Author Note: Plume CEO and co-founder Chris Yin shares his framework for understanding this cycle’s biggest opportunities: liquidity, utility, and value capture. In this essay, he outlines why yield is the driving force behind it all, and how Plume is positioned to enable the next era of capital markets.
Every cycle has a theme. Last time, it was scalability. Because of the massive spike in usage on Ethereum’s mainnet, the focus was on the Alt L1s. This was the basis of SOLUNAVAX, which was an even bet across the top Alt L1’s – Solana, Terra Luna, and Avalanche – giving investors maximum coverage across all of them, along with faster speeds and lower fees.
But now we’ve solved those problems. Gas is cheap and networks are generally pretty fast. So with core infrastructure improved, what comes next?
The next wave of adoption is built around what users actually do onchain.
The key driver behind that is yield. As blockchains get easier to use, the next question is – what do people do when they get here? And it turns out people like money. Especially free money. And so this cycle we’ve seen all the demand, usage, and TVL flow into products focused on yield.
There are 3 different components that make up the yield story – liquidity, utility, and value capture. Not only does each have their own dimension to yield, they are all also interrelated and important elements to onboarding the next billion users into crypto.
Liquidity: Yields Draw In Capital
Liquidity is the lifeblood of markets. Yields are used to incentivize capital to come in and provide liquidity to power onchain markets. This has come in many forms, but none more prominent than the stablecoin. Stablecoins exponentially grew off the back of the 5% US Treasury Bill yield, and as users got used to that they began to search for new yields in different places. This is why products like Ethena’s USDe has exploded to over $9B+ in TVL built on a different source of yield – the basis trade. Hence stablecoins of all sorts are a key pillar of the yield meta.
Utility: Usage Creates New Yield
Utility not only improves offchain products, but creates new yield opportunities. With crypto native yields looking slimmer and slimmer, there’s been massive demand for bringing new assets onchain as well as building new financial primitives to make better use of all these assets. While Ondo started more on the liquidity side, you can see a notable shift towards utility with the introduction of Ondo Global Markets to bring equities onchain. Not only is it important to bring these assets onchain but making them composable with other protocols creates new use cases and allows yield to be generated from the activity. Protocols that bring on new assets or create new opportunities are uniquely suited to create value in a yield economy.
Value Capture: Retain & Distribute Yield
Value capture makes it easy to bring value back to the user. Everyone in crypto is familiar with the revenue meta. And the reason why it’s gotten so popular is because value capture creates a sustainable flywheel not only for the protocol, but as yield for the end user. While we encompass all of the above, Plume is one of the cleanest expressions of value capture. The totality of the ecosystem including transaction fees, revenue from Nest, pUSD, etc are not only captured but then owned by the end user. And so as the largest & most active RWA ecosystem, Plume lets users easily capture value from the entirety of the network. Not only creating a holistic ecosystem around yield but then capturing those yields is how to monetize the entire value chain and create sustainable yields for user
Yield is the meta of this cycle. Yields onboard liquidity, utility creates new opportunities for yield creation & enhancement, and value capture funnels that yield back to users.
If yield is the meta, products that fit in these categories will dominate. The most durable yields are a mix of crypto native and real world yields. And the best way to express this idea and play the yield meta is by having exposure to all of these categories, like we have built on Plume.
Trillions inbound.
gPlume
- Chris Yin, Plume CEO & Co-Founder
