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The Solana Thesis In 2025 With Kyle Samani

By Lightspeed

Published on 2025-01-31

Multicoin Capital's Kyle Samani discusses Solana's potential to reach a trillion-dollar market cap, the future of internet capital markets, and why Ethereum's future may be Coinbase.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Kyle Samani on Solana's Trillion Dollar Potential and the Future of Internet Capital Markets

In a recent episode of the Lightspeed podcast, Kyle Samani, co-founder and managing partner of Multicoin Capital, shared his insights on the future of Solana and the broader cryptocurrency ecosystem. The discussion, based on Samani's recent piece "The Solana Thesis: Internet Capital Markets," delved into Solana's potential to reach a trillion-dollar market cap, the role of MEV in blockchain valuations, and the future of decentralized finance.

Solana's Path to a Trillion Dollar Valuation

Samani began by explaining the rationale behind his optimistic outlook for Solana. Currently valued at around $100 billion, Samani believes Solana has the potential to reach a trillion-dollar market cap. He acknowledged the skepticism such a claim might face, given that few assets in human history have achieved such valuations. However, he emphasized that the goal of his recent blog post was to outline how this ambitious target could be realized.

"I'm optimistic it can get to a trillion. And obviously that's a big jump. And a lot of people should be very skeptical. Very few assets in human history get to those levels," Samani stated.

Rather than relying on precise financial models, which Samani argues can be unreliable due to the rapid and unpredictable growth rates in the crypto space, he focused on outlining the core drivers that could propel Solana to such heights. This approach aims to provide a framework for understanding Solana's potential without falling into the trap of false precision.

The Role of MEV in Blockchain Valuation

One of the key concepts Samani introduced was the importance of Miner Extractable Value (MEV) in valuing blockchain networks. He argued that payments on blockchain networks are essentially "loss leaders," while the real value comes from financial services and the MEV they generate.

"If we're going to get to a trillion market cap, we're going to 100 billion a market cap. What are where the profits coming from to get you there? And the answer objectively is MEV today," Samani explained.

He pointed out that Solana's current price-to-earnings ratio, based on annualized quarterly revenue, is around 30, which he describes as "aggressive, but not crazy." Importantly, Samani noted that 99.9% of this value comes from MEV, with only 0.1% from transaction fees.

Payments as a Catalyst for Growth

While Samani downplayed the direct financial impact of payments, he emphasized their importance as a growth driver for the ecosystem. He explained that payments help onboard new users and increase the volume of assets on the blockchain, which in turn fuels financial services.

"Payments are obviously important because in order to have financial assets trading, people need to have assets and obviously people and like most things trade against USD. And so obviously the more USD is on chain, the more trading volume is on chain," Samani elaborated.

This perspective highlights the interconnected nature of different blockchain use cases and how they can synergistically drive growth and adoption.

Decentralization and Market Efficiency

Samani made a compelling argument for the efficiency of decentralized systems in financial markets. He contends that decentralization allows for faster information propagation and price discovery, especially when considering the global nature of information production.

"I look at from first principles like there is information produced in the world that information moves financial markets. That information is not all produced in New Jersey where, you know, Nizi and NASDAQ are. That information is up, but it's pretty everywhere," Samani stated.

This decentralized approach to information processing and market making could potentially lead to more efficient and fair markets, especially as Solana develops features like multiple concurrent leaders.

The Concept of Conditional Liquidity

An intriguing concept Samani introduced is "conditional liquidity," which involves quoting different prices to different market participants based on certain conditions. In the context of blockchain trading, this could mean offering tighter spreads to human traders and wider spreads to bots.

Samani argues that this approach could lead to fairer markets for retail investors:

"I prefer humans getting better prices at the expense of bots. That's like an ideological statement. One that I hold that I think most natural people also hold, because most people don't run bot armies."

He drew parallels to existing practices in traditional finance, such as how Robinhood has demonstrated the ability to offer better prices to retail users compared to institutional quotes on major exchanges.

Bringing Traditional Finance On-Chain

A significant portion of the discussion focused on the potential for bringing traditional financial assets onto blockchain networks. Samani identified some of the key barriers to this transition, including regulatory concerns and the need to find the right user base.

"The biggest barrier for getting them on chain is some combination of issuers. There's lots of companies like Denari and others working on that. I'm not super worried about the supply side. The bigger question is figuring out how to find the people who want to trade on chain and who can't currently access those assets and getting them there," Samani explained.

He speculated that the initial demand might come from traders looking to trade popular stocks like NVIDIA, Google, or Tesla with leverage, something currently not available in decentralized finance due to regulatory constraints.

The Importance of Atomic Composability

Samani emphasized the critical role of atomic composability in creating efficient and user-friendly decentralized financial systems. He argued that the fragmentation of liquidity and risk management across multiple chains in the Ethereum ecosystem is problematic.

