Generating Alpha: Venture Strategies Within the Solana Ecosystem

What if the membership card in your wallet was actually a share of stock in the company? This bold vision of programmable equity is just one of the groundbreaking concepts discussed by Tushar Jain, co-founder of Multicoin Capital, at Breakpoint 2025. In a wide-ranging conversation, Jain laid out how crypto venture investing fundamentally differs from traditional markets and introduced "Equity 2.0" – a concept that could reshape how companies and their customers relate to one another.

Summary

Top Projects

Lulo

Score: 7,586.13

Bonk

Score: 4,806.12

Sphere

Score: 2,544.42

Moonwalk

Score: 2,026.11

Tushar Jain, whose firm has established itself as one of the most influential venture capital players in the Solana ecosystem, explained that crypto investing represents a unique hybrid between traditional venture capital and public markets. Unlike conventional venture investing where investments sit illiquid for years, crypto protocols go public much earlier in their lifecycle, giving investors the ability to continuously reassess and adjust their positions based on real-time market feedback.

The conversation delved deep into how Multicoin Capital approaches valuation in an industry where traditional frameworks often fall short. Jain emphasized that different types of crypto assets require entirely different valuation methodologies – from Layer 1 blockchains like Solana to DeFi protocols to infrastructure plays. This specialization, he argued, is precisely why active management can generate significant alpha in crypto compared to simply buying and holding Bitcoin.

Perhaps most provocatively, Jain introduced the concept of "Equity 2.0" – a vision where tokens and traditional equity merge to create programmable, verifiable ownership stakes that unlock entirely new possibilities. Using Costco membership as an analogy, he painted a picture of a future where companies could require customers to own shares as a condition of membership, fundamentally transforming the relationship between consumers and corporations while creating built-in buying demand for company stock.

The discussion also touched on the regulatory path dependency that has historically forced crypto projects to separate tokens from equity claims, and how the changing regulatory landscape may finally allow these structures to merge into something more elegant and efficient.

Key Points:

Venture Economics with Public Market Liquidity

Jain's first major insight was identifying what makes crypto venture investing fundamentally different from traditional venture capital. When Multicoin Capital launched in 2017, Jain wrote about "venture economics with public market liquidity" – a framework that remains central to their investment approach.

In traditional venture, an investment sits marked at its last funding round regardless of what's actually happening at the company. Whether they're winning major contracts or losing key personnel, the valuation remains static until the next funding event. Crypto flips this on its head – protocols go public far earlier in their development cycle, meaning investors can continuously reassess their theses against live market prices and act accordingly.

This creates what Jain describes as a crossover between venture and public markets investing. It requires the long-term thinking and tolerance for early-stage uncertainty characteristic of venture capital, combined with the emotional discipline and position management skills essential in public markets. The opportunity to add to underpriced positions or trim overpriced ones without waiting for formal funding rounds creates significant alpha opportunities for investors who truly understand the space.

Novel Valuation Frameworks for Crypto Assets

One of the most substantive portions of the discussion focused on how to actually value crypto assets when traditional discounted cash flow analysis doesn't apply. Jain was emphatic that different asset types require completely different frameworks – what works for a Layer 1 blockchain won't work for a DeFi protocol or a DePIN network.

For Layer 1 blockchains like Solana, Jain outlined a sum-of-the-parts approach with three components: a cash flow element based on MEV (maximal extractable value from transaction ordering), a commodity element reflecting demand for tokens to pay transaction fees, and a "store of value" component representing demand from those concerned about fiat currency debasement.

For DeFi protocols, the framework shifts entirely to focus on risk management. Jain referenced Multicoin's thesis called "Protocols Don't Collect Fees, DAOs Manage Risk," which argues that in an open-source, permissionless world, DeFi margins will compress significantly. The key to value capture becomes whether a protocol effectively manages some form of risk. This specialization in valuation frameworks is precisely why Jain believes generalist investors struggle to compete with specialists who live and breathe these specific verticals.

