Investing Trends for 2026: DeFi, Tokenization, Capital Formation, Speculation & AI

I think the first and foremost thing that's been huge this year is you have this ultimate decline of not only career risk but this acceptance from Wall Street. Obviously we have people like Larry Frink writing the tokenization writing about tokenization in the economist. We have Black Rockck's highest grossing ETF product being Bitcoin. We have Hyperlid that actually just surpassed the NASDAQ in net income. So this is the first time I would say that crypto is no longer a contrarian thesis. It's no longer a contrarian thing. I would say it's a very consensus insight. Welcome to Banklist where we explore investing on the frontier of crypto. This is David Hoffman and I'm here with not only my co-host Ryan Tron Adams but we are also joined by two members of Banklist Ventures, fellow GP Ben Lakeoff and investment partner Arnav Pagadiala. Ben Arnov, welcome to Banklist.

Ben Lakeoff: Thanks for having us.

Arnav Pagadiala: Stoked to be here guys.

Ryan Adams: Broad question. Is there stuff to invest in in crypto in 2026? What do you guys think?

Ben Lakeoff: This would be a short podcast if there wasn't. So, yes is the short answer and we're very excited about a lot of things.

Ryan Adams: Yeah, we got over an hour probably of content to talk about. Arnov, you are the youngest of the group. When you look at crypto investing in venture in the venture category in 2026, what excites you? What gets you going?

Arnav Pagadiala: Yeah, I mean I think unlike prior cycles, there is stuff in every single sector that's kind of broken out. I think DeFi is looking monstrous with the adoption of RWAS this year. Stable coin payments, if you're into crypto, fintech is just monstrous. Prediction markets have just kind of hit escape velocity. I think it's the realm of opportunity is 100x more than I think it's ever been. So, it's super exciting.

Ryan Adams: Some big statements. We're definitely going to dive into why Arnov and the rest of the bank list team think that that is true and the sectors that we are investing in. Now, previously in bankless, we have been very careful to not cross-contaminate between media and ventures. These are two different organizations where only Ryan and myself cross the barrier. But also at Bankless Media, we never let good content go to waste. And at Bankless Ventures, we've been working pretty hard developing our investment focus themes for 2026. The the categories, the trends that we want to focus our investments at Bankless Ventures for the next year. In this episode, that is what you are going to hear. We want to share what Bankless Ventures is looking to invest in in 2026 and why we've come to these conclusions. A fundamental part of the entire Bankless journey is learning to be investors in crypto. Every Bankless podcast episode has been in pursuit of learning how to effectively allocate capital in this industry. Answering the question, how do I effectively invest is one of the main motivations behind creating the Bankless Podcast all the way back in 2020 when the industry was far more naive and unsophisticated.

Now, Ryan, myself, and Ben here, we've all been in crypto since 2017, 2016. We've seen different investing metas come and go. And while each cycle has its own characters, the thematic common denominators of every cycle are about the same. DeFi, tokenization, capital formation, and speculation. These themes are persistent across cycles, but generating outsiz returns in each of these themes requires some level of precision rather than broad capital allocation. It's not enough to just invest in DeFi. You must match the theme with the current market fitness of the era. Investing in DeFi in 2025 is just not the same as investing in DeFi in 2019, obviously. So, in this episode, we are going to go through each category I just mentioned and share how Bankless Ventures is allocating capital inside of these broad themes in pursuit of outsized returns for our LPs.

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David Hoffman: I think one thing that's like important to mention before we get in is some of the particular ways that capital formation forms inside of crypto and what that means. A lot of bankless listeners will notice that crypto happens in these waves, right? Like people have called these like four-year cycles before. There's a usually some sort of proof of concept stage followed by you know people see early traction and they get exuberant about something happening in crypto and then narrative runs far ahead of the fundamentals and price goes out of control and then things bubble and they pop and then we get kind of the bare market. We go back to despair. Folks like A16Z have pointed this out that this really follows builder waves too, right? So, capital forms and builders have ideas and they pursue these narratives in these approximately like 4year waves.

