Why Kraken Is Betting Big on Onchain Vaults | John Zettler & Sun Raghupathi

Transcript

I don't know if I can put concrete numbers on it, but I think in terms of caliber of companies that are offering DeFi yield products through vaults to their users, it's going to be an absurd year. 2026 is going to be the >> the year of the vault. >> The year of the vault. >> The year of the vault. >> Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds or [music] projects discussed.

All right, everyone. Welcome back to Empire. Very excited about this one. Um, so many of you guys may have heard the predictions episode that we did with Santi and Rob. Um my thesis uh one of the thesis is that onchain vaults is going to grow. I said onchain vaults will grow from 6 billion to 15 billion. Vaults will become one of DeFi's top narratives. All these asset managers are going to need to figure out their vault strategy. Got a ton of questions. Basically everything ranging from like what in the world are vaults to like really in-depth vaults questions and I couldn't answer a lot of those. So I brought on uh probably two of the best people in the industry to to talk about that. One is John Zetler from Kraken. Uh we've got son Ragupati from Beta. Really excited. So John, son, welcome.

>> Yeah, great to be here. Just 15 billion. >> 15 billion. You think bigger? >> These are rookie numbers, man. >> We got to pump [clears throat] those up. [laughter] You think bigger this year? >> Yeah, I think bigger. >> Really? >> I think bigger. Um I mean, I think it's a [snorts] we're just really at the start right now. Um all the tech is just kind of in place now. You've got the embedded wallets working well. You've got, you know, infrastructure that's in place like Beta. You've got a number of different fints who are all starving for yield in a rates declining environment with Fed fund rates going down and expected to go further down through the years. Um, you know, I think the setup is perfect. Uh, so I'm expecting it to be, you know, I don't think our launch, which will, you know, be live by the

time this podcast comes out, I don't think this is going to be the last one people hear about in the next coming months. >> Can we go a little deeper into that? So I said 15 billion. You think 20 billion? You think 50 billion? >> I'll take the over. How about that? >> Okay. You'll take the over. Nice. >> Yeah. I'll What I'll just say on that is it's going to snowball, right? So we're seeing movement from some of the early u let's say more advanced, more innovative companies like Kraken, but everyone's going to follow suit, right? Like DeFi yield will go everywhere. All assets will move on chain. So I'm expecting a fatter second half of the year. I I don't know if I can put concrete numbers on it, but I think in terms of caliber of companies that are offering DeFi yield products through vaults to their

users, it's going to be an absurd year. 2026 is going to be the >> the year of the vault. >> The year of the vault. >> The year of the vault. Okay. So, maybe we should talk about what is a vault. Um I'm going to ask some really dumb questions in this podcast. So, maybe for the um >> explain to me like I'm a listener. I'm a person who's never really even heard about DeFi and I don't even know too much about DeFi. What is a vault at the most basic level? >> Yeah. Well, I think >> Yeah. Sun context is Sun's been building in the vault space for Yeah. before anyone even knew the word vault. So, yeah, I would love to hear your explanation.

>> So, DeFi, like let's start with what is DeFi? Maybe that's a little too basic for for viewers, but DeFi is a set of financial primitives that allow peer-to-peer coordination and that's it, right? So, you have lending protocols that match lenders with borrowers. Boom. It's all programmatic. It's all public. It's onchain. It's magic, right? uh dexes, traders, liquidity providers and matches them. The problem with primitive DeFi is that it's not user friendly whatsoever and you can't package up the kinds of products you want as an institution, right? You have no risk controls, you have no compliance, you have no flexibility in customizing products for your user base. So that's primitive DeFi. Now, here's where vaults come in. Vaults are a layer on top of that that allows institutions, fintexs,

exchanges, anyone with users or capital that wants to offer financial products to their customers to package up the best of DeFi, layer on whatever compliance, whatever risk controls, offer whatever risk return profile they want as a yield product. And that's what vaults are fundamentally. It's a layer that sits above DeFi that allows you to package up the best of DeFi and distribute it globally to consumers. Mhm. >> And they've come a lot over the years, too. Like, you know, if you really rewind and go, you know, dial back the clock. I remember the first vault I ever used was uh urine finance.

