narrative Seven: Eliminate Friction, Increase Adoption

When you make things simpler by reducing costs and friction, people naturally use them more. Email changed how we communicate; the iPhone added convenience to taking photos and recording life; Amazon simplified how we shop online; and social media made content sharing smoother.

Obviously, if you make transactions and remittances easier, the same results will occur. Stablecoins may be one of the biggest financial innovations of this era. The ability for 24/7, nearly instantaneous settlement will have a profound impact. It will allow the US dollar to reach new markets and enter the hands of regular people in a way that the Treasury Department auctions cannot. It will make business operations more efficient, with no more downtime on nights, weekends, or holidays. It will reduce working capital needs and significantly lower the cost and time of cross-border transactions. The supply of stablecoins has reached new highs, the volume of stablecoin transactions has reached new highs, and as regulations clarify, the acceptance of stablecoins will also increase.

The development of stablecoins will further catalyze the concept of open finance. As transactions become easier, more transactions will occur. Those holding stablecoins will seek yield on these assets and gravitate towards platforms like Kamino and Drift, which facilitate autonomous matching of borrowers and lenders by reducing friction. Once on-chain, stablecoin holders will be just a few clicks away from earning yield on money market funds (such as Blackrock's BUIDL) and decentralized exchanges (such as Drift, Jupiter, Raydium, and Uniswap). With the continued growth of on-chain assets, undoubtedly, stablecoin holders will have an increasingly diverse set of assets to own and participate in. Stablecoins are the Trojan horse of on-chain economics, evolving into a more inclusive, open global financial system.

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