Author: Multicoin Capital Partner Team

Compiled by: Yangz, Techub News

Jeff Bezos, the founder of Amazon, often makes thought-provoking remarks about future trends. Bezos believes that the question "What will change in the next 10 years?" is interesting but quite ordinary. Instead, he sees "What won't change in the next 10 years?" as more important.

Earlier this week, we published a "cliche" venture capital article outlining the emerging areas our investment team expects to see in 2025. In the spirit of Bezos' remarks, we also believe it is important to highlight some trends that we believe are usually unchanging, which are quietly compounding and providing a stable foundation for our investments.

Multicoin Capital Managing Partner Kyle Samani: Relentless Pursuit of Capital Efficiency

When DeFi first emerged, capital efficiency was quite low. Uniswap, for example, was criticized by many investors for this issue.

However, over the past 5 years, DeFi's capital efficiency has improved in various ways, such as CLOB, circular/multi-product, concentrated liquidity, using USDe as collateral in derivative exchanges, using derivative collateral to facilitate lending, and using LP positions as derivative collateral. The market will always relentlessly pursue capital efficiency.

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

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

Multicoin Capital Managing Partner Tushar Jain: Insatiable Appetite for New Financial Games

Humans have a gambling nature, but the games keep changing.

MEMEcoins are the next generation of gambling games. MEMEcoins have higher volatility, making them more exciting than traditional casinos or sports betting. Compared to other forms of gambling, MEMEcoins offer the potential for higher maximum returns, and their extreme instability provides a level of thrill and risk that exceeds traditional casino games or sports betting. Additionally, their potential for massive payouts are highly appealing to risk-tolerant individuals. This potential for outsized gains, combined with the inherent unpredictability of MEMEcoins, creates an experience that traditional gambling cannot replicate.

MEMEcoins also have a unique social aspect. Tokenizing internet culture into MEMEcoins provides the social element that other forms of gambling lack. They are often tied to internet culture and online communities, fostering a shared experience among gamblers. This social aspect transforms MEME trading into a collective activity, where individuals can form connections through common interests and experiences. This creates a sense of belonging and shared identity that is absent in other forms of gambling.

MEMEcoins represent a convergence of gambling, internet culture, and social interaction. They offer a high-stakes, high-reward experience that caters to the human desire for excitement, while also leveraging the sociality and collectivity of online communities. As internet culture continues to evolve, MEMEcoins are likely to remain an important component of the gambling industry, providing a unique and highly attractive experience for those willing to take on the risk.

The human appetite for gambling will always exist, but the games we play are constantly changing. MEMEcoins are the next node in this evolution, but they will not be the last.

Multicoin Capital Investment Partner Spencer Applebaum: Pursuit of Financial Market Transparency

In TradFi trading, brokers can provide zero-fee trading for retail investors because firms like Citadel Securities, Susquehanna International, Wolverine Trading, and other high-frequency trading firms compete to bid on order flow. This is known as Payment for Order Flow (PFOF). These firms are willing to bid on large order flows at or near the midpoint price because, by definition, order flow is non-public. There is a largeliterature on why PFOF is beneficial for the world (despite its often negative connotation).

The challenge with Robinhood and E-Trade-type PFOF is that it is opaque, with auctions limited to market makers that the brokers partner with. Additionally, there are multiple intermediaries, such as clearinghouses, exchanges, and brokers, all of which charge hidden fees to the end-user, typically embedded in the spread.

Regarding the opacity of PFOF, this research notes that "Robinhood's agreements with wholesalers sacrifice PI (price improvement) in exchange for higher PFOF. This is precisely the conflict of interest that Gensler is concerned about... If consumers could easily discern differences in execution quality across brokers, this would not be an issue. But the current disclosure regime does not allow for such inferences to be drawn."

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

DFlow (backed by Multicoin) pioneered the concept of "conditional liquidity," where liquidity is only provided if the front-end application recognizes the transaction recipient as harmless (or the recipient gets better pricing from the sender via an algorithm). Senders can provide liquidity on-chain CLOB (like Phoenix) or on-chain AMM (like Orca) and offer significant price improvement for non-public retail orders, while avoiding being front-run by malicious recipients. The entire stack is publicly transparent, and by using "conditional liquidity," a PFOF-like construct can be built on top of it. This approach combines the benefits of TradFi and DeFi, allowing order flow segmentation to provide better pricing for retail, while maintaining the openness, transparency, and auditability of DeFi.

Multicoin Capital Investment Partner Shayon Sengupta: Value Capture Will Always Be Unbundled and Rebundled Across the Stack

Last year, I published a piece on the Attention Theory of Value, which described the core unlocking of cryptocurrencies in consumer applications - permissionless asset issuance and trading across any interface and environment.

In 2024, asset issuance was concentrated in a few places, with pump.fun being the most prominent. These venues dominated asset issuance, but importantly, these assets were traded elsewhere, such as Telegram chat bots, aggregators like DexScreener and Birdeye, or directly in Phantom. Asset issuance and trading have always been decoupled since the inception of crypto capital markets. Bitcoin was launched on the metzdowd.com crypto mailing list, and today it trades (via ETF) on Nasdaq. Similarly, tokens launched on ICOBench in 2017 continue to trade on major CEXes.

