Multicoin Capital says DeFi's first generation of tools won't fit the assets now arriving onchain
DeFi & Yields ·
The investment firm argues that primitives built for volatile crypto tokens must give way to order-book, fixed-rate, and privacy-preserving infrastructure as traditional financial assets migrate onto blockchains.
In a research essay titled "DeFi 2.0," Multicoin Capital lays out why the mechanisms that defined early decentralized finance — automated market makers, variable-rate lending pools, and perpetual swaps — emerged as a response to a specific kind of asset: native cryptoassets like BTC, ETH, SOL, and HYPE, which the firm characterizes as highly volatile, heavily speculative, and traded largely by permissionless, pseudonymous participants. Those conditions rewarded designs like Uniswap's AMM model, Compound and Aave's open-term variable-rate pools, and dYdX's perps, according to the essay, because getting any liquidity at all mattered more than optimizing execution.
The firm contends that logic breaks down as treasuries, equities, corporate credit, commodities, and FX begin moving onchain. These real-world assets, per the essay, carry lower volatility, tighter spreads, defined maturities, more identifiable borrowers, and institutional trading bases — a profile that calls for a different toolkit entirely. Multicoin names central limit order books, request-for-quote systems, proprietary AMMs, fixed-rate borrowing and lending, vaults, rate derivatives, repo markets, dark pools, portfolio margin, options, and dated futures as the "DeFi 2.0" primitives suited to this shift.
Notably, the essay points out that many of these instruments already exist within DeFi and in some cases were built before the assets that need them had actually arrived onchain. Multicoin frames this as the fourth installment in a series on onchain markets, following earlier essays on application-controlled execution, adverse selection protections in DeFi, and how various categories of real-world assets are likely to be tokenized.
The firm also reassesses DeFi 1.0 through a traditional-finance lens, arguing that AMMs are less capital-efficient than professional market makers, that overcollateralized lending is a costly way to obtain leverage, and that variable-rate borrowing makes it hard to forecast the cost of capital while concentrating risk in shared pools — trade-offs Multicoin says were reasonable when the priority was bootstrapping liquidity for newly launched tokens rather than achieving tight execution.
What remains unaddressed, by Multicoin's own framing, is how market structure and infrastructure will actually evolve as RWAs scale onchain, since the firm notes that most industry discussion so far has centered on tokenization itself rather than the primitives needed to trade these assets efficiently. The essay suggests value could accrue across the stack — from base-layer chains to core primitives to front-end order-flow platforms — but does not specify timelines, which protocols might build these tools first, or how quickly institutional volume might follow.