Leading the Convergence of TradFi and DeFi

Transcript

How you doing, man? Welcome to to your what, third token, fourth token? >> Yeah, I can't even count. I've been so many times here. >> Yeah. >> It's always good to come here, yeah? >> Yeah, man. I thought we were calling it uh on-chain finance and uh legacy finance, not not TradFi anymore. What's up with that? >> [laughter] >> Little clean up there. >> Um well, man, it was good It was great to speak with you in New York City uh at the Circle event and uh also at the Avalanche event. Obviously, you guys have launched some new products there, RWA hub, these types of things. Clearly, kind of, you know, being in this convergence and really, I think it's this tokenization supercycle that is the opportunity for Aave. And so,

>> Mhm. >> if I just were to give some context to the audience briefly and then I'll let, you know, Stani give a ton of uh alpha and answers here. You know, when we started back in 2020 in on-chain DeFi 2019, obviously, you a couple of years earlier, we were really orienting around building products for crypto assets, right? We had Ethereum as collateral, you know, wrapped Bitcoin, we had Chainlink, we had Aave token. These were the things that we oriented around. And so, when you look at the TAM for that market, you know, we're talking about two to three trillion dollars of total market cap, >> you know, 150 billion dollars of DeFi TVL primarily on Ethereum.

Very quickly, as you've seen this tokenization boom accelerate, you start to think a lot bigger as to what we're actually trying to do here. Because what we're really thinking about is how do we get, you know, bips and bips of the total asset size of the world, right? And we're seeing high-quality assets like tokenized equities, stocks, bonds, T-bill funds, etc., etc., etc. And so, I guess, Stani, just from the lens of this tokenization supercycle, how do you think about the TAM increase for what we're doing here on chain as it applies to Aave and just broadly for all DeFi builders?

>> Yeah, I think it's a really exciting chapter for a whole industry. So, obviously, we all started from like crypto native assets and Bitcoin, Ethereum as a as a collateral and expanding from there. Um we grew up to uh 76 billion um net deposit last year. And it's a fundamentally a a a great example of how you can have a a resilient system running on chain at 24/7 providing lending and borrowing. Now, this is a all great and Aave does um best in the space for lending borrowing when it comes to uh stablecoins against digital assets providing yield, providing a lot of economic opportunity uh

around the world. I'm I'm sure there's plenty of people here that is uh has used Aave or using it on a ongoing basis. Now, the next exciting chapter for for the whole space uh in my opinion is this sort of expansion to uh traditional assets. So, we're going to see more and more assets coming on chain and tokenized assets and this starts from we've already seen money markets um T-bill funds and and so forth, but now we're starting to see also tokenized stocks. So, last week uh we launched uh Coinbase uh tokenized stocks on Aave.

So, you can use um Mac 7 uh stock as a collateral on Aave and and borrow against uh USDC. >> And have people been actually, you know, trying that out? Has there been some uptick in >> Yeah, and it's a quite interesting because uh it is a 10 million uh market in terms of deposits and over uh 1 and 1/2 million in uh outstanding borrowing volume. And this is when you put into the uh actually sizing the whole market cap of the Coinbase tokenized stocks is between 20 and 30 to 40 uh million. So, we're talking about really small market cap on chain of these like bigger um equities that are traded um

uh globally. So, why this is very exciting is is because we are seeing a transition, moving a lot of these opportunities that exist in traditional finance on chain and providing that opportunity for everyone. And and then when you add these DeFi primitives and protocols like Aave, you get the efficiency and you get that lending and borrowing make these assets more productive and eventually you can be able to do it better than the traditional brokerages transparently as well. >> Yeah, I mean I mean if you just think about it, I mean, you know, I get a bit disillusioned when we just come on and talk about tokenizing other assets because I'm just a crypto bull. But when you think about the actual use case here of, hey,

you know, in order to do actual lending on equities in your brokerage account, you likely need a prime broker, which means you're a high net worth individual in the US and you have a very specific banking relationship that allows you to get a credit line on equities. Cuz look, I mean these things are volatile assets, they don't want to just have the average Joe have especially leverage on their assets. That being said, I don't believe in that. I believe in optionality and I believe in access. And so, you know, I think you obviously do as well. And so when you just think about these assets being collateral assets, being yield generating assets, right? You know, for that $1 million of outstanding loans more or less on Aave, that means that they're getting paid a fee to supply those assets and they're also paying interest to borrow, you know, stable or

