Original Title: Four Categories I'm Excited About
Source: Variant
Translation by: Zhou, ChainCatcher
In the past year, the cryptocurrency industry has undergone significant changes.
In terms of regulation, Congress has made substantial progress on clear rules for the "GENIUS Act"/stablecoins. The White House has established a Digital Asset Market Working Group, which has met with numerous industry participants and is working to provide them with clear guidance. The U.S. Securities and Exchange Commission has announced a "crypto plan" aimed at making the U.S. a cryptocurrency capital by exploring initiatives such as how to tokenize a broader range of assets in financial markets.
Cryptocurrency builders have also made significant advancements. There are now several large and liquid prediction markets (along with some new markets set to launch soon). The supply and usage of stablecoins have reached historic highs, with more people holding these assets (across more regions) than ever before. Many on-chain protocols have achieved revenues in the eight to nine-figure range. Some of these protocols also serve as developer platforms, boasting a robust startup ecosystem (with these startups also being profitable). It can be said that now is the best time for cryptocurrency builders.
The total addressable market (TAM) for digital assets is now the largest ever and will be the smallest thereafter. This is especially true now. Below are some of the most anticipated entrepreneurial directions organized by the original author.
1. Stablecoin-Supported Markets
Currently, discussions about stablecoins are mostly focused on their payment aspects. However, historically, emerging markets with a demand for stablecoins have played a larger role in driving the adoption and growth of stablecoins. The growth of Asian cryptocurrency exchanges has been a major driver of Tether's rise: traders no longer convert cryptocurrency profits into local fiat currency but instead hold USDT on exchanges as a means of value storage. Similarly, the DeFi boom in 2020 also helped USDC find its footing, as it provided new venues for the demand for digital dollars.
Currently, the circulating value of stablecoins is nearly $300 billion. There is a strong interest in using them for payments. However, it is undeniable that the payment sector is largely a winning path for existing enterprises, with existing distribution channels and infrastructure giving established fintech companies an advantage over emerging startups.
I am looking for entirely new markets enabled or created by stablecoins. We have two invisible investments that fit this theme. One is focused on building infrastructure to make all stablecoins interchangeable for end users. The other is constructing local liquidity markets.
What are some specific examples of stablecoin markets? Here are three examples:
1. New leveraged tools requiring instant funds. Stablecoins can circulate around the clock, meaning users can immediately deposit more collateral into their accounts (whereas in traditional models, exchanges may need to pre-fund margin accounts while waiting for wire transfers).
2. Company-to-company lending. I believe that in the future, many companies will hold a portion of their cash (and cash equivalents) in the form of stablecoins. Stablecoins can circulate 24/7, while transferring funds through traditional channels may take days and incur material costs. Holding cash in stablecoins allows companies to earn returns on these assets in broader and more creative ways—such as participating in short-term capital markets (like the overnight repo market) or providing on-chain liquidity.
3. Global lotteries. Cryptocurrencies provide a channel for accepting, aggregating, and distributing funds globally. Stablecoins not only help scale lotteries but their programmability also means that lottery deposits and winnings can be used in more interesting and exciting ways.
Stablecoin-supported markets can appear in a) any place where stablecoins are used as at least one means of transaction; b) products built around large (idle) capital pools held in stablecoins; c) markets that benefit from global scale using stablecoins.
2. Second-Order Prediction Market Opportunities
There are currently several large and evolving prediction market platforms, with a series of platforms set to launch this fall. Market trading volumes have remained strong throughout the year, countering critics who claim that prediction markets only experience volatility during election seasons.
This model has created more new opportunities for founders to create within or around prediction markets—opportunities that can leverage new market liquidity, broader user distribution, market platform fragmentation, and more. Here are some products I particularly hope to see.
1. Conditional betting. Parlay betting is common in sports betting. It is difficult to construct in prediction markets because participants are betting against other opponents rather than a bookmaker. The difference is that bettors are wagering against multiple different opponents rather than a single opponent (the bookmaker). Therefore, if a parlay bet fails, it is not only harder to close out but also more challenging to price/control overall risk.
