Multicoin Co-Head Applebaum Publishes Long Article "DeFi 2.0"

Spencer Applebaum, Co-Head of Venture Capital at Multicoin Capital, published a long article titled "DeFi 2.0," defining early AMM, over-collateralized lending, floating rate liquidity pools, and perpetual contracts as the original language for high-volatility native crypto assets like BTC, ETH, SOL, and HYPE. In contrast, RWA (real-world assets) such as government bonds, stocks, corporate bonds, commodities, and foreign exchange have lower volatility, defined terms, and cash flows, with identifiable borrowers. Institutions care more about execution quality and credit, and cannot apply the same original language rigidly.

The article specifically mentions that 1.0 products like Uniswap, Perpetual Protocol, Sky (formerly MakerDAO), Synthetix, Compound, Aave, and dYdX were able to operate due to high market volatility, speculative intensity, a large number of long-tail tokens, and permissionless access. New tokens on platforms like pump.fun or metadao first need to address whether there is liquidity, rather than just reducing slippage to a few basis points. For memecoins, a 2% slippage followed by a 30% increase can overlook execution costs, while a 10 basis point slippage on government bonds or EUR/USD could mean the entire profit of the transaction.

On the RWA side, he lists five groups of differences: lower volatility with narrower spreads, duration with predictable cash flows, better collateral with identifiable borrowers, larger institutional participants, and more heterogeneous portfolio risks. The corresponding original language changes to limit order books or RFQ, prop AMM, fixed rates and term lending, vaults, interest rate derivatives, repos, dark pools, portfolio margining, options, and term futures. Morpho Midnight conducts fixed-term auctions, Pendle and Exponent split principal and yield, and Pendle Boros adjusts fixed to floating funding rates, while Maple underwrites institutional borrowers, all cited as examples of "original languages that have existed, but assets have not matched."

With lower volatility, options and covered calls become economically meaningful. Ribbon, Katana, and Friktion previously automated call selling, but the underlying asset could fluctuate by 50% in a month, leading holders to forgo upside for insufficient yield; stocks need to rise 10% over a year plus additional yield to be sustainable. Early credit lending often falls at a collateralization rate of about 66% with strict liquidation, as collateral can drop 10% in a day; applying the same ratio to government bonds means losing the advantage of high-quality collateral. Open-term liquidity pools must also provide a buffer for redemptions, causing utilization curves to steepen, with liquidity buffers consuming the difference between what borrowers pay and what lenders receive.

Institutions can shift from $20,000 in Bitcoin to $100 million in stocks or bonds, increasing the cost of transparent market orders. Renegade uses multi-party computation and zero-knowledge proofs for private matching and on-chain settlement, Silhouette operates dark pools on Hyperliquid, and Zama provides homomorphic encryption modules for general chains to ensure confidentiality. Regarding portfolio margining, the article mentions Project 0 on Solana consolidating multi-protocol collateral into unified margin and credit; when government bonds hedge against interest rate futures, stocks against options, and commodities against term futures, the net cross-asset margin truly scales this original language.

In terms of market mechanisms, buyers aim to bring government bonds, stocks, credit, commodities, and foreign exchange on-chain for financing, hedging, and structuring, while sellers still design AMMs, perpetuals, and over-collateralized pools based on high volatility, anonymous wallets, and open-term structures. Event-driven dynamics arise from asset structure shifts, not from the launch of a single protocol. Funds will flow from simple tokenization to public chain block space, core original language transaction fees, brokerage aggregation layers, and application order flows; public chains will absorb continuous quotes, order cancellations, refinancing, and portfolio rebalancing, while exchanges and lending protocols will capture transaction and interest rate spreads, and prime and front-end will benefit from routing and client relationships. Beneficiaries will be protocols with existing order books, term lending, yield splitting, dark pools, and portfolio margining, while those relying solely on long-tail market-making fees and floating rate spreads, unable to accommodate institutions and high-quality collateral, will face pressure. Tokenization is just an entry point; once RWA scales up, these "original languages that have existed but assets do not match" will truly find a market.

Source: Public Information