While pump.fun dominated asset issuance last year, it was not as prominent in asset trading, which was more prominent on Telegram bots and other aggregator platforms. In the long run, I believe capturing trading or order flow will be the more profitable business.

Of course, this is just the first round of the asset issuance and trading battle, and they will be bundled and unbundled a thousand times across a thousand venues, as attention on the internet is not limited to a single application. It is ubiquitous across forums, live streaming platforms, messaging tools, and other interfaces we interact with.

More importantly, I hope these applications will better recognize that owning attention means the opportunity to own order flow. In 2025, we expect to see more consumer apps launching embedded wallets and trading functionality.

Multicoin Capital Investment Partner Eli Qian: Capital Seeking Yield

If you have money, you will seek simple and efficient ways to earn yield.

Until recently, most of the returns were only open to mature market participants and investors. For example, if you deposit money into a savings account at a US bank, you will only get an annual interest rate of 0.01% (while the US bank will lend out your money at a rate of 10%!). Only by purchasing money market funds can you get a more reasonable return. However, the demand for higher returns still exists, and the emergence of products such as ETFs (which abstract stock selection) and robo-advisors (which can manage investment portfolios) have made it easier for non-seasoned market participants to obtain returns that were previously unattainable.

The situation with cryptocurrencies is similar, but earning returns from Staking or lending is not easy, as users need to have a certain level of professional knowledge. Products that simplify the way to earn returns will continue to emerge, putting an end to the situation where knowledge arbitrage puts retail investors at a disadvantage. Nowadays, we only need to click a few times in the wallet or application where we hold cryptocurrencies to earn Staking or lending returns (knowledge of Staking, lending, etc. may or may not be necessary). Fuse Wallet, StakeKit, and others 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 optimal returns around the clock.

Vishal Kankani, Investment Partner at Multicoin Capital: Innovation Significantly Reduces the Cost of Banking Services

The Medici family led the development of modern banking in the 14th century. At that time, banking services were slow, physical, and expensive, and required a great deal of trust. Over time, the cost of accessing financial services has plummeted. With blockchain, we can clearly see banking services that are 24/7, global, and zero-cost.

Regardless of how sophisticated financial instruments become, the demand for banking services will always exist. The rise of Banking as a Service (BaaS) is because, no matter how much innovation happens at the application layer, it is difficult to build basic financial building blocks on TradFi; naturally, this has led to modularization in software, resulting in the separation of front-end and back-end. Today, the back-end is referred to as BaaS.

BaaS providers license their infrastructure to fintech companies, enabling them to launch digital banks, corporate cards, and lending products with minimal time and cost. By providing these services via APIs, BaaS providers allow tech companies to focus on the customer experience and unique products, while the BaaS providers handle the "boring but critical" back-end, such as compliance, risk management, and cash flow.

In the pre-blockchain era, a hypothetical BaaS stack would include banking infrastructure, KYC/AML compliance, payment processing, card issuance, and data aggregation. This system could function, but it would be complex, inefficient, as it would still be rooted in the traditional banking infrastructure (SWIFT/ACH) established in the 1970s.

Blockchain represents transformative innovation that will disrupt modern BaaS. By leveraging blockchain-based assets and protocols, we can build a brand-new BaaS model that is simpler, cheaper, faster, globalized, and more transparent. The post-blockchain BaaS stack will include self-custodial wallets (e.g., Squads), programmable, on-chain KYC and compliance protocols (e.g., zkMe), stablecoin payment infrastructure (e.g., Bridge), and DeFi protocols for lending (e.g., Kamino) and trading (e.g., 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 more streamlined, efficient, and transparent model for financial services.

Squads, a company invested in by Multicoin, is at the core of providing a BaaS protocol on Solana, allowing businesses, individuals, and developers to create secure accounts that can store value and be used for programmatic transactions. We expect Squads to be a leading force in BaaS by 2025.

Matt Shapiro, Partner at Multicoin Capital: Reducing Friction Increases Adoption

When costs and friction are eliminated, usage naturally increases. Email changed the way we communicate; the iPhone increased the convenience of taking photos and recording our lives; Amazon simplified our online shopping; social media made content sharing seamless.

Clearly, if transactions and remittances also become easier, the same result will occur. Stablecoins may trigger one of the biggest financial revolutions of our time. The ability to make remittances 24/7 and near-instant will have far-reaching impacts. It will allow the US dollar to penetrate new markets and reach people in the real world in a way that Treasury auctions cannot. It will make business activities more efficient, with no downtime at night, on weekends, or during holidays. It will reduce working capital requirements and significantly lower the cost and time of cross-border transactions. Currently, the supply and trading volume of stablecoins have reached new highs, and as regulation becomes 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 hold stablecoins will seek returns on these assets and gravitate towards platforms like Kamino and Drift. Once on-chain, stablecoin holders can simply click a few buttons to earn the yields of money market funds (like Blackrock's BUIDL) and DEXes (like Drift, Jupiter, Raydium, and Uniswap). As on-chain assets continue to grow, undoubtedly, stablecoin holders will have more and more choices of assets to own and participate in. Stablecoins are the Trojan horse of the on-chain economy, and they will grow into a more inclusive, open global financial system.