Original title: (Some Things Never Change, Even In 2025)

Source: Multicoin Capital

Translation: Azuma, Odaily Planet Daily

Two days ago, Multicoin Capital published an article (Multicoin Capital: Frontiers of Narratives Before 2025), outlining those narratives that are the most uncertain yet imaginative for 2025.

Today, Multicoin Capital has published another article, but the focus is on those narratives with the highest certainty — the 'eternal narratives'.

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

Amazon founder Jeff Bezos has a famous saying.

What changes will happen in the next 10 years? This is a very interesting question and one that is often asked. But I have almost never been asked this question — what will not change in the next 10 years? In my view, the second question is actually more important because knowing what will not change allows you to formulate business strategies around those certainties. In our retail business, we know customers need lower prices, and I know that will still be the case in 10 years; they need faster delivery; they need a richer selection of goods... Clearly, no matter how many years later, a customer will not come and say, 'Hey, Jeff, I love Amazon, but I’d prefer if the prices were a bit higher and the delivery a bit slower'... That will never happen. Therefore, we need to put effort into 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 term, you can invest a lot of effort into it.

Earlier this week, we published a typical VC article mainly about the new opportunities the Multicoin Capital investment team looks forward to seeing in 2025. Based on Bezos's logic, we also believe it is important to highlight trends that are often taken for granted but continue to evolve. This provides us with a stable opportunity on which we can continue to invest.

Unchanging Narrative One: Relentless Pursuit of Capital Efficiency

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

The capital efficiency of DeFi was initially very low. Uniswap's xy=k curve is notoriously inefficient in terms of capital.

Over the past five years, the capital efficiency of DeFi has improved in various aspects. CLOB, looping/multiply products, concentrated liquidity, USDe-based derivatives exchanges, borrowing against derivatives collateral, utilizing LP positions as derivatives collateral, etc. The market has always relentlessly pursued capital efficiency.

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

We believe that Drift, a leading derivatives exchange on Solana, represents a key focus in the path of DeFi's search for capital efficiency. A version of the logical endpoint. Spencer and David discussed these issues in their talk at the 2024 Multicoin Summit.

Unchanging Narrative Two: The Irresistible New Financial Games

Narrator: Tushar Jain

Humans have always wanted to gamble, but the games keep changing.

Meme tokens are the next generation of gambling games. The volatility of meme tokens is higher, making them more interesting than traditional casinos or sports betting. Compared to other forms of gambling, meme tokens offer higher potential returns, and their extreme instability provides a level of thrill and risk that surpasses traditional casino games or sports betting, making them highly attractive to those with a higher risk tolerance. This potential for massive returns, 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 lacking in other forms of gambling. They are often associated with internet culture and online communities, fostering a 'consensus' among gamblers. This social aspect transforms the trading of meme tokens into a collective activity, allowing individuals to connect through shared interests and experiences. This creates a sense of belonging and a shared identity, which is absent in other forms of gambling.

Meme tokens represent a fusion of gambling, internet culture, and social interaction. They offer a high-stakes, high-reward experience that caters to humanity's nature to seek thrills while also leveraging the social and collective nature of online communities. As internet culture continues to evolve, meme tokens are likely to remain an important part of the gambling industry, providing unique and appealing experiences for those willing to take risks.

The human impulse to gamble is eternally unchanged, but the games we play keep evolving. Meme tokens are the next step in this evolution, but they will not be the last step.

Unchanging Narrative Three: Financial Market Transparency

Narrator: Spencer Applebaum

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

These companies are willing to bid for large orders at mid-market/close to mid-market prices. There is a wealth of literature available on why PFOF is beneficial to the world rather than evil (despite its often negative connotation).

The challenges faced by payment for order flow (PFOF) types like Robinhood and E-Trade are that it is opaque, and bidding is limited to market makers who collaborate with brokers. Additionally, there are multiple layers of intermediaries, such as clearinghouses, exchanges, and brokers, all of which charge hidden fees to end users, and these fees are often included in the spreads.

Regarding the opacity of PFOF, a research article noted: "The agreements between Robinhood and wholesalers have sacrificed slippage for the growth of PFOF — which is precisely the conflict of interest issue that SEC Chairman Gensler is concerned about... If consumers could easily distinguish the differences in execution quality among different brokers, this wouldn't be an issue. However, these differences cannot be inferred from the current disclosure system."

The appeal of DeFi lies in its ability to compress settlement, exchanges, custody, and execution into a single API, all of which are transparent. This gives DeFi a natural advantage, as the market always values transparency.

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

The entire stack is open and transparent, utilizing '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 offer better quotes to retail investors, while also maintaining the openness, transparency, and auditability provided by DeFi.

Unchanging Narrative Four: Value Capture Models Will Continue to Split and Bundle

Narrator: Shayon Sengupta

Last year, I published an article on the 'Attention Theory of Value', in which I described that the core way to introduce cryptocurrency into consumer applications is through permissionless asset issuance and trading in any interface and environment.

