Blockchain Capital general partners Aleks Larsen and Spencer Bogart said on the Bankless podcast that crypto is shifting from an infrastructure story to an application story, with stablecoins and tokenization at the center of that change. In the discussion, they argued that broad stablecoin adoption has already built a large pool of on-chain liquidity, lifting revenue for lending and trading protocols, while tokenized equities and venture funds could push capital efficiency across the financial system much higher.
The conversation, summarized by PANews and republished by Blockcast, framed the change as structural rather than cyclical. Even though traditional finance and crypto still pull against each other on compliance, the speakers said tokenization is already reshaping the financial system in ways that will be difficult to reverse.
Buyback-and-burn still matters, they said
The host opened by recalling earlier industry conversations with Spencer around 2018 or 2019 about MKR and value capture. Spencer said they had even considered buying MKR at the time. By 2026, he said, newer projects such as Hyperliquid, Lighter and Venice were still using the buyback-and-burn model first popularized by MKR. He acknowledged years of debate around whether the design is capital-efficient, but said its real-world track record has held up.
Aleks said he used to be much harsher on the model. His earlier view was that in an end-state scenario, the last remaining token would need a clear claim on distributable cash flow or it would be hard to justify valuation. He now sees that line of thinking as overengineered for the current market and said buyback-and-burn works well today.
Spencer tied that to legal uncertainty. Unless the Clarity Act passes, he said, the formal rights of tokenholders remain blurry. In theory, investors might prefer a startup to reinvest cash flows into new growth, but in practice most crypto protocols have not shown they can expand successfully across categories. Because of that, many tokenholders would rather hear a team say plainly that it will keep buying back and burning tokens, if only to remove uncertainty.
He also said the uneven quality of early crypto tokens shaped those expectations. Serious projects, in his view, have had to use real money to buy back and burn from day one to prove they are different. Even if that model is no longer dominant five years from now, he said it remains the clearest and most credible way to align with tokenholders at this stage.
A bear market for tokens, but not a lack of catalysts
The host brought up a common line in the market: that crypto venture capital is dead, with large funds broadening out into AI, robotics and other frontier sectors. Blockchain Capital, by contrast, has leaned in during the downturn. That has happened at the same time that traditional financial institutions are showing stronger interest in blockchain, even as many long-time crypto participants sound deeply pessimistic.
Aleks said the firm tends to zoom out and avoid anchoring too tightly on bull and bear market price swings. He described the current token bear market as unusual because it has come with more positive catalysts than earlier downturns. He pointed to the Genius Act and a clearer path for the Clarity Act, saying the rules are starting to take shape while traditional institutions are entering at scale.
He also said some applications have broken out of crypto’s information bubble and into the mainstream. Prediction markets were one example. In the case of Polymarket, he said, many users do not really care whether the underlying rails are crypto. Stablecoins were another. They offer very cheap dollar-based cross-border payments and remittance rails. According to Aleks, both areas have kept growing strongly even in a weak token market.
Part of the disconnect, he said, comes from attention being pulled elsewhere. Over the past year and more, AI absorbed a large share of market focus, especially after coding agents and open-source Claude drew heavy attention seven or eight months ago.
Larsen compared crypto to the internet around 2003 or 2004
When the discussion turned to the S-curve, Aleks said crypto’s path looks a lot like the internet’s. The internet began commercializing in 1989 and spent its first decade in exploration mode. By 2000 it had billions of users, but the product experience was still rough and bandwidth was constrained. The period from 2000 to 2005 then brought the broadband transition.
He said crypto has just gone through its own broadband moment. Blockspace has become cheap and abundant. Solana, in his telling, was the first chain to show a high-performance, scaling-oriented monolithic path in 2020. By 2024, Layer 2 networks had become broadly viable and fast to adopt, while Ethereum itself was moving along its own scaling path. That, he said, is now the industry’s normal state.
Aleks added that the internet did not explode the moment broadband arrived. The sharp turn up in the S-curve came later, between 2006 and 2010, once mobile took off. If Ethereum’s birth in 2015 marks the start of the clock for crypto, he said, the sector is only 10 to 11 years into its development.
