By Alana Levin, Variant

Compiled by: TechFlow

The crypto industry has undergone significant changes over the past year.

On the regulatory front, the US Congress has made significant progress with the GENIUS Act and the development of clear rules for stablecoins. The White House established the Working Group on Digital Asset Markets, which has engaged with numerous industry participants and is committed to providing clear regulatory guidance. Meanwhile, the US Securities and Exchange Commission (SEC) announced Project Crypto, which aims to establish the US as a cryptocurrency hub by exploring how to tokenize a wider range of assets in financial markets.

Crypto builders have also made significant progress. There are now several large, liquid prediction markets, with more coming soon. Stablecoin supply and usage have reached all-time highs, with holders reaching a wider geographic base. Numerous on-chain protocols are generating eight- and nine-figure revenues, and many of these also serve as developer platforms with vibrant ecosystems of startups—and these startups are also generating revenue! It's safe to say that this is one of the best times to be a crypto builder.

One of my favorite quotes is, "The Total Addressable Market (TAM) for digital assets is both the largest it can be today and the smallest it can be tomorrow." This couldn't be more truer than right now. So, based on these developments, I've compiled a list of startup ideas that excite me. If you're a builder considering these areas, feel free to reach out!

Stablecoin-driven market

Much of the current discussion about stablecoins focuses on their use in payments. However, historically, new markets demanding stablecoins have actually played a greater role in driving their adoption and growth. For example, the growth of Asian crypto exchanges has been a significant factor in the rise of Tether (USDT): rather than converting crypto profits into local fiat, traders are choosing to hold USDT on exchanges as a store of value. Similarly, the DeFi (decentralized finance) boom of 2020 has provided new use cases for USDC, helping it gain a foothold on platforms that require a digital dollar.

The total amount of stablecoins in circulation is now approaching $300 billion, sparking strong interest in their use cases for payments. However, the payments space clearly represents an opportunity for incumbents, as their distribution and infrastructure give established fintech companies an advantage over new startups.

I’m looking for new markets that are uniquely enabled or created by stablecoins. We currently have two stealth investments that fit this theme: one focused on developing the infrastructure that makes all stablecoins feel fungible to end users, and the other focused on building local liquidity markets.

What are some potential application areas for stablecoin-driven markets? Here are three ideas:

New leverage tools that require immediate funding

Stablecoins can be transferred 24/7, meaning users can instantly add more collateral to their accounts (whereas in the traditional financial system, exchanges may need to pre-fund margin accounts while waiting for bank transfers to complete).

Intercompany loans

I believe that many companies will hold a portion of their cash and cash equivalents in stablecoins in the future. Stablecoins allow for 24/7 transfers, while traditional financial system transfers can take days and incur high costs. Holding stablecoins not only allows companies to earn returns in a wider range of innovative ways, such as participating in short-term capital markets (like the overnight repo market) or providing on-chain liquidity, but also significantly improves capital efficiency.

Global Lottery

Crypto technology provides a way to accept, aggregate, and distribute global funds. Not only can stablecoins help expand the scale of lotteries, but their programmability also allows lottery deposits and proceeds to be used in more interesting and innovative ways.

Stablecoin-driven markets could emerge from: a) scenarios where stablecoins are used as at least one transaction link; b) products built on large (idle) stablecoin capital pools; and c) new markets that leverage stablecoins to achieve global scale benefits.

Second-Order Prediction Market Opportunities

There are already several large and growing prediction market platforms, with a host of new ones expected to launch this fall. Market trading volume has remained strong throughout the year, disproving critics’ claims that prediction markets only achieve product-market fit during election season.

This market landscape creates more groundbreaking opportunities for entrepreneurs to build around prediction markets—opportunities that leverage the liquidity of new markets, the widespread distribution of users, and the fragmentation of market platforms. Here are some products I’m particularly excited to see:

1. Conditional betting. Parlaying is a common betting strategy in sports betting. However, it is difficult to implement in prediction markets because participants bet against other users rather than the bookmaker. This difference means bettors must bet against multiple independent counterparties rather than a single counterparty (i.e., the bookmaker). Consequently, closing a bet when a parlay fails becomes more difficult, and pricing and controlling overall risk are more complex.

One possible solution is to allow users to effectively bet against a single counterparty. For example, a third-party service based on open prediction markets could be built, acting as a kind of bookmaker. This service could leverage the liquidity in the prediction markets to set odds and offer parlays. It could operate across platforms and accept third-party liquidity to support its strategies (similar to Hyperliquid's HLP). If these parlays focus on areas like Bitcoin price movements, the service could also use other mechanisms to hedge the overall risk.

2. Betting on users. A key feature of platforms like Polymarket is leaderboards, which rank traders by profitability and trading volume and allow third parties to view the positions held by these top users. Let's say I believe a trader will perform well. My "bet" is that the trader's bets will perform well. Currently, my main option is to manually copy that user's trades. However, future product forms may allow users to deposit funds into a pool, which professional traders use to place their bets. This design space becomes even more exciting when AI agents are introduced to participate in market betting—humans can provide capital through the pool and provide these agents with information and feedback for them to use.

The growth of prediction market liquidity, increased user interest, and expansion of supporting platforms opens up the possibility of many secondary opportunities. Leverage, exposure to market size, and market popularity (user engagement) are all areas worth watching.

Tokenized Equity Coordinator

We are in the early days of equity tokenization, and it is becoming increasingly clear that a range of architectures are emerging.

Some products, like Robinhood’s stock tokens, are designed for the sole purpose of providing 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 actual shares.

Other products, such as BackedFi’s xStocks, take custody of the underlying stock and create a digital representation of it (similar to how stablecoin issuers take custody of fiat dollars and create tokenized wrappers of those assets). These products not only provide a more direct and secure link to the asset’s price but also allow for redemption of 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 emerge as a power-law winner. Consumers will likely use many of these tools without understanding the full constructs. Therefore, interfaces will be responsible for selecting and 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 into 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 its respective shares. To consumers, these should all look like regular stocks.

A similar pattern is emerging in the stablecoin space. Many different stablecoins exist, aiming to replace the US dollar, but not all are interchangeable. Consequently, networks have emerged to coordinate these different stablecoins, giving end users the illusion that they are simply using US dollars. As the equity tokenization category continues to grow and evolve, there's an opportunity to build a similar infrastructure for equity tokenization.

The next big thing: New ways to make money online

One striking and recurring theme I heard this summer was that many recent college graduates are struggling to find jobs. I thought we were still a few years away from AI encroaching on some of the more complex entry-level positions, but it turns out I was wrong.

Therefore, I believe the way people allocate their time will change dramatically in the coming years. Secondly, people will have more free time and a greater desire to monetize their creative endeavors. This could manifest in many ways: increased participation in financial markets, the financialization of the entertainment industry, and an ever-expanding range of content people can create and monetize online.

Cryptocurrency provides some of the most practical rails for building these products and services. It provides cheap, global access to capital, which means the potential customer base is virtually limitless. Anyone, of any age, with a wallet and an internet connection can build and earn.

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 marketplaces for trading.

The space for designing new products and services that help people make money online remains vast. Whether it’s through content, creativity, investing, entertainment, or other means, making money is always a killer app, and crypto technology provides the best infrastructure for people to make it happen.