whatever it is. So there is now a yield, you know, machine for for equities. You know, I think these small things well, for us it's like still a small market. These are going to be monumental breakthroughs for Wall Street to understand the value of what we're building here. >> Yeah, I think this is really exciting. And obviously a lot of these tokenized assets, whether it's stocks or other RWAs, we see a lot of different mechanisms how they're actually constructed. You know, there is certain things that are debt notes, there are certain things that are, you know, direct ownership through a trust and it is very unclear obviously like what is the sort of like a winning path but also if you think about how cash was moving on chain it happened to stable coins and stable

coins happen to be effectively you know assets tokens that are wrapping T-bills. So we don't have a perfect solution today but also stable coins that we use today were came out of like a a a solution of of actually how we move these types of uh how we solve things on chain and that was the sole stability and here actually we're trying to provide access to these products across globally. So I think for Aave it's very important to actually be everywhere and be on the frontier. So we're known for obviously for safety and security doing things very efficiently but also for being innovators in the space and

that is the reason why we have to be there in the forefront to actually get this opportunity and and provide that to our users. And doing it on chain obviously where users own their control of their funds have the full transparency and get the smart contract based execution. >> Yeah, I love it. Last thing on the organization side you know when you think about Aave as a protocol as I mentioned on you know at the top there you know we had a lot of these crypto native assets be the primary use case. What we saw in hyper liquid as of late is that the RWA per volume in the crypto bear market actually superseded the crypto per volume. Now it's obviously back everyone you know

we're in a bull market if you if you haven't realized that then you know you need to look at your portfolio. And so how you think about the outstanding loan value for crypto loans versus RWA loans on Aave? Is this a metric that you care about? Is it something that you want to see supersede crypto loans? Do you think it will? How much time? Just give us a lens into like what your north star is for you know valuing whether or not this is actually working. >> Yeah, I I think that the development will be slow and you have to remember that basically where we are with crypto loans, we we've we've been doing that you know, over a half a decade essentially and longer. And where we are with staked back loans and RVAs, obviously Aave Protocol is a well-known

example of our RVA offering where you can use token as assets as a collateral and borrow stable coins that reached to half a billion market size started last year. So, we're extremely early in this process and a lot of these assets are still building market cap. So, I think over time like those headline numbers are important, but it's actually what's even more important is to being able to provide a better offering than exist in traditional finance and access new audiences. End of the day, Aave is all about, you know, preserving financial wealth, wealth creation and lending and borrowing is is big part of that that you can unlock liquidity out of your holdings.

>> Well, I've got my green socks on guys, so I'm feeling bullish. Can I get a show of hands? Who uses Revolut or Venmo or Cash App or PayPal in this room? Who has those apps and uses them? Okay. All right. So, do you guys, you know, people use these apps for sending money. They use them for transfer money to their friends, for saving money, for buying and selling crypto, other assets. These have kind of become these neo banks. You're working on the Aave app. And what's interesting about the Aave app from my perspective is that unlike other neo banks, you're strictly focused on savings. You're strictly focused on democratizing access to high quality yields for global investors no matter what the size is. Could be $10, could be $10 million. You want to be able to provide a platform for democratized

yields on chain in a safe and secure manner. Just talk to us about why this is an important part of the Aave stack and what this actually means to you deep down. Obviously, you know, you're from Finland, I believe. So, I know, came from a bit of a place that may not be known for their financial services industry, although obviously, you know, you've done quite well and built an amazing product. Talk to us about why this matters to you. What, you know, deep down, why does offering this savings product matter to Tani? >> I think this is a sort of like the bigger vision here is that, you know, the living cost has increased around the world and inflation is everywhere, you know, and we see energy prices going up, cost of living in a lot

of cities going up. So, inflation is a global problem and a lot of these financial applications, financial services, they are not addressing at a sort of a global scale or providing the best opportunity. And I personally think and our whole team believes that DeFi is where the best financial opportunities will exist and that is sort of a why we think that consumer offering that is fully on DeFi is is the future. Now, an interesting part here is that we don't want to build a neo bank or have a card or have a like a complex offering. What we really want to achieve

is to provide users savings and bring savings back because banks have failed to do that. So, on average >> for example, in the US um >> Terrible, man. >> users are earning 40 basis points on their savings and that is how banks and and financial institutions they make their margin is when they can offer lower rates to certain user groups and capture a a a bigger net. What we want to do is we want to provide savings at a competitive rate across globally and from DeFi. And this is really important because end of the day DeFi can do things very efficiently. We're still in the early stages of DeFi where, you know, we we we still have the very

basic yield sources that is that are backed by liquids crypto holdings, but down the line you can borrow you can borrow against tokenized stocks, you can borrow against RVs and the best financial opportunities are going to exist on chain essentially and that is what Ave is focusing to do now. And we want to make DeFi very simple abstracted experience while users are still holding their uh they're holding their access to their funds and they can be in full control. And that is possible today. The it's not a technical problem.