He also argued that the industry is still early in practical usage. Out of 700 million crypto holders, perhaps only 10% are active on-chain users. One reason, he said, is that consumer-grade technology stacks only really matured and spread over the last two to three years. He listed embedded wallets, social recovery, spending limits and passwordless login as examples of tools that no longer require users to act like cryptographers.
That leads him to place crypto roughly at the internet’s 2003 to 2004 stage: after broadband adoption, before mobile drove the curve sharply upward. If edge applications such as stablecoins and prediction markets continue moving toward the center, he said, the next bend in the S-curve could follow.
The mood among crypto veterans was described as growing pains
The host suggested that many people who came in during 2021 may simply have been too young and too impatient, expecting the world to change overnight when infrastructure and product quality needed more time. Still, he said, that alone does not fully explain why so many crypto OGs appear discouraged.
Spencer called it a psychological growth pain. He compared it to what happens when a startup approaches an IPO. Early employees often miss the rebellious pirate phase and struggle to accept that the company becomes a large, compliant machine on the road to success.
He used a music analogy too: someone discovers an obscure band and loves it, but once that band becomes widely accepted and successful, that same person says they only liked the early albums.
Aleks agreed. Industry conferences, he said, are now full of people in suits talking about permissioned channels, compliance and access rather than cypherpunk ideals. But finance is inherently regulated, and he argued that ignoring the rules is not a path to scale.
At the same time, he said, Ethereum and Bitcoin still hold deep appeal for institutions because decentralization and neutrality provide a stronger trust assumption. In that sense, he argued, the cypherpunk vision has not disappeared. It has become quieter and larger, operating as the base layer of a new financial network. The work may sound less romantic than earlier crypto narratives, but he said it is directly upgrading the pipes of the global financial system.
Application-layer fees passed infrastructure-layer fees in 2025
The host then pointed to another shift: for the first time, traditional institutions are going deeper into crypto during a period of falling prices and without a manic market narrative. Around 2025 and 2026, he said, the industry also seems to have moved past the old loop of investing in infrastructure for infrastructure’s sake.
Spencer responded with an example from 2019. Using Uniswap could cost users several dollars or even well into the tens of dollars per interaction because blockspace was scarce. That scarcity became the sector’s biggest bottleneck, and it also drove too much capital into infrastructure during the frenzy. The result today, he said, is oversupply, with too much blockspace and many empty blocks.
Still, he argued that abundant and cheap blockspace was a necessary condition for application builders to do real work.
He cited a clean data point. In 2021, more than 70% of user-paid fees went to the infrastructure layer. By 2025, for the first time, total fees at the application layer surpassed those at the infrastructure layer. In his view, that marked a transfer of value upward through the stack as transaction costs fell sharply.
A healthy ecosystem should not let the communication base layer extract most of the monopoly rents, he said, adding that breaking that pattern is part of what crypto is trying to do to the rent structure found in traditional banking.
From fat protocols to fat applications
When the host asked whether this meant the industry was moving from the old fat protocol thesis to a fat application thesis, Aleks agreed.
He said protocol layers were never supposed to trap oversized profits because the point of blockchain is to reduce intermediary take rates and raise efficiency. But he also framed the bigger idea as thin protocols and large markets. Even if take rates are low, expanding the base market for global finance by an order of magnitude can still create very large absolute value capture.
Their comparison between crypto and AI
The host then brought the same framework into AI and asked whether investment patterns there might follow a similar path.
Aleks said the similarities are obvious. In crypto, teams could raise at multibillion-dollar valuations on the back of a white paper. In AI, many startup labs are commanding extreme valuations on the strength of research vision and star talent. Crypto investors spent years looking at testnet TPS and benchmark data; AI investors now do the same with model benchmarks. Crypto teams rely on exchange listings for distribution and liquidity; AI companies rely on hyperscale cloud providers for distribution channels.