"Having 10 instances of all day across 10 of EM environments is really terrible. It's less capital efficient, interest rates are wider, spreads are higher, liquidations are going to be slower and more heterogeneous," Samani stated.

This perspective highlights the advantages of Solana's single-chain approach, which allows for more efficient capital markets and risk management.

User Experience and Chain Abstraction

The discussion touched on the challenges of creating seamless user experiences across different blockchain networks. Samani introduced the concept of "Chain Extraction API," which he believes is crucial for improving interoperability and user experience.

"To make the UX seamless, because you need every app to also implement, I'm going to call it the Chain Extraction API correctly to deliver that butter experience," Samani explained.

This emphasis on user experience and interoperability showcases the ongoing efforts to make blockchain technology more accessible and user-friendly.

The Future of Ethereum and Coinbase

In a provocative statement, Samani suggested that "the future of Ethereum is Coinbase." He elaborated on this by explaining the growing dominance of Coinbase's Base layer-2 solution in the Ethereum ecosystem.

"I think the future, the dominant L2 on Ethereum is the most likely to be base. And since I started tweeting that base has taken all of the market share of the L2. I mean, not all, but this is clearly directly taking market share from all of the other L2s by a very wide margin," Samani stated.

This observation highlights the growing influence of centralized exchanges in the supposedly decentralized Ethereum ecosystem, raising questions about the future direction of the platform.

Addressing Sandwich Attacks

Samani addressed concerns about sandwich attacks in the Solana ecosystem, particularly in the context of bringing regulated securities on-chain. He argued that the problem is primarily confined to crypto-native assets, especially meme coins trading on automated market makers (AMMs).

"I'm actually not very worried about that. The sandwiching that happens happens overwhelmingly on crypto and native assets, primarily meme coins trading, uh, on AMM curves, because all meme coins are created on AM curves," Samani explained.

He outlined several approaches to mitigate sandwich attacks, including conditional liquidity, moving towards centralized limit order books (CLOBs), reducing block times, and implementing more request-for-quote (RFQ) systems.

Cost Reduction in Blockchain Financial Services

One of the most compelling arguments Samani made for blockchain-based financial services is the potential for massive cost reductions. He claimed that these systems could reduce fees by up to 99% compared to traditional financial rails.

"The root of the cost savings comes from trust. Uh, the entirety of financial market infrastructure in the United States and abroad is based on different routes of trust," Samani explained.

He argued that blockchain technology eliminates many of the inefficiencies and costs associated with traditional trust-based systems, allowing for near-zero cost money movements.

Frontier Ideas: DePIN and Zero-Employee Companies

Looking towards the future, Samani discussed two frontier ideas that he finds particularly exciting: Decentralized Physical Infrastructure Networks (DePIN) and zero-employee companies.

For DePIN, Samani sees potential in combining blockchain incentive structures with AI and robotics:

"As we think about the evolution of AI and transformers, the area that's honestly the most interesting to me is, is, uh, physical world, um, robotics and using AI, uh, transform based AI in terms of vision and, um, you know, manipulation and dexterity and control and, uh, training those robots is going to require a lot of data."

Regarding zero-employee companies, Samani envisions AI-driven organizations that operate autonomously on blockchain rails, with minimal human oversight:

"The logical end state of all of this is that you have a company that has an AI and the AI will start to hire people to do stuff that it cannot do itself. Um, presumably using crypto rails as its primary financial work, financial rails."

The State of Crypto Venture Capital

When asked about the state of crypto venture capital, Samani took a pragmatic approach, focusing on Multicoin Capital's strategy rather than speculating on broader market trends.

"I don't care. Uh, cause I don't give a shit about other venture firms. Like, okay, do your own fucking thing. I got a focus on my venture firms," Samani stated bluntly.

He emphasized the importance of focusing on clear trends and successful projects within the Solana ecosystem, rather than overthinking investment decisions.

The Importance of Solana ETFs

Samani explained the significance of potential Solana ETFs, highlighting how they could expand the pool of potential investors:

"There are a lot of people who are just not going to sign up for a phantom, uh, dress or a coin base account or a cracking account. They already have all of their money at e-trade, Morgan Stanley, Goldman, whatever. And they're just for, for mechanical and lazy reasons, not going to move."

He argued that ETFs would allow traditional wealth managers to offer Solana exposure to their clients without losing their management fees, effectively aligning incentives and broadening the investor base.

Conclusion

Kyle Samani's insights provide a comprehensive view of Solana's potential to revolutionize internet capital markets and reach a trillion-dollar valuation. From the role of MEV in blockchain economics to the importance of atomic composability and user experience, Samani's analysis offers a roadmap for Solana's future growth and development.

As the cryptocurrency ecosystem continues to evolve, Solana's focus on efficiency, scalability, and innovation positions it as a strong contender to reshape the future of finance. With ongoing developments in areas like DePIN and AI-driven organizations, the potential for Solana to achieve Samani's ambitious vision seems increasingly plausible.