>> You guys use that. That was like DeFi summer, right? Like >> that was the best [ __ ] time. >> Summer summer 2020, right? And like the way I sort of think of vaults and where they fit into the DeFi ecosystem is a bit kind of like a pyramid. You got the very base layer is liquidity and the liquidity is needed in the automated market makers, the unis swaps, the curves of the world. Those then power the borrow lend protocols which sit in the next layer up. And so that's where you've got like the names that a lot of people here know of of a of compound of morpho ones like that. And they rely on the layer beneath because they need to be able to do liquidations. when people when you know the collateral decreases

too quickly, there needs to be solvers out there who can go sell those assets down and and fulfill the loans to not have bad debt. Okay, so now you got all these different borrow lend protocols out there and then all these different like independent markets and you're saying, "Okay, well, how do I then go get the best deal?" Because the user just wants a good deal. That's it. So the vaults kind of sit at the top of the pyramid and then can be a layer to package up and aggregate all the different opportunities across the borrow protocols. >> Okay. Where does the um when I think of evolved I think of the first thing I look at is how quickly can I take my money out and what is the yield right?

So some things have seven day you're you're kind of stuck in it for seven days or a day and you know maybe some have 3% yield some have 7% yield. Where is the yield coming from? Yeah, that just that dichotomy right there is a great point I think and there's a lot of like alpha there. Liquidity and yield are fundamentally tied. Yeah. Right. And to some extent the job of creating a yield product is you have a user, you want to know what their preferences are over these things. How long are they willing to wait to get their money out and how much yield are they looking for? Uh I think that's globally true. With DeFi, it's a little bit more complicated, right? Because you have all kinds of other forms of risk. You have counterparty risk, you have smart contract risk, you have protocol risk

and economic risk. And so I think that like the construction of a good vault product is in some sense optimizing over all of these different considerations. This is also why you need flexibility in vault products, >> right? You need to be able to for any given user optimize for what they care about over all of these dimensions. >> Yeah. >> And then to your question, right, of like, you know, where does the yield come from? Like, don't worry, I've got this one dialed in because I know we're launching on Monday when this podcast comes out. I'm already expecting the reply guys to be in there with the goose meme.

>> Where does he come from? Where does the come from? [laughter] >> You got it. >> Oh yeah, I'm ready. So, reply guys, watch out. >> Not to mention the legal team at Kraken. >> Right. Right. Right. You've been in my ear as well. Um, but the short like the the short short version of this, right, is going back to that layer of the borrow lend protocols that sit under the vaults. There are borrowers on the other side. And that's really ultimately the primitive of what's driving the yield. People want to borrow assets out of these protocols. Typically for the use case of going levered long, which is one of the reasons why USDC is always the one that people want to borrow the most against because they could post their crypto as collateral, pull out USDC, borrow it, and then go buy more crypto

with it >> and then lever up again and then lever. >> There's all sorts of things they can do from there. And you know, buyer beware, your mileage may vary. But ultimately, you know, kind of going back to it, where does yield come from? It comes from onchain borrowers, people who want to pull out typically USDC or other stable coins for any purposes. Um, and then when you, you know, package that up in all the different protocols, that's really like you can change the collateral type, you can change the protocol type, you can change the liquidity windows. All these different parameters then layer out to a you know equilibrium of sort of a a risk and yield curve.