One thing that I actually appreciate about crypto, this is a benefit to anyone who's investing in the space, is during the bare phase, during that despair part, the bad projects are cult and the good projects survive. So it allows you to like reunderwite your ideas and your thesis for the space. Gives you kind of a clean slate. So you can just be like, okay, what happened last cycle? What's still real about this industry? I have a sober mind now. and we can consider what's going to be what's going to be important moving forward. And you can rebuild and then you can reload. And builders do this as well. And so do investors. It's kind of like you know the the idea of a forest, right? If a forest gets too dense, if it doesn't have a fire every once in a while, then kind of the new growth can't actually flourish and grow. And so every once in a while, a healthy forest needs a fire to clear out all the underbrush. and you create renewal so we can have something new or you got to roll the seven on the craps table.

Ryan Adams: Yeah, you totally do. Uh or to get like another metaphor basically is just kind of this is survival of the fittest. This is like an evolutionary process and you have some maybe dominant uh organisms on the earth and every once in a while an asteroid comes destroys them all and we get a chance to see what can um what can persist through these cycles and what can grow a new and we get all of these new life forms. For me and I think for a lot of venture investors a lot of this starts I guess you could say Bitcoin but then after Bitcoin. And so Bitcoin is kind of the original store of value use case. We uh uncovered what like the original use case for blockchains, but then Ethereum and the idea of programmable finance that's kind of birthed all of the other investment categories and particularly the investment themes that we're going to talk about today. And since Ethereum, since the birth of the smart contract platform and programmable finance, there's been roughly like four waves. And I'll give the dates and I'll measure this by the crest. Some of you guys will have been here, been present during those years and and some have gotten in um you know in future waves but the first was 2017. That's when we crested in in wave 1. Wave 2 was roughly 2021 and again this is the peak of the cycle. Wave three is where we've been now 2024 and into 2025. And then wave 4 again we don't know when the next wave will crest. It doesn't have to happen in 4-year cycles as it has previous, but let's say it does. That would be uh 2029. Maybe there are reasons this wave crests a little bit earlier or differently or something. But our job really as investors in the space and I think every everyone listening who's deploying capital to crypto and by the way for retail investors, there's even more opportunity to do this because ICOs are back. seems like you know your job is really to forecast the world of say 2028 2029 and invest in the founders and the categories that will create that world.

So that's the idea right now as we enter 2026 we have an opportunity of course to reunderate reunderwrite our themes and figure out what we're still bullish on and figure out what the new unlocks are for the next wave of growth. So those four themes, DeFi, tokenization, capital formation, speculation markets, those have been present across all of the waves up until now. Like it's crypto programmable money does all of those same things, but there are new manifestations and new subsegments to take a look at, and that's what we're doing today. Maybe we could go through each of those four themes. And David, the first is DeFi. You mentioned it. This has been really the theme that the bankless thesis was based around. And when you and I first got connected and started really investing in crypto and getting excited about it, that was uh 20 2019. So that was in kind of wave 1 in the in between of wave 1 and wave two. But take us back to Ethereum in in 2017. And uh tell the story of of DeFi.

David Hoffman: Yeah, the building blocks of D5 really got started, of course. I mean, if you want to go all the way down to into the basement with the ERC20 token, and you could see a bunch of attempts to create structures and infrastructure on top of that. Ether Delta being one being one early indication of what might be worthwhile of investment further down the line. 0x also came around that era and it was really all about just tokens and trading tokens. The ERC20 primitive was perhaps the most important primitive in all of crypto and the the infrastructure that surrounded that was all about trading those tokens. And so it barely worked.

Ryan Adams: Oh my god, it sucked.

