Multicoin’s Latest Solana Investment Thesis: Solana Aims for the Internet Capital Market

Multicoin Capital participated in Solana’s seed round of financing in May 2018. Since then, Multicoin Capital has also been investing in Solana’s native asset SOL and the broader Solana ecosystem. We have previously published four investment theses on Solana. During that time, the first two versions were released approximately nine months before the mainnet produced its first block in March 2020. As the Solana network has evolved, our reference framework for how to think about the Solana network and the SOL asset has also been continuously evolving.
Now Solana has become a $100 billion asset, the fastest - growing developer ecosystem, and has surpassed Ethereum in the most important on - chain metrics (transaction volume, daily active addresses, revenue, total economic value TEV, DePIN payments, etc.). We would like to share our thoughts on why we have been subscribing to SOL to obtain strong returns, even when Solana’s market capitalization exceeds $100 billion.
This article is the fifth in our evolving Solana thesis. The first four are: 1. Separation of Time and State; 2. The World Computer Should Be Logically Centralized; 3. Technological Scalability Enables Social Scalability; 4. The Hidden Costs of Modular Systems.
In this article, I will argue that Solana is the leading public chain supporting the Internet capital market. In addition, I believe that as a technology, Solana can outperform major traditional finance (TradFi) players in core performance indicators such as latency (including NYSE, NASDAQ, CME, JPM, Goldman Sachs, and Morgan Stanley in financial markets, as well as Visa and Mastercard in payments), while retaining the core properties of blockchain that TradFi has never provided (atomic composability and permissionless access for users, developers, and validators). Most importantly, I believe that the Solana ecosystem can achieve the following two goals simultaneously, even though they may seem contradictory:
Reduce end - user financial service fees by 90 - 99%.
Achieve a higher total market capitalization than existing traditional finance (TradFi) companies.
While traditional finance players such as the New York Stock Exchange and NASDAQ only provide a small part of the value in the financial stack, Solana has been supporting a superset of the functions of these systems through unique DeFi protocols that have been put into production on Solana over the years. Solana not only expands the total addressable market (TAM) for transactions by increasing access and performance but also captures value from more levels of the financial stack.
Broadly speaking, all financial services can be classified into two categories: payments and finance. I will first explain why payments are a loss - making product for blockchain; after that, most of this article will focus on the core infrastructure of Wall Street finance.
Providing the Best Global Payment Experience
There are many ways to transfer funds. The user experience of Apple Pay is excellent. Using a physical credit card is great. Using Venmo, PayPal, or Square Cash is also good. Other methods are mediocre or even worse - ACH, Wires, Zelle, Bill Pay, money transfers, etc.
But even if these traditional systems have a good user experience, their fees are outrageously high. Wire transfer fees are $25, and credit card fees can exceed 2%. It’s crazy that updating ledger entries incurs such high costs for consumers and merchants. This goes against common sense and directly contradicts the natural intuition that electronic transactions should be cheaper than analog transactions.
Solana simplifies the payment process and makes the user experience excellent. And the fees are almost zero. Please watch the video (https://youtu.be/LaNwHW_NBIs), Sling Money is built entirely on Solana. This is the future of money flow.

The global payment companies have a market capitalization of approximately $1.4 trillion. Solana aims to reduce this cost by 90%. The only fee that Solana itself charges users is gas, which is approximately $0.001 per transaction. Even if the Solana network processes an average of 50,000 transactions per second in a year, this only amounts to a total of $1.5 billion for users. In contrast, Visa sustains thousands of transactions per second.
Payments are a loss - making product for blockchain. Payments are crucial for driving adoption, providing real utility to users and companies, but they are not the main profit source for the blockchain or its ecosystem.
However, payments are essential for the development of blockchain. The beauty of payments is that they are inherently viral. When Alice sends money to Bob, and then Bob sends money to Carol, this leads to the natural growth of wallet adoption.
The main profit source of blockchain is not payments, which are actually zero in terms of profit. Instead, the main profit source of blockchain is the natural fluctuations that occur between asset prices, which manifest in the form of maximum extractable value (MEV). My co - founder Tushar further explained this in his 2022 Multicoin Summit speech.
The rest of this article will focus on how and why Solana can outperform TradFi in traditional performance indicators, and how this will enable SOL and the Solana ecosystem to generate profits.
Market Efficiency of CeFi and DeFi
Solana is a decentralized network consisting of thousands of nodes that reach consensus on a series of financial transactions at a rolling speed of 400 milliseconds (and is expected to be reduced to 120ms in the coming years).
The correct way to measure market efficiency is not through transaction latency but through the spread provided by market makers (MMs). Ultimately, what buyers and sellers experience is the price. Human users (i.e., non - robots) cannot experience the difference between financial transactions of 50 milliseconds, 100 milliseconds, and 200 milliseconds. For reference, the average time for a human to blink is 100 - 150 milliseconds.
Market - making in centralized finance (CeFi) is almost deterministic. Most market makers' servers are located in the same place as the CeFi exchange, and each market maker has a fiber - optic cable of exactly the same length connecting its server to the exchange. The exchange completes transactions in microseconds, so market makers can understand their exposure in real - time with high precision.
Decentralized finance (DeFi) exchanges - such as Drift, Phoenix, Clearpools, Raydium, and Orca - are far less deterministic than CeFi exchanges, because:
Solana's network leader rotates continuously.
The finality time increases due to the need for validators around the world to reach consensus.
Therefore, market makers cannot understand their exposure in real - time with the same precision. In many cases, market makers may leave outdated prices on the blockchain order book, and others may take advantage of these prices.
As a result, DeFi spreads are usually larger than CeFi spreads.
Let's take a look at how these systems are changing to bring a better experience for makers and takers.
Makers - Narrowing the Spread through Conditional Liquidity
Things are changing. DFlow has just quietly launched Conditional Liquidity (CL) on Solana. As the name implies, conditional liquidity refers to liquidity that is only available when the taker's order meets certain predefined conditions. For the purpose of this article, the important conditions are toxic and non - toxic order flow.