>> Yeah. Okay. So when I give my money to a vault and I get the AP so I'm putting you know let's say $100 into into the VA into one of the Veta vaults I get 7% on that. The 7% is because you guys are then lending out my money >> effectively. There's lending. There's other protocols that are involved as well but yeah it's being deployed into D5 protocols that are again peerto-peer. So there's users on the other side that are making productive use of that capital. >> So there's there's a layer between, right? So like the the the assets go into the vault, the vault allocates and so then then it's being supplied into something like a right >> or like tyro which is you know the instance that exists on Inc. Um and then once it's being supplied in there the protocol itself is handling all the

lending out. You know it's their pools. It's not like peerto-peer in any sense, but someone's going in on the other side and pulling from that pool to borrow it out. So, that's kind of where it all is coming from. >> Do you have a sense of how much of the borrow lend protocols like how much of a Ave a supply that's being lent out to them is through vaults? Have you guys >> It's a great question. >> So, I would say for a most of it is direct. Yeah, probably. I mean, a has something like $40 billion. >> Well, maybe Morpho is a larger percent. >> Morpho is mostly vaults, right? And this is a super I mean this is an interesting subject >> and Morpho controls the vaults and they are the borrow lend.

>> Yeah. So let's let's go through it. A morphoa because there's a very clear progression here. >> So a is like the OG or one of the OG lending protocols in DeFi, right? It's basically decentralized. It's governed by a DAO. But the fundamental economic model is a poolled system where you lend your assets into it. It goes into this big global pool, right? that has many different assets and collaterals and anyone can come and post any one of those collaterals and borrow from that global pool right so let's say the supply is a bunch of stable coins USDC USDT die whatever and the collaterals are ETH BTC um liquid staking tokens you can deposit any of those and pull any of the supply tokens so it's a poolled model that's the important thing you

don't need vaults in that setup because you're there's there's no decision to make right you just put your assets into a DAO is doing the risk parameters of like what collaterals are being supported, what are the borrow capabize fits all for lending, right? What if we want uh people to be able to choose what collateral they lend against, right? Because with a v3, you don't get that choice. >> So morpho is a set of isolated markets. It's one collateral, one loan token. So think of it as Bitcoin USDC, ETH USDT, right? And these are siloed, right? But then Morpho introduced vaults and vaults are necessary to in the system because

when you have siloed markets, it's super fragmented, super inefficient. There's no shared liquidity. So you can create a morpho vault that says now I want to allocate to this market and that market and you're packaging up different forms of collateral that come together into a yield product. But that's just morpho, right? you don't have a morpho vault that can earn on a that can go to other protocols. Um so morpho vaults are a step in the right direction but it is still too specific. It's still not flexible enough and this is where veta comes in. >> So veta is multi-rotocol multi-chain. This was like our design principle. The goal is that you should be able to aggregate any form of DeFi, whether it's Morpho, whether it's a whether it's Pendle, whether it's RWAS, right?

Packaging up all these things into a single product with the most flexibility possible is the ultimate evolution of vaults. And if you actually look at what other players are doing like lending protocols, like Morpho, they are increasingly trying to diversify their vault products to be more and more flexible. >> So I think this arrow only goes in one direction, right? People I mean John can speak to this, right? institutions uh want flexibility because they want the best yields. They want the most uh product flexibility, right? To be able to target these different risk return profiles. So, I think we're only going to go in one direction and institutions, enterprises will want multi-chain.

They'll want multi-rotocol. They don't want to be locked into any single chain, any single protocol. >> Yeah, I think that right there is it. It's like the multi-chain, multi-protocol nature of beta is really the superpower because unlike a lot of the other instances that have launched of vaults, they're usually just typically isolated into like one thing or one market. And when that market when the yields go down because you don't have those borrowers anymore or no one's wanting to use that market, you know, then it becomes a lot less attractive. Yeah. And there's other products out there that have, you know, already started to see some of those decreases in their TVL because the yields are now falling to like, you know, 3 and a half or sub 3%.