David Hoffman: But it did work. Ether Delta didn't work. It did work. Uh and it really was all all these prototypes were just premonitions of things to come. Now, if you were around in 2017 and if you're paying really close attention and you stuck around through 2018, you might have been able to while I you know one through 99 were collapsing in a burning fire around you. If you were still paying attention, you would have noticed this one one uh startup still chugging along called Maker Dow. And that was before DeFi was even a thing. And so one of the themes that we see across waves is that there's at least one or two examples of the next wave that is still still starting up as the wave that came before it is burning down. And Maker Dow was really the first era of real DeFi which we are calling the second wave the 2021 wave where uh as Ryan called it the the absolute peak of wave 2 really really crested in 2029. We're calling this slow defi collateral based applications like maker dow a compound that really fueled the store of value nature of ether and other tokens and then also things like like unis swap the first decentralized exchange that as a uh an investment produced outsiz returns for for any and all of those was that was unis swap 2018 or 2019 I think it's 2019 the top of the valuation of the uni token was 2021 the investments into unis swap came in 2019 and and 2020. Uh and so right that was right at the be the beginning of uh wave number one. We also had uh some uh failures some catastrophic failures. Teruna is in this category as well. Some weird platypus between a stable coin and DeFi and economic experiments. Uh and so this is kind of some of the history uh that wave two one and two brought us to and starts to get us into wave three which is again like Ryan said uh we are starting to close the door on wave three looking into the rearview mirror and measuring successes and failures.

Ryan Adams: So, a through line you can see with a lot of these I it reminds me of the Chris Dixon, the next big thing starts off looking like a toy.

David Hoffman: Yeah.

Ryan Adams: And then there also was a Py McCormack uh article that I love that would say it's just practice and you see like all of these little glimmers of of of good ideas that are taken and then they're expanded upon. there that maybe they blow up in that in incredible fashion, but there's pieces that sustain into these next waves as we move on.

David Hoffman: Yeah, that's right. Um, and the bad ideas do collapse and they burn off and the good ideas kind of persist. I think wave three has been interesting if if wave 2 is sort of the the birth of modern DeFi. Wave three has almost been like a refinement of the concept that we've seen in this kind of 2024 2025 cycle. So we saw early phases of reststaking uh that's now pivoting into something a little bit different like IE layers going into the verifiable compute realm. Um and then we saw an extrapolation on the A uh maker DAO idea of collateralized lending and borrowing with some more modularization like Morpho has been a big success this wave and and so is Pendle for example. And we actually did see a stable coin that is um not a completely centralized stable coin like a tether and USDC that has actually started. I think this will persist across cycles. That's Athena, right? With the idea of the kind of the basis trade yield type of um stable coin and uh per dexes have been a major theme. So previously most of the per in crypto were traded on centralized exchanges. This has been the first wave that we've seen decentralized exchange per dexes have the volume and the liquidity and the traction that they do. There have been a few other things, but those are the things I would highlight as successes in this in this third wave. And and broadly speaking, I will say that all a lot of the third wave stuff is a lot of what were what was previously centralized services from big prop trading firms or lending and borrowing desks uncolateralized lending and borrowing desk start to move onchain in more sophisticated ways.

Ryan Adams: That's right. You can you can measure that too, right? Like by a percentage in terms of what percentage of spot and per volume is offch like offchain versus onchain and like what is it now David? Like I've seen estimates of like 20% something like this.

David Hoffman: Yeah, something like 22 to 26% uh is moving moving on chain. I think I think these are lessons that the industry learned post FTX uh the the contagion of all the borrowing lending desks and that brings us to modern times wave four. And so there's a line here. We're going from looking in the rear view mirror to looking out of the front windshield of our car as we drive forward into 2026. And so now we are going to make predictive ideas as to where we think is the appropriate place to allocate capital uh inside of the DeFi category across the next DeFi wave. And now I want to turn it to to Arnov. Arnov, you spoke briefly at the very beginning of the pod, but turning back to you. Uh when you look at DeFi in 2026, uh where do you think is the smart way to allocate capital?

Arnav Pagadiala: Yeah, absolutely. I think I'll start by sharing before I go into the things I'm super bullish on for wave 4 and beyond. A few of the constraints and the recent unlocks I think are very interesting so you can reason about what's coming next. I think one of the most interesting pieces of the cycle is kind of this shift towards becoming more institutional today. I would still say things are not where they need to be. So we don't have enough customizable infra institutions yet. We don't have credible risk ratings of protocols. We still don't have enough liquidity on most longtail assets so an institution can swap its size and we still have a lot of smart contract risk, right? And I think that's very well exemplified by the recent balancer hack, a protocol that has been around for, you know, 5 years and had a zero day. Uh, so we still have these things. And I think a few other things I call out are on-ramps are still not where they need to be. You have like a 90% attrition rate when somebody's just trying to swap, you know, go $100 from their bank account to $100 on chain. And I think the last thing I'd mention is that we still don't have enough exogenous assets on chain yet to justify the switching costs for institutions.

