Author: Multicoin Capital

Translation: Luffy, Foresight News

At the end of each year, we gather to discuss the biggest potential changes in the cryptocurrency industry for the coming year. This is the first time we have publicly released these thoughts.

Shayon Sengupta: Attention-Value Theory

Exchanges are typically used to trade easily priced items, such as stocks, commodities, interest rates, etc. There are standardized methods to measure these assets (e.g., some functions of discounted future cash flows for stocks). This is the significance of price discovery for liquid markets.

However, there is a class of commodities where price discovery is purely centered around attention. Sneakers, art, sports collectibles, antique furniture, these are inherently less liquid than stocks or commodities, and their value comes purely from social consensus rather than discounted cash flow models.

In recent years, attention-value theory has permeated traditional markets, largely due to the internet. TSLA, GME, AMC, DOGE, and CryptoKitties have all experienced meaningful price discovery under this model. The primary pricing mechanism for these assets used to be cash flow and clearing prices, but now the main mechanism comes from their level of attention.

Cryptocurrencies play two important roles in attention-value theory: the ability to rapidly create new assets and the ability to trade them. If attention is the core pricing factor, then cryptocurrencies can provide an infinite canvas for issuing and trading assets that track attention. A more extensive "attention financialization" model requires two of the most important attributes of cryptocurrencies to reach its natural end state: permissionlessness and composability.

• Permissionlessness: Anyone can issue any type of asset
• Composability: Anyone can trade these assets anywhere

The design space for this experiment includes:

• Expanding the range of new asset issuance (e.g., creator tokens, prediction market LP positions, meme coins)
• Embedding issuance and trading into new venues (such as communication bots like bonkbot or Bananagun and in-game markets)
• Facilitating coordination among asset holders (such as pooling funds to purchase constitutional copies)

In the short term, this means the next major exchange will no longer look like current exchanges. It will look like a live platform where creators and audiences can bet against each other, or a group chat platform where friends and communities can launch crowdfunding campaigns, raising millions of dollars to establish network states, or a Stack Exchange-style forum where top contributors will not only be rewarded for their contributions but also for their substantial financial advantage.

In 2024, we will see entrepreneurs experimenting along these three major patterns. We will see the emergence of a new type of exchange for both liquid and illiquid assets. The trading volume of these exchanges will rise in the rankings and follow in the footsteps of Wall Street bets.

Vishal Kankani: Social Network for NFT Collectors

In 2024, I am excited about collectible NFTs, more people starting to collect, and the social experience of collectors.

Collecting has ancient origins, from monarchs collecting unique treasures in ancient Egypt and Chinese civilization to the European curiosity cabinets of the Renaissance. Museums essentially evolved from these private collections.

Psychologically, besides speculative opportunities, collecting is a form of self-expression. In certain circles, collectibles have become symbols of identity, binding the act of collecting to personal identity, symbolizing reputation, expertise, and knowledge. The internet has amplified this behavior, connecting previously isolated enthusiasts and fostering new senses of belonging in their respective communities.

Despite this progress, collectors still face some obstacles:

• Fraud related to authenticity and provenance
• Trade and fungibility
• Security, damage, and loss
• Space and storage issues

Blockchain can break down the above barriers and attract more collectors. Blockchain has particular appeal to the younger generation keen on collecting digital goods (such as Pokemon Go, virtual sneakers, and in-game skins). These collectibles are precursors to digital native collectibles on public blockchains.

Even as digital collectibles transition from private databases to public blockchains, some behaviors of collectors will remain unchanged: flaunting their collections, easily exchanging collectibles, discovering their collector tribes, and engaging with others. These behaviors will lay the foundation for the rise of ownership-based social experiences.

Spencer Applebaum: Stablecoin-Supported Remittances in Emerging Markets

After interning at Bitspark, one of the earliest companies to use BTC as a remittance channel, with its primary markets in Southeast Asia and Africa, I fell into the rabbit hole of cryptocurrency. Since discovering cryptocurrency, cryptocurrency-driven cross-border payments have been one of my most exciting use cases.