How does CL work? CL stipulates that a given unit of liquidity can only be withdrawn when the taker is endorsed by a known front - end application. These include the following wallets: Phantom, Backpack, Solflare, and Fuse, as well as front - ends such as Drift, Kamino, Jupitar, and DFlow's own front - end. This mechanism ensures that robots cannot consume CL because robot orders have no endorser. This is a huge step forward for MMs because it effectively guarantees that even if their quotes are a few seconds late, they will not be outmaneuvered.
Although CL is a new concept in mechanism, it is directly inspired by widely adopted practices in TradFi. Robinhood is a pioneer in this regard. Robinhood always provides its customers with a better price than the national best bid and offer (NBBO) of the NYSE and NASDAQ. They have proven this pricing improvement through trillions of dollars of trading experience in the past decade. This makes sense because market makers have good statistical reasons to believe that the average toxicity of Robinhood users is lower than that of those who trade directly on the NYSE or NASDAQ. In short, in a trade, who would you rather face: Joe who watches YouTube videos, or Citadel?
CL lets MMs know that they are not facing the well - known Citadel.
For more background information on how order - flow segmentation brings better prices for retail traders, you can look here.
The advantage of DFlow CL is that it combines the best of TradFi and cryptocurrency. It can provide a tighter spread for retail customers like those of Robinhood and offer real - time permissionless access and open auditability of the blockchain.
CL is an emerging concept. However, we expect it to become the dominant paradigm for on - chain liquidity quotes in the next few years because market makers hate being deceived by stale quotes. Market - making is fundamentally about quoting based on the maximum available information. There is no reason for market makers (whether passive or active) not to incorporate more information (i.e., conditional liquidity) into their pricing.
DFlow's implementation of CL on Solana is currently 100% open - source and does not charge any fees or taxes. Here is the GitHub repository.
Since Uniswap launched the xyk automated market maker (AMM) at the end of 2018, conditional liquidity is the most important functional improvement in DeFi. As it is adopted, it will reshape all discussions in DeFi regarding UX, spreads, MEV, etc.
To reiterate, CL will enable market makers to provide more stringent quotes for ordinary users. We hope this will be beneficial to market makers, users, SOL, and the Solana ecosystem.
Takers - Utilizing Alpha by Reducing Latency
Financial markets should incorporate all publicly available information into asset prices. They usually do. However, the price discovery of most assets occurs on a single server in one place, while the information that affects prices is generated all over the world.
The TradFi market microstructure is designed around low - latency traders who want to co - locate with the exchange matching engine.
If you, as a retail trader, observe an event in Singapore that will affect the price of TSLA, you still have to send the information to New Jersey next to the market maker. This is fundamentally unfair to the taker and unnecessary for the market maker.
The first correct view of this problem is that the observer of this information should be able to place an order with the validator in Singapore, not New Jersey, based on this new information. The market participant should receive the alpha for observing this information first and adding the order to the global order book at the fastest speed.
Today, like other leading blockchains, Solana has only one leader at any given time. But this will soon change because Solana is moving towards Multiple Concurrent Leaders (MCL).