Ryan Adams: By exogenous arnov, do you mean like real world assets like just like um cuz we we have we have stable coins, we have dollars, I guess we have some degree of treasuries, but apart from that that we don't have anything outside of our onchain crypto native assets.

Arnav Pagadiala: We do, but it just proliferated this year.

Ryan Adams: Okay. Um, and we'll go into that more in the tokenization section. But yeah, that being said, I'd say 2025 was definitely a breakout year. It mostly driven by a lot more regulatory clarity and institutional adoption. I think the first and foremost thing that's been huge this year is you have this ultimate decline of not only career risk, but this acceptance from Wall Street. Obviously we have people like Larry Frink writing the tokenization, writing about tokenization in the economist. We have Black Rockck's highest grossing ETF product being Bitcoin. we have hyperlquid that actually just surpassed the NASDAQ in net income. So this is the first time I would say that crypto is no longer a contrarian thesis. It's no longer a contrarian thing. I would say it's a very consensus insight and stable coins only make that 100x more true when you see everybody adopting stable coin payment rails or even launching their own stable coin. And beyond all that I would say stable coins tokenized treasuries are just straight up and to the right. It's it's honestly unbelievable how parabolic that growth has been. Um and very last thing is that from a regulatory front, we have a lot of unlocks this year. The CFTC providing a more advanced per framework. We have the Genius Act, Clarity Act probably next year. All of these things will lend itself to DeFi just proliferating like 100x more than it currently has. But getting into the four things that I think are incredibly interesting over this next cycle. Um I think the first would be onchain lending. You might think it's already done with a and morpho, but I would say we barely started. Pretty much all of lending today is predicated on some fashion of overcolateralized variable rate loans. But in the future, I absolutely believe that we're going to get into fixed rate, unsecured, undercolateralized loans and lending against longtale assets. And when you think about how lending works in Tradfi, it is primarily unsecured or underolateralized loans and they are usually fixed rate and fixedterm on a much wider variety of assets. I think crypto will only follow the same path and we're like in our first innings of all of these things. I would say unsecured under collateralized. You have people like three chain, wildcat, credit on worldcoin. Um for fixed rate lending, morpho v2 is going to be huge this year. This will be the first material swing I think we've had at fixed rate because we have a very lindy protocol breaking into it. And lastly, I think exotic lending is going to take off a lot more. You know, things like lending against RWAs. Um so I think that'll be awesome. So, I'd say it's the first area I'm super bullish on as far as thesises go. The second area would probably be equity per so far. Obviously, PERS have been massive this year with Hyperlid and all these other new per techs is launching. Uh, what's very interesting about US equity per is that the TAM is roughly 15 to 20x greater than that all of crypto than all of crypto trading today. And I think that is massive.

Ryan Adams: I think Arnoff, um, people don't realize that crypto basically invented the perp, right? I mean some people may not be aware of that but do can you talk about that for a minute?

Arnav Pagadiala: Yeah absolutely. So perks are this really elegant mechanism where previously all we had is options right where you express trade with leverage but it's dated right there is an expiry. Uh perpetual futures essentially offer a more elegant conduit for leverage with no expiry. So you can take out 10, 20, even 100x leverage on ETH and you cannot get like there is no expiry. However, obviously you can get liquidated instead. So it's a different f like form factor to manage risk.

Ryan Adams: It feels like like traders in Tradfi like should love this. Equity traders should love this. I mean do you think that it's like one of the mechanisms that they're looking over at crypto and being like, "Oh my god, we're jealous of you guys. like you have these per or do you think they're getting all of what they need in terms of leverage and margin from options?

