Multicoin Capital: Forecasts may change but these 7 trends remain unchanged

Written by: Multicoin Capital Partner Team

Compiled by: Yangz, Techub News

Amazon founder Jeff Bezos's remarks on future trends are often thought-provoking. Bezos believes that "what will change in the next 10 years" is an interesting but 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 introducing the emerging fields that our investment team expects to see in 2025. In the spirit of Bezos's remarks, we think it is also appropriate to highlight some trends that we believe are generally unchanging, which are quietly compounding and provide a stable foundation for our investment.

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

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

However, over the past 5 years, DeFi's capital efficiency has been improved in various aspects, such as CLOB, circular/multi-product, centralized liquidity, using USDe as collateral on derivatives 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 promoted all of these capital efficiency improvements.

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

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

You are human, but the games are constantly changing.

Memecoin is the next generation of gambling. Memecoin is more volatile, making it more interesting than traditional casino or sports betting. Compared to other forms of gambling, Memecoin has a higher maximum return rate, and its extreme volatility brings more excitement and risk than traditional casino games or sports betting. In addition, its potential for huge returns is a huge attraction for people with strong risk tolerance. This potential for huge gains, combined with the inherent unpredictability of Memecoin, creates an experience that traditional gambling cannot match.

Memecoin also has unique social attributes. Tokenizing internet culture into Memecoins provides a social attribute that other forms of gambling lack. They are often tied to online culture and online communities, facilitating a shared experience between gamblers. This social attribute transforms the trading of Memecoins into a group activity where individuals can connect over shared interests and experiences. This creates a sense of belonging and shared identity that other forms of gambling do not have.

Memecoins 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 evolve, Memecoins will likely continue to be an important part of the gambling industry, providing unique and highly engaging experiences 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 will not be the last.

Spencer Applebaum, Investment Partner at Multicoin Capital: The Quest for Transparency in Financial Markets

In TradFi trading, brokers are able to offer zero-fee trading to retail traders because Citadel Securities, Susquehanna International, Wolverine Trading, and other high-frequency trading firms compete to bid for execution of order flow. This is known as payment for order flow (PFOF). These firms are willing to bid for a large amount of order flow at or near the mid-price because, by definition, order flow is not public. There is a large literature on why PFOF is good for the world (even though it usually has negative connotations).

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

Regarding the opacity of PFOF, the research article states that "Robinhood's agreement with wholesalers sacrifices PI (price improvement) in exchange for an increase in PFOF. This is exactly the conflict of interest issue that Gensler is worried about...If consumers can easily tell the difference in execution quality between different brokers, then this is not a problem in itself. However, these differences cannot be inferred from the current disclosure system."

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 because the market always values ​​transparency.

DFlow (invested by Multicoin) pioneered the concept of "conditional liquidity", that is, liquidity can only be obtained if the front-end application recognizes that the recipient of the transaction is harmless (or the recipient obtains better pricing from the sender through the algorithm). Transaction senders can provide liquidity on an on-chain CLOB (such as Phoenix) or on-chain AMM (such as Orca) and provide significant price improvements for private retail orders while avoiding being robbed by harmful receivers. The entire stack is public and transparent, and PFOF can be built on top of it using "conditional liquidity". This approach combines the advantages of TradFi and DeFi, which can split order flow and provide better prices for retail investors, while having the publicity, transparency and auditability provided by DeFi.

Shayon Sengupta, Investment Partner at Multicoin Capital: Value capture will always be split and re-bundled across the stack

Last year, I published an article on "Value Attention Theory", which described the core unlocking method of cryptocurrency in consumer applications, namely, permissionless asset issuance and trading in arbitrary interfaces and environments.

In 2024, asset issuance was concentrated in a few venues, with pump.fun being the most prominent. These venues dominate in 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. The issuance and trading of assets have been decoupled for as long as the crypto capital markets have existed. 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 trade on major CEXs.

While pump.fun dominated in asset issuance last year, it has not been as dominant in asset trading as Telegram bots and other aggregators. In the long run, I think being able to capture trading or order flow is the more profitable business.

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

More importantly, I hope these apps will more clearly realize that owning attention gives you the opportunity to own order flow. In 2025, expect more consumer apps to launch embedded wallets and trading functions.

Eli Qian, Investment Partner at Multicoin Capital: Money Seeks Yield

If you are rich, you will look for simple and efficient ways to earn income.

Until recently, most sources of income 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 will only get an annual interest rate of 0.01% (while Bank of America will lend your money out at an interest rate of 10%!). Only by buying a money market fund can you get a more reasonable return. However, the demand for yield remains, and the emergence of products such as ETFs (which abstract individual stock selection) and robo-advisors (which can manage portfolios) has made it easier for non-sophisticated market participants to obtain yields that were previously impossible.

The situation is similar in cryptocurrencies, but earning yield from staking or lending is not easy and requires users to have a certain level of expertise. Products that simplify the way to earn yield will continue to emerge, thus ending knowledge arbitrage and putting retail investors at a disadvantage. Today, we can earn staking or lending yields with just a few simple clicks in the wallet or application where we hold cryptocurrencies (knowledge of staking and lending is optional). 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.

Vishal Kankani, Investment Partner at Multicoin Capital: Innovation has led to a significant reduction in the cost of banking services

The Medici family led the development of modern banking in the 14th century. Banking services at the time were slow, physical, costly, and required great trust. Over time, the cost of obtaining financial services has dropped dramatically. With blockchain, we can clearly see 24/7, global, and zero-dollar-cost banking.

No matter how advanced financial instruments become, people's demand for banking services will always exist. The reason for the rise 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; naturally, this has achieved modularity in the software, resulting in the separation of the front-end and back-end. Today, the back-end is called BaaS.

BaaS providers license their infrastructure to fintech companies, enabling companies to launch digital banking, corporate card, and lending products with minimal time and cost. By providing these services through APIs, BaaS providers let tech companies focus on customer experience and unique products, while the BaaS provider handles the "boring but critical" backend, namely compliance, risk management, and money 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 worked, but was complex and inefficient because it was still rooted in the traditional banking infrastructure (SWIFT/ACH) established in the 1970s.

Blockchain represents a transformative innovation that will disrupt modern BaaS. By using blockchain-based assets and protocols, we can establish a new BaaS model that is simpler, cheaper, faster, global, and more transparent. The post-blockchain BaaS stack will include self-custodial wallets (such as Squads), programmably enhanced on-chain KYC and compliance protocols (such as zkMe), stablecoin payment infrastructure (such as Bridge), and DeFi protocols for lending (such as Kamino) and trading (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 company invested by Multicoin. Its core is to provide a BaaS protocol on Solana, allowing enterprises, individuals, and developers to create secure accounts that can store value and use for programmatic transactions. We expect Squads to firmly lead the development of BaaS in 2025.

Multcoin Capital Partner Matt Shapiro: Removing Friction Increases Usage

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

Obviously, the same results would occur if transactions and remittances were also made easier. Stablecoins could spark one of the biggest financial changes of our time. The ability to remit money with 24/7, near-instant settlement would have far-reaching consequences. It would enable the dollar to penetrate new markets and get into the hands of people in real life in a way that Treasury auctions cannot. It would make commerce more efficient, with no downtime at night, on weekends, or on holidays. It would 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 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 own stablecoins will seek returns on these assets and gravitate to platforms like Kamino and Drift. Once on-chain, stablecoin holders can access the returns 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 the Trojan Horse for the on-chain economy, which will grow into a more inclusive and open global financial system.