Under MCL, there will not be just two leaders at any time, but dozens. With MCL, participants who observe real - world information can and will incorporate this information into asset pricing more quickly.
The key to optimizing price discovery is not to reduce the latency of a single matching engine by one nanosecond but to push price discovery to the edge, enabling people around the world to access information about updated prices.
Contrary to intuition, decentralization enables takers to minimize the latency of trading time, thereby maximizing the information dissemination in financial markets.
By definition, decentralized price discovery is superior to centralized price discovery. The world is large and diverse.
Horizontally Expanding TAM...
Most major exchanges in the world, from the London Stock Exchange to the Chicago Mercantile Exchange to the Tokyo Stock Exchange, trade one type of asset (such as stocks or commodities). But blockchain reveals a reality: all units of value (currency, commodities, stocks, derivative positions, debt, Meme coins, governance tokens, utility tokens, NFTs, etc.) can be represented as standardized tokens on a permissionless blockchain.
Today, most of the assets traded on the blockchain are blockchain - native assets. That is, they are created and issued natively on the chain. This includes DeFi tokens, DePIN tokens, NFTs, etc. But more and more assets are being issued on the chain that represent TradFi assets, including US stocks, bonds, real estate, US Treasuries, mezzanine debt, etc.
Ultimately, almost all assets will be traded on systems like Solana that are inherently global and permissionless. This does not necessarily mean that people will stop trading on the NYSE, NASDAQ, and CME, but rather that an increasing amount of trading volume will occur on the chain rather than in TradFi venues. This is natural because blockchain is inherently global, permissionless, available 24/7, more accessible to retail traders, and easier for developers to integrate than TradFi.
Integrating private keys and tokens into any application is a piece of cake, whether it is a Telegram bot, a lightweight Android application, or a WeChat mini - program. The difficulty of interfacing with the large number of heterogeneous systems representing the global TradFi system increases exponentially. Their APIs are much more complex, settlement times are slow and inconsistent, and in many cases, TradFi institutions simply do not deal with retail traders.
Since blockchain is public and permissionless, it clearly increases the participation in various forms of financial markets. Ultimately, asset issuers don't care what track their assets are traded on. Asset issuers just want to ensure that anyone who wants to buy their assets can do so. Today, most company CEOs do not think that issuing stocks on the chain will expand their potential shareholder base, but this will change in the next few years as the number of global cryptocurrency users grows from approximately 500 million to billions.
We not only believe that cryptocurrency will support all TradFi assets but also expect it to support many new assets that were not possible before. One of my favorite examples is Parl, which offers perpetual contracts based on the average price per square foot of completed real - estate transactions in a specific market over a continuous 30 - day period. Parcl allows you to go long on Austin, short on San Francisco, and use the equity value of each position to collateralize the other position!
There are even teams developing products to issue NFTs to represent single bottles of whiskey, wine, and watches on the chain!
Solana's TAM is expanding in all directions. Wall Street is slowly moving towards the chain, and developers are building various new financial markets on the chain.
...And Capturing Value from Innovation
So far, everything in this article has regarded Solana as a matching engine. But with DeFi protocols such as Drift, Jupiter, Kamino, marginfi, etc., the Solana ecosystem can provide:
All imaginable financial services.

To everyone in the world.
Improve transparency and auditability, thus significantly reducing the risk of contagion.
Higher capital efficiency than TradFi.
Today, the largest DeFi primitives on Solana are 1) spot trading, 2) lending and borrowing, and 3) perpetual futures trading. These roughly correspond to 1) NYSE/NASDAQ, 2) large banks providing consumer and prime loan services, and FCMs, and 3) the Chicago Mercantile Exchange. These are only applicable to the United States. Solana competes to provide financial services to everyone in the world.
Although many Solana supporters, including Anatoly (Co - founder and CEO of Solana Labs) and I, have referred to Solana as a decentralized NASDAQ, the TAM of Solana and its ecosystem is much larger than that of NASDAQ. Solana is trying to power all global financial services; it is far more than just a matching engine.
The incredible thing about Solana is that all these different financial tools can be combined natively and atomically with each other without the explicit approval or support of application developers. This concept of using existing smart contracts as building blocks to build more useful services is what most people in the industry call composability. This enables faster experimentation and growth because developers can build on a set of basic contracts, integrations, and liquidity, all of which create value for stakeholders in the Solana ecosystem in a virtuous cycle. This means that Solana - based products can innovate faster and provide a better consumer experience.
Solana itself does not provide financial services. But the stack created by Solana supports hundreds (soon to be thousands) of financial services that facilitate trillions of dollars of risk transfer each year. Although the gas cost is close to zero and is decreasing, Solana directly benefits from the growth of these financial services through maximum extractable value (MEV).
As my partner Tushar said at the Multicoin Summits in 2022 and 2024, an asset ledger like Solana can be valued based on the MEV it captures. Each new financial service generates incremental MEV, and Solana can capture a portion of it. Today, for a single Solana application, more than $100 million of MEV has been generated, and everything here is still in its infancy, apart from the revenue of those specific applications.
In the fourth quarter of 2024, the Solana network obtained more than $800 million in REV (excluding SOL inflation), which is approximately $3.2 billion on an annualized basis. And it was only approximately $0 a year ago. This is the case even though almost no TradFi assets have been issued on Solana, and the major DeFi protocols on Solana are relatively immature, with most of them only a few years old.
Solana's TAM is growing in three dimensions:
DeFi protocols are constantly maturing, adding new features and functions and creating more MEV opportunities.
Entrepreneurs are building new types of financial markets on the chain, such as computing, telecommunications, energy markets, and Blockchain - Enabled Collectibles Marketplaces (BECMs), etc.
More and more assets, from memecoins to US stocks, are being issued on the chain.
These not only increase Solana's TAM but also reinforce each other. For example, the more assets are issued, the more collateral is available for lending.
Solana's compounding is getting faster and faster.
The Internet Capital Market
The Solana ecosystem is fully committed to realizing the vision of the Internet capital market. Solana simultaneously improves execution for market makers through conditional liquidity and improves for takers through multiple concurrent leaders. In addition, the Solana ecosystem is expanding its TAM horizontally (by supporting a wider range of TradFi