>> Yeah. >> Um, so, you know, that's that's really a superpower of beta. And speaking from, you know, the Kraken perspective and, you know, what I think is a shared perspective of a lot of fintexs, that is ultimately, I think, what's going to win the day. multi-protocol multi-chain allowing you know the simplicity and and and and um aggregation in the most uh the highest form >> is the if I if I tried to summarize all of that um is it that a pioneered lend basically lending borrowing and you've got the big big open pools morpho introduced vaults and then VA took the kind of self-contained Morpho vaults and introduced a new model which is kind of multi-chain open-ended vaults with the nuance that our vaults existed before

Morpho existed. So we were building vaults before that. If just as a minor correction, a pioneered lending borrowing at scale. >> Morpho introduced modular lending. >> So it's package up your your specific lending products, your specific risk return profile. What beta has introduced is truly abstracted flexible multi-chain multi-protocol uh vaults. >> And I'll also like you just jump in. There have been a lot of other players too. Let's not forget compound. You know, compound was one of the first ones doing borrow lend. >> They were the first actually.

>> Synthetics was like the first one way back when that was giving you yield on your tokens. You're involved. >> Who else are the who are so because you worked at Coinbase when you worked on the Morpho integration. Now you're Kraken working with Veta. Who's like >> I mean if you did like an RFP like who who are the other vaults players you could have looked at? >> Yeah. So I would say um there's so so maybe one thing that's also worth mentioning to is the difference between the vault providers and then like like the administrators who like provide the infrastructure versus the risk managers. >> Yeah, that's also >> we should actually talk about all the key parties vault operators. Yeah. Yeah. So let's maybe can you get into the different the parties involved here?

>> Sure. So like the way that I would describe it as simply as I could is that you know VETA is the administrator the who administer the vaults and provide the actual infrastructure. um everything down to like doing the daily nav calculations and so forth like that comes from VA and then there can be off of beta's infrastructure many different risk managers what they called who then operate the vault who come up with strategies and then decide on the allocations of those vaults and so in that world you know we're with this launch that's coming out you know the day on Monday when this uh podcast releases we're working with Chaos Labs

and with Centur two of like you know premier risk managers in the space. Chaos Labs people might know from working with a they've managed the A DAO risk manage the A dowo for quite a while now. Um and Centura is more institutional focused but you know growing very quickly and a great partner to work with. Um but there are many others too and I think other ones that people might have heard of um along those lines are like um Gauntlet and Steakhouse as like two other examples of risk managers out there. And I'll just just add to that this category you can call them risk managers, curators, whatever. This category is growing rapidly almost as quickly as vaults as a whole because you have the largest asset managers in the world already today are

becoming interested in diversifying their offerings through these onchain products. So that's going to explode right like we have this nent these are very cryptonative companies right stakehouse gauntlet chaos but the biggest tradfi and even you know tradfi adjacent crypto asset managers they have the skill set to do this and they're already starting to move on chain >> u probably a really dumb question why don't you why do you need the risk managers why do you need gauntlet and stakehouse and sola what are they called >> Santo um and chaos why don't you just do that yourself >> yeah it's a good question. I believe in a world that like has diversity of curation. Like there's never going to be one party that just manages all of the world's assets. I mean, you could say

like Black Rockck does a lot of it, but even they don't, right? Like there is a diversity and plurality. And if I think about what our advantage is, it's really the cryptonative, DeFi native stuff, right? Building the plumbing, making the infrastructure work, the widest possible access to chains and protocols. Are we really going to go toe-to-toe with the Black Rocks of the world in risk management and building trust with uh capital allocators? Maybe. But that's not the business that we're doubling down on. So, it's just it's just a different business model, right? It's who playing to our strengths. And from our perspective too, the other interesting thing to add is like we can integrate against VETA once with one standard integration, one model of the way that the vault works and then you

can get any number of different styles and and and ways of of um how those vaults are shaped and formed and how they deliver returns. >> Yeah. One more question on this front is um you know we said we so we had we we now have chains building apps and we have apps building chains, right? You kind of go up and down the stack. Um, and people, you know, as the industries grow, you verticalize. Um, will do you think that we'll see any of the curators start to maybe try to own the the layer below. >> It's already happening. >> It's already happening. >> They're trying, right? So, Gauntlet has their own vault infrastructure uh product.