In some low-income countries, remittances are one of the largest drivers of GDP and a fundamental means by which many economies sustain themselves:

Source: World Bank Development Indicators data

Historically, remittances have faced challenges of high costs and only a few fiat currencies being exchangeable and tradable outside their home countries (e.g., USD, EUR, JPY, GBP), making many remittance corridors slow and difficult to access. According to World Bank data, the average cost of remittances is about 6.2%, but for long-tail countries, this ratio increases significantly. For example, the cost of remitting from South Africa to China is over 25%.

In this context, I am excited about the opportunities for 1) consumer-facing remittance applications and 2) B2B SaaS companies targeting physical remittance operators (MTOs), especially with the emergence of stablecoin-supported MTOs in 2024.

These products 1) exchange local currency ABC into USDC/USDT in a P2P manner, 2) send USDC to another country, and 3) hold USDC or exchange it for local currency through other brokers.

Over the past 12 years, digital payments have had a profound impact on global remittances:

Source: World Bank Global Remittance Prices Quarterly Report

Stablecoins will accelerate this trend and further reduce the cost of remittances, especially in historically slow and expensive long-tail regions. With the rapid adoption of stablecoins in 2023, 2024 will be the year of stablecoin remittances.

Matt Shapiro: Cryptocurrency as a Product Transforms into Product-Driven Cryptocurrency

By 2024, we will see a significant shift from cryptocurrency as a product to cryptocurrency-driven products. Early signs of this change have already emerged, and I believe the signs of recovery are everywhere.

Last year, cryptocurrency illuminated unprecedented new markets. Hivemapper created a brand-new map, with viewing frequencies 24 to 100 times higher than Google Street View, and in less than a year, it mapped nearly 10% of the Earth, using cryptocurrency mechanisms to incentivize permissionless contributions in a scalable manner. In the midst of a global GPU shortage, Render Network created a new market for GPU supply, and we believe this area will face continued supply-demand imbalances in the coming years. Helium Mobile is seeking to fundamentally change the cost structure of the telecommunications industry by supporting cryptocurrency, user-owned infrastructure, and devices.

Nubank is one of the largest neobanks with over 80 million customers, and it has launched Nucoin as a form of measuring user loyalty. Starbucks is entering the cryptocurrency space through its Odyssey program, which is an extension of their existing rewards program. Blackbird offers cryptocurrency rewards to customers entering restaurants (which could pioneer a strong payment business, adding extra profit to the restaurants).

BAXUS is using cryptocurrency to light up the trading and investment market for whiskey and other premium spirits, opening the market to new participants. oRamp is using cryptocurrency to improve new markets for local and regional forex, reducing spreads and lowering costs for customers.

All of these examples are different, but they share the same core: they all use cryptocurrency to drive products, resulting in meaningful economic outcomes. In some cases, such as Starbucks, Nucoin, and Blackbird, cryptocurrencies mostly operate behind the scenes. In other cases, such as Hivemapper and Render, cryptocurrencies are tightly coupled, highly visible, and a critical part of the product itself. The design space here is vast, and the infrastructure built over the past 5 years paves the way for cryptocurrency to power everyday use cases. By 2024, experiments in this field will explode.

Eli Qian: On-Chain Data

By 2024, I expect on-chain data volume to grow by several orders of magnitude. With new users joining, use cases and functionalities of DApps and protocols will also grow. Data from decentralized social protocols will be very rich, and people will do more on social products and generate more data compared to financial products.

How will we handle such a massive and explosive growth of data? In the past, people have always looked at on-chain data from the perspective of advertising and personalization. However, I am eager to see teams take a more first-principles approach and recognize that contextualizing on-chain data when building social products is not just a nice-to-have, but a necessity.

Currently, our on-chain social data and identities are built into a universal graph (such as Farcaster), making it difficult to build social products for different social environments. People are multifaceted, living in various social contexts. Our behavior varies depending on the situation, and our demands are different. We use Facebook, Twitter, LinkedIn, and Snapchat for unique reasons, and the social graph creates specific contexts and experiences on each platform.