Arnav Pagadiala: I think there's a few things to unpack there. Definitely options are a great instrument and there's a monstrous amount of volume in the options market. I guess for reference there, hyperlquid has done about $4 trillion in volume to date cumulative. The options market does that in one day in the US alone, right? So, you know, these these guys are they're monsters, right? But they've definitely taken notice to per. I think the biggest thing that people really took notice to is that Hyperlid flipped the NASDAQ's revenue. That's kind of that was a really big turning point. But beyond that, it's the fact that retail may find this product more interesting. Retail loves PERS in contrast to options.

Ryan Adams: Yeah. I mean, I it needs to be tested in the broader market because a great example is Robin Hood does a billion dollars in pure retail options revenue a year. It is their highest grossing product. Wow. One thing that I'm very interested to see is is Robin Hood or some other um exchange going to convert these options traders to per traders. And that is one of the thesises I'm very interested in in 2026.

Ryan Adams: Okay. But by the way, the these two things, the first category of like um an expansion of onchain lending to like fixed rate and credit and longtail and equity per are are you saying when you're listing these um these category ideas in the in the theme of DeFi, like are these investable to you? Like is this coming from net new startups or to what extent are just the existing incumbents of the world going to capture all of this? Like does a expand into fixed rate? Does Robin Hood expand into equity perks or is this investable as a net new category for some new low valuation startups to like become unicorns?

Arnav Pagadiala: Yeah, it's a great question. I would say these two ideas are both investable. We're so early and the market size is so insanely large that there definitely is multiple upcoming players who I think will grab a lot of market share.

Ryan Adams: What's the third?

Arnav Pagadiala: Yeah. So the third one is definitely going to be DeFi neo banks. It's something I'm very excited about kind of from two areas. I think one neo banks in emerging markets are going to be absolutely huge. And a big reason for that is these people in emerging markets they want access to US dollars. They want access to tokenized treasuries. They want access to a number of these things. And not only that, DeFi or stablecoin native neo banks you there is a regard there in the sense that if you want to implement certain products you can kind of you don't need licenses for them inherently right an example of this is um Coinbase integrating the morpholo lend product right they're able to offer 5.63% 63% APY to their users. That's pretty crazy. And DeFi neo banks can do that. And I think that presents a step function unlock over what exists today.

Ryan Adams: What's an example of a DeFi neo bank? Is that like um like Ether always comes to mind for me where there's sort of, you know, smart contracts onchain protocol, but then they have this extension where you can get like a Visa card that works like in a lot of countries in the world and you that's kind of connected to your smart contract account. Is that what a DeFi bank is? that type of idea.

Arnav Pagadiala: Exactly. That's exactly what it is. I think Ether has nailed it though. They're definitely more so focused on primary markets. These are people in like the US mostly who are probably using Etherfi, which is awesome. But yes, but I think the True Step Function Unlock is going to be mostly in folks in emerging with folks in emerging markets because they desperately need these products.

Ryan Adams: emerging market neo banks because we've kind of seen the neo bank trend already arrive in inside of the crypto industry and in well financed financially served countries like the United States like you said so what you're saying is this trend continues down into the developing country uh part of the part of the globe is that right

Arnav Pagadiala: absolutely and I actually think that's where the biggest outcomes are going to be you look at new bank that's like a hundred billion dollar company and they're serving mostly users in the latam region neo banks also the TAM there is massive, right? So, that's also why I think you're going to have not just one but multiple emerging bank emerging markets neo bankank unicorns because you can cater to specific audience types. You can you can cater to emerging market gig workers, right? You could um target emerging market freelance workers. Like there's so many of these niches that sound like that's not really a venture scale outcome if you invest there. But definitely there is.

David Hoffman: When you look through history like we spent some time doing from 2017 up to today 2017 starting with the primitive of the ERC20 token which turned into the ICO mania. Then we layered on swap and collateralized and lend products and services on top of that in 2021. And I think now we are looking at the neo bankank era which has some inherent amount of centralization to it. So maybe some listeners are throwing a flag about like why is this in the DeFi category but if you take all the puzzle pieces that we've created as an industry this is you know Ethereum becoming the bank account the banking ledger USC tether the stable coins being the uh private money building block and now we are high enough up in the stack where we feel comfortable building fintechy layers on top of the Ethereum ledger to uh to send outwards into the developing markets into the into the rest of the world. So, as we get further and further down these waves of DeFi, which is what we're talking about, we're in the DeFi category right now. We start to look higher and higher up the stack and now we're at a pretty abstract layer of the stack. We're talking about the the neo banking layer. uh so many layers below us already and those were the waves that you know he said 2017 to 2021 to 2024 and five and now uh it's bankless centers's opinion that we are thinking about the neo banking layer as the investment focus for defi in 2029 that's not all of it though uh we also want to talk about specialized exchanges arov specialized exchanges what do we mean by this