The Case Against Generalist Investing in Crypto

Jain made a compelling argument for specialization in crypto investing. While passive investors can simply buy Bitcoin through an ETF without needing professional help, the opportunities for alpha generation require deep, focused expertise that generalist investors simply cannot match.

The variety of asset types – from L1s to DeFi to DePIN to middleware infrastructure – means investors must develop novel valuation and risk frameworks for each vertical. A generalist looking at too many things simultaneously cannot achieve the depth of understanding necessary to identify mispriced assets or assess risks properly. This creates a barbell dynamic where investors should either hold highly liquid passive positions on one end, or outsource active management to specialists who dedicate their full attention to specific sectors.

Token vs. Equity Cap Tables: Historical Path Dependency

The conversation addressed one of crypto's most persistent structural challenges: the often awkward relationship between token cap tables and equity cap tables. Jain attributed much of this complexity to "historical path dependency" driven by regulatory hostility under the previous SEC leadership.

Projects were forced to "twist themselves into legal pretzels" to create utility tokens with governance rights but no economic claims, while separately maintaining equity structures with actual ownership rights. This bifurcation was inefficient and created coordination problems, but was necessary to operate within regulatory constraints. The good news, according to Jain, is that these structures may finally be able to merge as the regulatory landscape evolves.

Equity 2.0: The Future of Programmable Ownership

The most forward-looking portion of the discussion centered on Jain's concept of "Equity 2.0" – a vision of what ownership looks like in an internet-native world. Traditional equity from the industrial age was simple: ownership in a company plus some director voting rights. Blockchain technology enables far more sophisticated structures.

Tokens have introduced capabilities that traditional equities cannot match: international availability, continuous liquidity, programmability, and cryptographic proof of ownership attributes. You cannot prove you've owned Apple shares for 10 years in a verifiable way, but you can prove exactly that with on-chain tokens.

Equity 2.0 merges these token innovations with traditional equity protections – actual claims on cash flows rather than vague, indirect relationships. Jain cited Binance as an example of the current awkward structure: one of the most profitable companies on earth, yet BNB has only a "tangential maybe sort of kind of claim" to those cash flows through theoretical burn mechanisms. If Binance were started today under a better regulatory framework, BNB would simply be equity.

The Costco Membership Analogy

To make Equity 2.0 tangible for traditional finance audiences, Jain offered a compelling example: imagine if Costco membership required purchasing and locking up one share of Costco stock annually for 10 years. This would convert customers into shareholders, creating more loyal customers with direct ownership stakes while lowering the company's cost of capital.

With approximately 50 million memberships at $100 worth of required stock purchases per year, that's $5 billion in annual buying demand introduced to the stock – a substantial financial engineering innovation. Beyond simple ownership, programmability enables further possibilities: discounts for long-term shareholders, special benefits based on provable ownership duration, and other mechanisms impossible with traditional equity structures.

Jain expects early-stage companies to pioneer these models first, as Fortune 500 companies will view them as too risky initially. However, he predicts that within 10-15 years, even major corporations will adopt Equity 2.0 structures.

Facts + Figures

• Multicoin Capital was founded in 2017 and published their foundational thesis on "venture economics with public market liquidity" at launch

• Jain presented Multicoin's L1 valuation framework at their 2022 Summit, available on multicoin.capital

• The L1 valuation framework has three components: MEV cash flows, commodity value for transaction fees, and store of value against fiat debasement

• Multicoin's DeFi valuation thesis is titled "Protocols Don't Collect Fees, DAOs Manage Risk"

• Binance is described as "one of the most profitable companies on the face of this earth" yet BNB has only indirect claims to those profits

• Costco has approximately 50 million memberships that could theoretically generate $5 billion annually in stock buying demand under an Equity 2.0 model

• Jain predicts Fortune 500 adoption of Equity 2.0 structures within 10-15 years

• The concept of Equity 2.0 involves programmable, verifiable ownership stakes that merge token innovations with traditional equity protections

Top Quotes

"Crypto is things go public way earlier in their lifecycle. You don't need to be a multi-billion dollar company or protocol in order to go public."