>> Interesting. >> Which is similar to VAS >> in the market. >> It's in the market. I don't know if anyone is really using it, but it's out there. Um I think the challenge is that >> AV4 too is going to have >> yeah I think that's closer to Morpho than it is to a to a vault product but um you're right like um you know protocols need vaults hyper liquid they have their own vaults right like everyone everyone wants vaults I think the challenge is that >> building a successful vault platform is very different than these other things right it's very different than building a successful lending product different than doing good curation um there's real economies of scale with doubling down on vault infrastru ructure because it's so complicated. It requires a lot of attention to detail. So none of these

you know people who are trying to vertically integrate I think will have a better vault product than we do >> right as an infrastructure. Now what they're trying to do is capture more margin right and power to them. But you know in my view they'll be out competed by the curators that focus on their expertise and use the best infrastructure that exists. >> So how do you pick yeah how do you pick these curators or risk managers? >> Yeah great question. Um, you know, what we're generally looking for, you know, just speaking from the lens through which we saw this at Kraken is we wanted someone who had experience uh doing curation at scale. You know, Chaos Labs being a great example of that. They've been working on doing risk management for the uh for the A protocol for for quite a while now. Um, another thing

that's important, right, is um their security model, their familiarity with working with the uh vault provider. So someone who's actually had experience like Centura has had plenty of experience working with Beta that was important because you know that there's like already that relationship there that um that knowhow um and then I think furthermore there's you know sometimes also a level of uh craftiness and innovation of being able to consider um different newer protocols um looking for temporary incentive programs that they can deploy into um and also sometimes like looping and some of those other more slightly higher risk activities, but that can bring about

more yield. >> I what I'll say is there's a large number of curators now and risk managers in the space. There's a huge there's a very long tale of people that are just doing stuff like you know they they don't really know what they're doing. Uh you tend to see power laws in this category with with everything in finance, right? You have curators who have managed billions of dollars at scale and they know what they're doing, right? and they have institutional relationships and they have like really deep data models. Um, and then you have ones who are just like, "Yeah, you know, we're just going to kind of throw money around." So it they they tend to kind of separate on them.

>> Do you think so? Right now, so so Chaos, Gauntlet, and Steakhouse are probably like three of the leading people. Um, do you think that we will see traditional asset managers move into the space in 2026? Like will uh yeah, traditional >> asset manager become, you know, try to compete with Gauntlet on this business? >> Absolutely. That's like a very a prediction I'm very very confident. >> Yeah. Will they do well? >> They will because they they will because they have the customers, right? Like the the DeFi curators in some sense are competing for this pool of DeFi users, right? Or they're trying to go to, you know, large credible institutions like Kraken and sell their services to to people who have distribution. But the largest asset managers do have

distribution, right? They have customer relationships. They have assets that they can funnel into their products. So I think it's very difficult right if Black Rockck comes on chain and says we want to bring a hundred billion dollars on chain they can do it >> do you want when black rockck launches a vault you want them to do it with you guys >> they will do it on beta >> yeah okay okay um can we talk about the revenue in the business models like where's the value being captured here is it is VA let's say someone let's say there's 10 $10 gets made how much does beta make how much do the risk curators make like where's the flow of capital >> yeah sure I'm happy to do go into it so The vaults themselves um are built in such a way that they take a performance

fee. So a percentage of the rewards that are earned on the vault basically gets set aside to the operator of the vault. Basically like whichever um >> operator equals the curator equals the risk manager. Th >> this one not quite because like it goes to you know the uh holder of the admin key basically and that admin key can uh provide a uh 0x address that all the fees get paid to. So in this case, you know, in the vaults that we've launched together with this release, um we've got three vaults. They are a 25% performance fee. Those rewards then flow into a fee spplitter smart contract. Very simple.