The launch of Threads provides a case study in this regard. Threads did not kill Twitter for many reasons, but one of them is the blurred social context. Threads' social graph was imported from Instagram, a social network where the context is primarily related to real-life social relationships. However, Threads' medium, the way users interact, is taken from Twitter, an online-first, often anonymous social environment. Users are unsure how to act because the product does not match the context.

By 2024, the edges and nodes of the social graph will be shattered and categorized into more specific contexts. Currently, on-chain solutions (such as Farcaster) exist, but I expect off-chain solutions to emerge as developers begin to demand data that is more relevant to the products and social experiences they want to build. I am excited about the next wave of data primitives and developer infrastructure that will support the new generation of social applications.

Tushar Jain: New Token Distribution Models

Every bull market in cryptocurrency is sparked by a new token distribution method.

• PoW Chain Adoption - 2013/2014
• ICO - 2017
• IEO - 2019
• Liquidity Mining - 2020
• NFT Minting - 2021

Two new token distribution mechanisms have emerged in the recent bear market, which could be the fuel for igniting the new bull market:

• DePIN: Rewarding people with tokens to help build productive capital assets (e.g., Helium, Hivemapper, Render).
• Points: Incentivizing people to use the product before the token mechanism is formulated. Issuing tokens requires a lot of work, and once the token is live, it is difficult to change the economic model. Points have no unit, no maximum supply, and due to being non-transferable, they pose less regulatory risk.

The new forms of token distribution are an effective way to bring new users into the crypto ecosystem. I believe the next wave of user adoption will come from users earning crypto assets rather than purchasing them. DePIN and Points both provide novel ways to offer crypto assets to new users who have never owned a crypto wallet before.

Kyle Samani: UI Layer Composability and Client-Side ZK

UI Layer Composability

In my 2021 Multicoin Summit talk, I discussed the idea of composability. At the time, I was more focused on on-chain atomic composability. However, over the past few years, I have become less bullish on on-chain atomic composability (hence I changed my name from "Composability Kyle" to "Integrated Kyle" on X). Recently, I have become more interested in permissionless UI layer composability. In 2023, we saw the first major breakthrough in UI layer composability: Unibot.

Unibot is a decentralized terminal and DEX bot on Telegram. Previously, people would find information somewhere on the internet (X, Reddit, Bloomberg, Telegram, etc.), and then trade on a separate UI (e.g., Drift, Binance, Coinbase, etc.), but Unibot brings trading to Telegram, where people already hang out, socialize, and exchange information.

By 2024, there are huge opportunities to bring trading activity into network environments beyond just Telegram group chats.

Based on this idea, I hope to see more UI layer composability, not just for asset ledgers, but for social products, most notably Farcaster. Farcaster's vision is bold: a single event source where each event is signed by a person, and there are countless UIs that can read from and write to that event source.

In layman's terms, X provides unique product experiences for different use cases: cryptoTwitter, fintwit, sportsTwitter, politicalTwitter, etc. The opportunity lies in building the Farcaster client, realizing this vision from first principles.

Client-Side ZK

Most discussions about zero-knowledge (zk) over the past few years have focused on using zero-knowledge rollups and zero-knowledge coprocessors to scale blockchains. However, I believe the most interesting design space for zk is in client-side privacy. I recently learned about two client-side zk designs that I find very compelling:

• zk.me: This is a system for generating zk proofs about yourself, especially in KYC and AML compliance scenarios. It's hard to imagine DeFi growing another 10x without stricter on-chain KYC. Under this assumption, I hope users do not have to leak their data, and zk proofs will be the foundation for achieving this vision.
• Brave Boomerang: Traditionally, ad trading runs on centralized servers. This is true for Google, Facebook, and all other online ad platforms. Brave is disrupting the ad trading model. Users run ad trading locally on their devices and submit proofs of their ad trading to the blockchain. This model ensures no PII is leaked and still provides advertisers with the precision they seek (zk proofs can ensure that Honda's ads are shown to a 16-year-old and not a 6-year-old).

As these two examples show, the biggest opportunities to reshape internet trust and build new business models using zk are on the client side.

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