But he stressed one major difference. Token prices in crypto are public and transparent emotion gauges. If the narrative breaks, a token can fall 90% in a month. In AI, the bubble and the downside are still largely hidden inside private capital markets, where the pressure may show up more as down rounds or talent departures than as immediate public price collapses.
Spencer said he believes the application layer in AI will break out too. He referenced comments from Palantir Technologies CEO Alexander, saying that models and intelligence alone do not produce the operational outcomes enterprises want. Someone still needs to go into the field and turn that intelligence into workflows and output.
He also said many AI venture investors have recently become anxious about the idea that software has no moat. From the perspective of crypto venture, he said, that concern is familiar: crypto has spent the past decade living in a world where everything is open source, anyone can fork the code and classic software moats barely exist.
Aleks said general model weights will increasingly commoditize, but the harness built to solve real-world problems will not. In high-stakes, low-error domains such as semiconductor manufacturing and complex tax audits, he argued, applications built from frontier models, fine-tuning, proprietary enterprise datasets and closed-loop feedback can develop moats that general models cannot easily breach.
Stablecoins as the first major RWA success story
When the conversation returned to real-world asset tokenization, the host described stablecoins as the first and most successful generation of RWAs in crypto and asked what lessons that offers.
Spencer said few people realize Blockchain Capital was the only venture firm that invested in the three largest stablecoin issuers, Tether, Circle and Paxos, a decade ago.
Today, he said, total stablecoin market capitalization is about $300 billion. He added that he has more than 90% confidence that by 2030 the number will rise into the trillions, saying it could even reach $2 trillion. Stablecoins were once driven mainly by a retail flywheel, but each new flywheel today is being pushed by institutions, in his view, drawing stocks, money market funds and Treasuries on-chain because a 24/7 programmable base network is much more capital-efficient.
He argued that the core of a stablecoin is not just a payment product. It is sticky. Once dollars move on-chain, most of that money stays and becomes working capital inside lending venues, exchanges and other parts of the on-chain economy, creating a much larger amount of economic activity.
Spencer said Blockchain Capital had quantified the effect: every net $1 billion of new stablecoin issuance generates about $122 billion of on-chain economic activity over one year and directly contributes about $19 million of recurring protocol revenue to downstream on-chain protocols in that period.
Tokenized equities, first access and then composability
On tokenized stocks, Spencer said the market is likely to develop in two waves.
The first is access. Investors around the world, especially users outside the United States, want a simple and low-friction way to trade U.S. equities, he said. The second is composability. Once a tokenized Apple stock is on-chain, multiple lenders and securities-lending protocols can compete in public markets to offer the best collateral ratios and yields. That, in his view, is the endgame for capital efficiency.
He said the market currently has two main competitive routes. One is the X-Stocks model associated with Backed, which was acquired by Kraken. That structure uses a Cayman SPV to issue debt instruments pegged to stocks. Its advantage is that it can operate without permission, without KYC and can circulate freely through DeFi. Its weakness is legal and credit exposure: the holder owns a claim on an SPV, not an actual share in Apple. For large institutions managing tens of billions of dollars, he said, that risk profile is unacceptable.
The other route is a regulated channel in which investors directly hold equity ownership. The trade-off there is obvious: permissionlessness has to be compromised.
A sidecar model instead of forcing full convergence
The host closed by asking whether that means the suited incumbents of traditional finance and the pirates of crypto must eventually force one side to yield.
Spencer said not necessarily. In his view, the two systems do not have to be fused into one uniform structure. Traditional equities worth tens of trillions of dollars can run on public blockchains in a sidecar model.
That means the assets would sit behind regulatory guardrails while existing next to fully permissionless DeFi capital pools. Rather than slowing down crypto-native systems, he said, that setup could speed up liquidity formation for them, because large pools of money sitting in tokenized equities could be converted into ETH with one click and then move into fully decentralized, permissionless environments.
The interview was summarized by PANews and republished by Blockcast, which said the original article first appeared in Blockcast’s cited source outlet.