One solution might be to allow users to actually bet against just one party. For example, one could envision a third-party service emerging/establishing above open prediction markets that operates similarly to a bookmaker. This service would utilize the liquidity of prediction markets to construct odds and offer parlay bets. It could operate across platforms and accept third-party liquidity to support its strategies (similar to Hyperliquid's HLP). If the parlay bet focuses on factors like Bitcoin's price movements, this service could also use other mechanisms to hedge overall risk.
2. Betting on users' abilities. A major feature of platforms like Polymarket is the leaderboard. It ranks traders based on profits and trading volume, allowing third parties to explore the positions held by these super users. Suppose I believe a certain trader will perform well—my bet is that this trader's betting performance will be good. Currently, I mainly increase exposure to that bet by manually following that user. However, future product forms could allow users like me to pool funds into a fund for professional traders to bet. As people start to think about AI agents betting in the market, this design space becomes even more exciting—along with how humans can pool funds and provide information/feedback to these agents in different ways.
The growth of liquidity, interest, and platforms supporting prediction markets has also brought many other types of second-order opportunities. Leverage, exposure to market size, and exposure to market popularity (in terms of participating users) are all areas worth paying attention to.
3. Tokenized Equity Coordinators
We are in the early stages of equity tokenization. A range of architectures is emerging, and this is becoming increasingly clear.
Some products, such as Robinhood's stock tokens, are designed solely to provide exposure to the prices of real-world stocks. These tools are entirely synthetic: they track price movements through a series of structured derivatives without holding actual stocks.
Other products, such as BackedFi's xStocks, will hold the target stocks and create their digital representations (similar to how stablecoin issuers hold fiat dollars and create tokenized wrappers for these assets). These products provide a more direct/safe link to asset prices and also offer the ability to redeem the underlying stocks.
Finally, there are more native on-chain stocks. Last week, Superstate announced that it has directly issued Galaxy Digital common stock on-chain—a tokenized asset that enjoys the same rights and benefits as traditional stocks.
These are various constructs of tokenized stocks. It is still unclear which structure will emerge as the power-law winner. Consumers may use many of these tools without fully understanding the complete constructs. Therefore, platforms will be responsible for selecting/listing different tokens. I suspect that liquidity and compliance will be the main factors for listing, but as long as various tokenized stock constructs meet the interface standards, multiple constructs can be integrated at the underlying level. We could easily end up in a world where one interface offers BackedFi's xAPPL but provides GLXY issued by Superstate, as each transfer agent provides the most liquid on-chain market for their respective stocks. And to consumers, they should all look like stocks.
Similar patterns are also emerging in the stablecoin space. There are many different stablecoins on the market aimed at replacing the dollar, but they are not all interchangeable. Thus, some networks have emerged to coordinate different stablecoins, making end users feel like they are transacting in dollars. There is now an opportunity to build similar types of infrastructure for tokenized stocks, especially as this category continues to grow and evolve.
4. The Next Big Category: New Ways to Make Money Online
One of the most shocking and recurring themes I heard this summer was how many college graduates are struggling to find jobs. I had thought that in a few years, AI would eat away at some of the more complex entry-level jobs. It turns out I was wrong.
Therefore, I believe that the way people allocate their time will undergo a significant change in the coming years. Secondly, people will have more free time and will be more eager to make money through creative means. This could manifest in many ways: more people participating in financial markets, the financialization of the entertainment industry, and an expanding variety of content types that people can create and monetize online, among others.
Cryptocurrency provides some of the most practical tracks for building such products and services. It offers a cheap global currency track, meaning the potential customer base is almost limitless. Anyone of any age, as long as they have a wallet and internet connection, can build and earn.
There are many companies in the Variant portfolio that align with these themes. Zora provides creators with new tools for media monetization. Remix helps players of all ages create, publish games, and monetize them. The Clearing Co is working to build and expand tradable markets.
The design space for new products and services that help people make money online is vast. Making money—whether through content, creativity, investment, entertainment, or other means—has always been a killer use case, and cryptocurrency offers some of the best ways to help people achieve this goal.
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