Arnav Pagadiala: yeah absolutely I actually want to say one last thing on the neo bank point is I believe that DeFi NEO banks are going to grow the DeFi mullet by like 100x today alone with um again the Coinbase Morpho integration in literally just a handful of months that drove the morpho based TVL from 700 million to about 3.3 billion and that is only that is only with borrowing USC against your Bitcoin. They just announced the lend product where you can actually earn a higher APY from your Coinbase account like in September. Like I fully expect this to probably eclipse over 10 billion by the end of the year. And that is just one CFI integration. Now imagine everybody every NEO bank in emerging markets does this. I think it might be probably one of the biggest sources of capital inflows in 2026 and beyond.

Ryan Adams: It's pretty incredible, David, because these are early bankless thesis, right? It's like the whole money Lego thesis where we sort of build the base of all of these primitives and we kind of stack up the idea of the the DeFi mullet as well which is just you know fintech in the front and DeFi in the back the party. It's growing longer and longer. It's growing longer and longer and now we have gravitated to uh the app layer.

David Hoffman: It's uh it's all coming together.

Ryan Adams: The fintech layer.

David Hoffman: The fintech layer. That's right. And the user experience is incredible. I don't know if you've actually tried this. Use your Bitcoin as collateral for a loan on on um Coinbase.

Ryan Adams: No, it's completely like doing everything the hard way, man. I'm old school. I don't like that.

David Hoffman: Ron and I operate at the second wave. I have friends that have no idea. I mean, they they know that they can borrow and they've se you've seen these other startups, Blockfire, whatever that could lend you at 8% and Coinbase is able to do it at five, six, 7%, it's variable based on Morpho, but it all happens underneath the hood and it's it's powered by Morpho, which is a a prominent D5 protocol in the background. So pretty pretty awesome. One of the big signs of maturity for this sector specifically is there's not a single blockchain reference inside of the A app. A app got released at Dub Connect not terribly long ago. You cannot find anything related to a blockchain. Obviously there are tokens there like USDC but that's just not for the average user that's just that's just whatever. It's on a blockchain there. Uh and so this kind of indicates the market readiness and technological readiness to actually deliver some of these promises through the fintech layer that crypto uh the promise that crypto made forever ago.

Ryan Adams: All right, Arnoff, let's polish off the DeFi section with uh specialized exchanges. What do we mean by this?

Arnav Pagadiala: Uh so I think there's kind of two areas here with spot and pers. When I'm referring to spot, I think one up and cominging area that has is relatively underexplored today is we're going to have specialized spot exchanges, exchanges meant for RWAs, exchanges meant for longer tail assets, exchanges meant for FX markets, and even beyond that, exchanges that are more tailored for institutions. So things like onchain KYC exchanges, right? I think like an early rendition of this even though it's in lending is uh a horizon where borrowers actually have to KYC to borrow but the lending side is completely permissionless. Um and then the per front um there's already a lot of perplexes launching. We're kind of in this perex war at the moment if you will. Oium does a good job here differentiating because they're just offering per predominantly on traditional assets. But the thing I think is more interesting, not only with HIP 3, which HIP 3 is essentially this uh permissionless infrastructure where you can build on top of Hyperlid's existing infrastructure. So you don't got to go spin up your own chain to launch new per decks. You're just handling the front end. And um what this gives way to is a lot more experimentation with more kinds of per. This could be per on funding rates. This could be per on emerging markets. This could be per using Athena's SUSD as collateral. It's kind of like an infinite design space. So, I'm very excited for that on the perspation.

Ryan Adams: There is space as well in DeFi. Arav you think for the fifth