"It's almost a crossover between venture and public markets. Because it's not traditional public markets investing... but with the ability to manage your emotions and manage your positions that you need in public markets."

"The biggest problem this industry had for a long time was Gary Gensler and the SEC and their vindictive approach to anything crypto related."

"What we saw was people having to twist themselves into legal pretzels to be like, this is the utility token. It just does governance. There's no claim on anything."

"Binance is one of the most profitable companies on the face of this earth. BNB has a tangential maybe sort of kind of claim to that cash flow... Really those two things should be the same."

"The opportunities for alpha are significant if you actually understand and deeply live in the world of these different types of protocols."

"I don't think a generalist investor can compete at that level. Because they're spread too thin."

"I can't prove to you that I've owned Apple shares for 10 years. How do I actually prove that?"

"You're going to take those best practices and you're going to merge them with equity protections of I actually own the cash flows of this thing. I don't just have some vague claim to them."

Questions Answered

How does crypto venture investing differ from traditional venture capital?

The fundamental difference is liquidity and timing. Traditional venture investments sit illiquid for years, marked at their last funding round regardless of what's actually happening at the company. Crypto protocols go public much earlier in their development cycle, giving investors real-time market feedback on their investment theses. This means investors can add to positions when markets underprice assets or reduce exposure when prices get ahead of fundamentals – without waiting for formal funding rounds. It requires combining venture-style long-term thinking with the position management and emotional discipline essential in public markets.

How should investors value Layer 1 blockchains like Solana?

According to Multicoin Capital's framework, L1 valuation should be a sum-of-the-parts approach with three distinct components. First, there's a discounted cash flow element based on MEV (maximal extractable value) – essentially profits from transaction ordering that flow to the chain. Second, there's a commodity component reflecting demand for tokens to pay transaction fees. Third, there's a "store of value" element representing demand from investors seeking non-dilutable assets as a hedge against fiat currency debasement. Each component requires different analysis, making L1 valuation more complex than traditional equity analysis.

Why can't generalist investors succeed in crypto?

The diversity of crypto asset types – from L1 blockchains to DeFi protocols to DePIN networks to infrastructure middleware – requires developing completely different valuation and risk frameworks for each vertical. A generalist investor simply cannot achieve the necessary depth of understanding while covering multiple sectors. This creates significant alpha opportunities for specialists who "deeply live in the world of these different types of protocols." Jain recommends a barbell approach: passive exposure to liquid assets like Bitcoin on one end, with active management outsourced to focused specialists on the other.

What is Equity 2.0 and why does it matter?

Equity 2.0 is Jain's concept for internet-native ownership that merges the innovations of crypto tokens with traditional equity protections. Tokens introduced capabilities impossible with traditional stocks: international availability, continuous liquidity, programmability, and cryptographic proof of ownership attributes. Equity 2.0 combines these features with actual cash flow claims rather than the vague, indirect relationships seen in current token structures. This could enable entirely new relationships between companies and customers, such as requiring stock ownership for membership programs, or offering loyalty discounts based on provable ownership duration.

Why have token and equity structures been separate historically?

Jain attributes this primarily to regulatory hostility, particularly from the SEC under previous leadership. Projects were forced to create convoluted structures where utility tokens handled governance with no economic claims, while separate equity captured actual ownership rights. This was necessary to operate legally but created inefficiencies and coordination problems. As the regulatory landscape evolves, Jain expects these structures to merge into more elegant Equity 2.0 formats where tokens simply represent actual ownership with programmable features.

How should DeFi protocols be valued?

Unlike L1 valuations, DeFi protocols should be evaluated based on risk management rather than simple fee generation. Multicoin's thesis argues that in an open-source, permissionless environment, DeFi margins will face significant compression because any successful model can be copied. The key to value capture is whether a protocol effectively manages some form of risk. This shifts analysis from revenue projections to understanding what unique risk management function a protocol provides that creates sustainable value.