It's it's a basically a UX challenge that we solved and it's also go to market problem. Like how do you figure out the easiest way to move funds from bank accounts into Ave. And that is where we are focusing with the Ave app and that's one of the reasons why we don't have a complex offering or why we don't call it a neo bank because end of the day like we just want to do one thing really really well. >> And that's provide investors to the highest of quality of yields for US dollar denominated assets on chain.

>> Globally, yes. >> Yes. Okay. And so with that in mind and thinking about kind of the UX experience and just kind of how you think about you know, part of this. I'm 27. I'm you know, I'm an American and in America we you know, I spoke to Hunter Biden recently, Joe Biden's son and I asked him what the biggest financial threat was to young Americans. He's a character. And he said the affordability of housing crisis. >> Right? And without getting too political, that was kind of a stem from what you said also with regards to just this inflationary regime. And so one of the things that I like about the Ave app is when you go on it, what you can see is you can scan out a time frame, call it 5 years, 10 years, 20 years. If I put $1,000 in today, what am I going to have

in 10 years, 20 years? What is that going to look like? And so, I just want to understand why, you know, why it is important for you to kind of build this this experience for people in a way that you know, this [snorts] may sound a little cliche, but empowers them to take control of their financial future with the tools that you have. I was just at the Robinhood uh uh event in Houston last week. I talked with Vlad, their CEO. His whole thing is democratizing access to finance. Quant tools, yield strategies, everything in that app. This is something This is similar. How do you think about that kind of like democratizing and empowering people as part of your core product strategy?

>> I mean, the blockchain is um very dem- democratic tool. Um you know, open protocols, uh permissionless access really enable the the the most important access, which is uh the financial opportunity. Cuz inflation is what actually takes away the financial opportunity and also creates uh inequality and reduces opportunity. And everyone's dream is financial freedom. And I think that uh a lot of the fintech apps are going to the right direction. I think we can go more faster and I think that at a global scale, we can create uh better financial opportunities, more sustainable, uh through DeFi. And that's when all the assets also are moving on

chain, not just uh securities, but also, you know, I have this thesis of funding the abundance. So, I believe that, you know, with GPUs and AI and um robotics, um we we we basically are moving towards a world where uh everyone has abundant amount of intelligence, labor, uh and almost free energy with solar and batteries. And I think that funding this uh future of abundance, uh you need DeFi protocols where you can collateralize these assets and fund these um capex-heavy operations and create yield. And then use applications like the Aave app to distribute that yield backed by these uh infrastructure um uh primitives that are backing the

future that we want to live in basically. And that's the thing like we live in a very scarce world. There's scarcity everywhere from like housing, from you know, various different things. You know, people tend to want to live in crowded cities and maybe the future is uh living sort of like uh anywhere in the world having all the available resources um and access. And this is what Aave wants to provide and and and really help you to achieve uh financial freedom. And I think a lot of people share the same vision and they're also in the space for that reason.

>> Love it. Uh so then the last thing uh last thing from me, um agents agentic side of things. We just got a couple seconds here. How do you plan to uh empower your users with agentic tools to leverage better yield opportunities on Aave on chain and get more get more bang for their buck uh you know, leveraging some of the world's best intelligence on chain on Aave. What's the strategy for that? >> I think using the Aave MCP is is a really great starting point that we launched. So we launched the agentic Aave.

Um and I think that's uh we're going to reach a point where AI is going to manage all the money in the world um at some point. Wow. Some point soon actually. Um not that that depends obviously also on regulation. Um but in other words like if AI can do it better and can achieve that financial freedom better and there is a safeguards, I don't see um a problem with that. But I do think that uh a lot of innovation will happen with the agentic uh innovation like agentic payments. And I think this is going to be a a a single biggest user group um on on DeFi because it is the perfect substrate. It's very simple to generate a wallet versus uh

creating a a bank account for an agent. Um you have stable coins, you have means of payments. Um you have these protocols so so so the infrastructure is very native for for AI engines. Zeros and ones, the transaction hashes, addresses, all these things that are hard for humans to kind of read and synthesize, but agents can do it very quickly. Exactly. That's how I think that's a really cool opportunity is. And obviously, you need to think about safety. Like, how do you safeguard? You know, how what you can actually delegate to an agent and and what not. And I'm very excited to see products built built on Ave and on agents.

>> Ladies and gentlemen, give it up for Stani.