While challenges remain, particularly in areas like regulatory compliance and user adoption, the trajectory Samani outlines for Solana paints a picture of a blockchain platform poised for significant growth and impact in the coming years.

Facts + Figures

  • Solana's current market cap is around $100-130 billion, with Samani projecting potential growth to $1 trillion.
  • Solana's current price-to-earnings ratio is approximately 30, based on annualized quarterly revenue.
  • 99.9% of Solana's current value comes from MEV, with only 0.1% from transaction fees.
  • Samani predicts that by the end of 2025, sandwich attacks on Solana will be reduced to a level where they are no longer a major PR issue.
  • Blockchain-based financial services could potentially reduce fees by up to 99% compared to traditional financial rails.
  • Coinbase's Base layer-2 solution has been gaining significant market share in the Ethereum ecosystem.
  • Samani suggests that ETFs could expand the pool of potential Solana investors by allowing access through traditional wealth management channels.
  • The concept of "conditional liquidity" could offer tighter spreads to human traders compared to bots, potentially creating fairer markets for retail investors.
  • Samani introduces the idea of "Chain Extraction API" as crucial for improving interoperability and user experience across different blockchain networks.
  • Two frontier ideas highlighted by Samani are Decentralized Physical Infrastructure Networks (DePIN) and zero-employee companies operated by AI on blockchain rails.

Questions Answered

What is Kyle Samani's thesis for Solana reaching a trillion-dollar market cap?

Samani's thesis for Solana reaching a trillion-dollar market cap is based on its potential to become the foundation for "internet capital markets." He argues that Solana can outperform traditional finance in speed, cost, and accessibility while enabling new financial primitives. Key drivers include cost reduction, market efficiency, expanding total addressable market (TAM), and MEV capture. Samani emphasizes the importance of financial services and MEV generation over simple payment transactions in driving this valuation.

How does MEV contribute to blockchain valuation?

MEV (Miner Extractable Value) contributes significantly to blockchain valuation, especially for Solana. According to Samani, 99.9% of Solana's current value comes from MEV, with only 0.1% from transaction fees. MEV represents the profit that can be extracted from reordering or including/excluding transactions within blocks. This value is crucial for blockchain economics and is a primary driver of profitability for validators and the overall network valuation.

What is conditional liquidity and why is it important?

Conditional liquidity is the concept of quoting different prices to different market participants based on certain conditions, such as whether the trader is a human or a bot. Samani argues that this approach could lead to fairer markets for retail investors by offering tighter spreads to human traders and wider spreads to bots. This is important because it could potentially democratize finance by giving better prices to individual investors, similar to how Robinhood has demonstrated the ability to offer better prices to retail users in traditional finance.

What are the main barriers to bringing traditional financial assets on-chain?

The main barriers to bringing traditional financial assets on-chain include regulatory concerns, finding the right user base, and technical challenges. Samani identifies the supply side (issuers) as less problematic, with companies like Denari working on solutions. The bigger challenge is identifying and attracting users who want to trade these assets on-chain and can't currently access them through traditional means. Additionally, there are technical challenges related to interoperability and user experience that need to be addressed to make on-chain trading of traditional assets seamless and accessible.

Why does Kyle Samani say "the future of Ethereum is Coinbase"?

Samani's statement that "the future of Ethereum is Coinbase" refers to the growing dominance of Coinbase's Base layer-2 solution in the Ethereum ecosystem. He observes that Base has been rapidly gaining market share among Ethereum layer-2 solutions, potentially becoming the dominant L2 on Ethereum. This trend suggests an increasing centralization within the Ethereum ecosystem, with a major centralized exchange (Coinbase) playing a crucial role in its scalability and future development. This observation raises questions about the long-term decentralization of Ethereum and the influence of centralized entities in its ecosystem.

What are DePIN and zero-employee companies, and why are they considered frontier ideas?

DePIN stands for Decentralized Physical Infrastructure Networks, which Samani sees as a promising frontier combining blockchain incentive structures with AI and robotics. This concept involves using blockchain technology to incentivize the collection of real-world data for training AI and robotics systems. Zero-employee companies are another frontier idea, envisioning AI-driven organizations that operate autonomously on blockchain rails with minimal human oversight. These ideas are considered frontier because they represent novel applications of blockchain and AI technologies that could potentially revolutionize how we think about infrastructure, data collection, and corporate structures in the future.

How could Solana ETFs impact the cryptocurrency market?

Solana ETFs could significantly impact the cryptocurrency market by expanding the pool of potential investors. Samani explains that many people are reluctant to set up cryptocurrency accounts or move their money from traditional brokerages. ETFs would allow these investors to gain exposure to Solana through their existing investment accounts at firms like E-Trade, Morgan Stanley, or Goldman Sachs. This could align the incentives of traditional wealth managers with cryptocurrency investments, potentially bringing a large influx of capital into the Solana ecosystem and the broader crypto market.

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