In 2024, asset issuance will concentrate in a few venues — with pump.fun being the most prominent. These venues dominate asset issuance, but importantly, assets are traded elsewhere — on Telegram bots, on aggregators like DexScreener and Birdeye, within Phantom wallets... Asset issuance and trading do not occur on the same 'issuance platform/trading platform', but across a series of decentralized locations. As long as the crypto capital markets exist, asset issuance and trading have always been uncoupled. Bitcoin was initially issued on a crypto mailing list called metzdowd.com, but now it trades on Nasdaq (via ETFs). Tokens launched during the ICOBench period in 2017 traded on major CEXs.

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

This is just the beginning of the issuance platform/trading platform. Asset issuance and trading will be split and bundled a thousand times across a thousand venues because attention on the internet is not limited to a single application; it exists in forums, streaming platforms, chat tools, and other interfaces we interact with, omnipresent.

More importantly, I hope these applications can recognize more clearly that having attention provides the opportunity to own order flow, and order flow is a highly profitable industry. Get ready to see wallets and trading functions embedded in more consumer applications by 2025.

Unchanging Narrative Five: Capital Seeks Returns

Narrator: Eli Qian

Everyone is looking for ways to earn returns, preferably in a simpler and clearer manner.

Until recently, most sources of returns were only available to mature market participants and investors. For example, if you deposited money into a savings account at a US bank, you would earn an annual interest rate of 0.01% (while the bank would lend your money at a 10% interest rate!). Only by purchasing a money market fund could you achieve more reasonable returns. But the demand for yields still exists, and products like ETFs (which abstract stock selection) and robo-advisors (which can manage your entire portfolio) have made it easier for non-expert market participants to access previously locked yields.

The situation with cryptocurrencies is similar; earning returns from 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 passive knowledge arbitrage situation for retail investors. Nowadays, with just a few clicks, you can log into a wallet or application with cryptocurrency and earn staking or lending returns without much related knowledge. Tools like Fuse Wallet and StakeKit 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.

Unchanging Narrative Six: Reducing Banking Costs Through Innovation

Narrator: Vishal Kankani

The Medici family led the development of modern banking in the 14th century. At that time, banking was slow, physical, expensive, and required immense trust. Over time, the cost of accessing financial services has drastically decreased. With blockchain, we can clearly envision 24/7, global, zero-cost banking.

No matter how advanced financial instruments become, the demand for banking services remains constant. The rise of banking-as-a-service (BaaS) was driven by the difficulty of building basic financial components on the TradFi track, regardless of how innovative the application layer becomes; this naturally 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, allowing these companies to launch digital banking, corporate cards, and lending products with minimal time and cost. By providing these services through APIs, BaaS providers enable tech companies to focus on customer experience and products, while BaaS takes care of the 'boring but critical' backend tasks, including compliance, risk management, and capital flow.

The pre-blockchain era BaaS stack included banking infrastructure, KYC/AML compliance, payment processing, card issuance, and data aggregation. This system can operate but is complex and inefficient, as it is still rooted in traditional banking infrastructure established in the 1970s (SWIFT/ACH), incurring high costs, lacking 24/7 availability, low capital efficiency, and lacking global reach.

Blockchain will disrupt modern BaaS because it 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-custody 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 blockchain-based models is inevitable. As 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 is a project invested by Multicoin, whose core is to provide banking-as-a-service protocols on Solana, allowing businesses, individuals, and developers to create secure accounts that can store value and be used for programmatic trading. Squads is the first formally verified protocol on Solana, having processed over 1 billion stablecoin transactions, and assets collateralized using the Squads protocol are growing exponentially. We expect Squads to lead the development of BaaS in 2025.

Unchanging Narrative Seven: Eliminating Friction to Increase Usage

When you make things simpler by reducing costs and friction, people will naturally use them more. Email changed the way we communicate; iPhones increased the convenience of taking photos and documenting life; Amazon simplified the way we buy goods online; social media made it smoother to share content.

Clearly, if making transactions and remittances easier can produce the same results. Stablecoins may be one of the greatest financial revolutions of our time. The ability to settle remittances 24/7 and almost instantaneously will have profound implications. It will enable the dollar to penetrate new markets and reach ordinary people in ways that Treasury auctions cannot. It will make business activities more efficient, eliminating downtime during nights, weekends, or holidays. It will reduce working capital needs and significantly lower the costs and time of cross-border transactions. The supply of stablecoins has reached new highs, trading volumes have also hit new highs, and with clearer regulations, the acceptance of stablecoins will increase.

The development of stablecoins will further catalyze the concept of open finance. As trading becomes easier, more transactions will take place. Those who hold stablecoins will seek returns on these assets and tend to prefer platforms like Kamino and Drift, which autonomously match lenders and borrowers by reducing friction. Once on-chain, stablecoin holders can earn returns from money market funds (like Blackrock's BUIDL) and decentralized exchanges (like Drift, Jupiter, Raydium, and Uniswap) with just a few clicks. With the continuous growth of on-chain assets, there is no doubt that stablecoin holders will have an increasing variety of assets to choose from and participate in. Stablecoins are the Trojan horse of the on-chain economy, which will grow into a more inclusive and open global financial system.