Source: Alana Levin, Variant Fund Venture Partner; Translated by Golden Finance. The crypto industry has undergone significant transformation over the past year. On the regulatory front, the US Congress made significant progress with the GENIUS Act and clear rules for stablecoins. The White House established the Digital Asset Markets Working Group, which met with numerous industry participants and worked to provide them with clear guidance. The US Securities and Exchange Commission announced "Project Crypto," which aims to establish the US as a cryptocurrency capital by exploring how to tokenize a wider range of assets in financial markets. Cryptocurrency builders have also made significant progress. There are now several large and liquid prediction markets (with new markets launching soon). Stablecoin supply and usage have reached all-time highs, with more people holding these assets (and across more regions) than ever before. Many on-chain protocols are generating eight- and nine-figure revenues. Some of these protocols also serve as developer platforms and boast robust startup ecosystems (and those startups are profitable!). It's arguably the best time to be a cryptocurrency builder. One of my favorite sayings is that the total addressable market (TAM) for digital assets is both the largest and smallest it's ever been. This feels especially true right now. In light of these developments, I've compiled a list of some of the startup ideas I'm most excited about. Much of the current discussion about stablecoins focuses on their use in the payments sector. But historically, emerging markets with demand for stablecoins have actually played a greater role in driving their adoption and growth. The growth of cryptocurrency exchanges in Asia was a major driver of Tether's rise: instead of converting crypto profits into local fiat, traders are storing USDT on exchanges as a store of value. Similarly, the DeFi boom of 2020 helped USDC find its footing by providing new venues for demand for digital dollars. Currently, there are nearly $300 billion worth of stablecoins in circulation. There's a lot of interest in using them for payments. However, it's undeniable that the payments space is largely dominated by incumbents, whose existing distribution channels and infrastructure give established fintech companies an advantage over emerging startups. I'm looking for entirely new markets enabled or created by stablecoins. We have two stealth investments that align with this theme. One is focused on building infrastructure that makes all stablecoins fungible to end users. The other is building a local liquidity market. What are some specific examples of the stablecoin market? Here are three: New leverage instruments that require instant funding. Stablecoins can be circulated 24/7, meaning users can instantly deposit additional collateral into their accounts (versus traditional models where exchanges might need to pre-fund margin accounts while waiting for wire transfers). Business-to-business lending. I believe that many companies will hold a portion of their cash (and cash equivalents) in stablecoins in the future. Stablecoins are liquid 24/7, while transferring funds through traditional channels can take days and incur material costs. Holding cash in stablecoins allows companies to earn income from these assets in a wider range of innovative ways—for example, participating in short-term capital markets (such as overnight repo) or providing on-chain liquidity.
Global Lotteries. Cryptocurrencies provide a gateway for accepting, aggregating, and distributing funds around the world. Stablecoins not only help expand the scale of lotteries, but their programmability also means that lottery deposits and proceeds can be used in more interesting and exciting ways.
Stablecoin-backed markets can emerge: a) anywhere stablecoins are used as at least one means of transaction; b) in products built around large (idle) pools of capital held in stablecoins; and c) in markets that use stablecoins to benefit from global scale.
Second-Order Prediction Market Opportunities
Several large and growing prediction market platforms already exist, with a number of others slated to launch this fall. Market trading volume remained strong throughout the year, disproving critics who claim prediction market volatility is confined to election season. This model creates new opportunities for founders within and around prediction markets—opportunities that can leverage new market liquidity, a wider user base, fragmentation of market platforms, and more. Here are some products I'm particularly excited to see. Conditional betting. Parlays (where winnings from a previous bet are combined with interest on the next) are common in sports betting. They are difficult to construct in prediction markets because participants bet against other opponents rather than the bookmaker. The difference is that bettors bet against multiple different counterparties rather than a single counterparty (the bookmaker). Therefore, if a parlay fails, it is not only more difficult to close the position, but also more challenging to price and control overall risk. One solution might be to allow users to effectively bet against only one party. For example, one could envision a third-party service emerging/built on top of open prediction markets that operates similarly to a bookmaker. This service would leverage the liquidity of the prediction market to construct odds and offer parlays. It can operate across platforms and accept third-party liquidity to support its strategies (similar to Hyperliquid's HLP). If the joint win bet focuses on factors such as Bitcoin's price movement, the service can also use other mechanisms to hedge the overall risk.
The ability to bet on users. A key feature of platforms like Polymarket is leaderboards. They rank traders based on profit and loss and trading volume, and allow third parties to explore the positions held by these top users. Let's say I believe a trader will perform well—my "bet" is that this trader's betting will perform well. Currently, I mainly increase exposure to this bet by manually copying that trader. However, future product forms could allow users like me to deposit funds into a pool where professional traders can place bets. This design space becomes even more exciting when people start thinking about AI agents betting in the market—and the different ways humans can pool funds and provide information/feedback to these agents.
The growth of liquidity, interest, and platforms supporting prediction markets also creates 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 watching. Tokenized Equity Orchestrators We are in the early days of equity tokenization. It's becoming increasingly clear that a range of architectures are emerging. Some products, like Robinhood's equity tokens, are designed solely to provide price exposure to real-world stocks. These instruments are entirely synthetic: they track price movements through a series of structured derivatives without requiring custody of the actual shares. Other products, like BackedFi's xStocks, take custody of the underlying stocks and create digital representations of them (similar to how stablecoin issuers take custody of fiat dollars and create tokenized wrappers around those assets). These products provide both a more direct/secure peg to the asset's price and the ability to redeem the underlying shares. Finally, there are more native on-chain stocks. Last week, Superstate announced that it had issued Galaxy Digital common stock directly on-chain—a tokenized asset with the same rights and benefits as traditional stocks. These are all various constructs of "tokenized equity." It's unclear which construct will be the power law. Consumers will likely use many of these tools without understanding the full construct. Therefore, interfaces will be responsible for selecting/listing different tokens. I suspect liquidity and compliance will be the primary factors in listing, but as long as multiple tokenized equity constructs meet the interface's standards, multiple constructs can be integrated on the underlying layer. We could easily end up in a world where an interface offers BackedFi's xAPPL but Superstate's GLXY, as each transfer agent provides the most liquid on-chain market for their respective shares. To consumers, they should all look like stocks. A similar pattern is emerging in the stablecoin space. There are many different stablecoins designed to replace the US dollar, but not all of them are fungible. Therefore, networks have emerged to coordinate different stablecoins, allowing end users to feel like they are transacting with US dollars. There is an opportunity to build a similar type of infrastructure for tokenized equity, especially as the category continues to grow and evolve.
The Next Big Category: New Ways to Make Money Online
One of the most striking, recurring themes I heard this summer was how many college graduates were struggling to find jobs. I assumed that in a few years, AI would eat into more complex, entry-level jobs. Turns out, I was wrong.
As a result, I believe the way people spend their time will change dramatically in the coming years. Secondly, people will have more free time and a greater desire to monetize through creative means. This could manifest in many ways: increased participation in financial markets, the financialization of the entertainment industry, and the ever-expanding types of content people can create and monetize online.
Cryptocurrency provides some of the most practical rails for building these products and services. It provides a cheap, global monetary rail, meaning the potential customer base is virtually unlimited. Anyone of any age with a wallet and an internet connection can build and earn income.
Variant's portfolio includes many companies that fit these themes. Zora provides creators with new tools to monetize their media. Remix helps gamers of all ages create, publish, and monetize games. The Clearing Co is working to build and expand the marketplace where transactions can be made.
The space for designing new products and services that help people make money online is vast. Making money—whether through content, creativity, investing, entertainment, or other means—has always been a killer use case, and cryptocurrencies offer some of the best ways to help people do it.
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