And then that's split between Kraken as like the distribution partner bringing all the customers in volume. The lion share goes to to that distribution, beta as the infrastructure provider, and then also the risk manager of that vault. >> Got it. Okay. And I can tell you a little bit about like my philosophy with with Beta as a business. Our goal is to serve thousands, tens of thousands, hundreds of thousands of vaults, right? And who's going to take the lion share of the fees that are actually generated in these products? It's going to be the distribution, right? The people who own the distribution. But our goal is to be, you know, is to serve everyone, right?

And so you kind of have this dynamic where the distribution partner always takes a lion's share, right? Because they own the user. uh the curator comes in and they're kind of competing based on their ability to outperform. Right. Right. And our goal, we operate more like a SAS company, right? Where we're providing a technology platform. >> Exactly. That's right. >> Do you care about owning the distribution at all? >> Uh I care about it in the sense that uh owning distribution is great. It's a great business. >> Uh but that's not our focus right now. >> That's not your focus. So you'd rather go to the exchanges and the fintexs and cla and Robin Hood and Kraken and integrate >> in general. The trend we're seeing in DeFi, DeFi is increasingly a backend, right? You have two choices. Either

you're going to do the consumer thing like the Ether FIS of the world, plasma, where you're building a neo bank effectively, you're trying to compete with the largest exchanges in FinTech. That's a really hard battle. It's really expensive. There's a lot of luck involved. Some people are fighting the good fight. If you're not doing that and you're building infrastructure, you need to be going to enterprise, right? Meaning the fintexs that are moving on chain. Yeah, that's an interesting I go ahead. Yeah, I was going to say like it it's that's a I think you know Sun's point is really interesting too because there is there could be this perception that you know this product like the classic DeFi mullet you know of of you know fintech in the front DeFi in the back is competitive to DeFi but it's really not like it's really

complimentary to DeFi >> because you're basically just a different front end that's bringing it to all the same protocols and all the same activity in TVL onchain >> and my view here is like, you know, as someone who has been using vaults since, you know, the DeFi summer, I guess, and even before, the problem has always been like keeping track of where all your money is. Like, where the heck is it? What? Oh, yeah, I use this protocol like 3 months ago. I forgot. I still have like money over there and this one over there. Like, that's a pain in the butt.

um MetaMask or whatever self-custody wallet you have always has issues with your ledger and like that's always a pain in the butt and then you're like okay well how do I aggregate all these things well then there was that like Zapper I remember I used Zapper back in the day that like connected all these things >> Zapper and Zerion >> yeah like those were helpful and that was a step in the right direction but you know I think they've degraded and I don't use them anymore I remember one of them I think went out of business or something so it's been like >> challenging and not easy to use all these DeFi protocols especially if you have to go to four or five or six different websites to go find the best yield that you're looking for. So the beauty I think of where this is going

and speaking of like distribution partners is once you have that packaging that aggregation layer of vaults and then you have it you know plugged in into a traditional easy to use fintech with a slick native app you're bringing it right to the user's fingertips without them having to think about much. Yeah. And so the way we've done this is, you know, we've worked with um an embedded wallet provider, Privy, which probably a lot of people in this podcast have heard about, the one acquired by Stripe. They've been a pleasure to work with. And what it allows for is it allows for a non-custodial wallet that's embedded under the hood directly onetoone with the user account.

>> So you know, um you've got like your your Kraken account, you've got your Kraken account, you each have an embedded wallet that is just yours. And but we Kraken can't touch it. We can't move the funds. We can't influence it. We can't do anything about it. It all requires you to be in the loop. You'll get like a one-time OTP code, like a a small six-digit passcode that comes to your email from Privy. You type that in. That's your way of like assembling all the pieces and then you can actually interact and do the transaction. >> So, I think that's where this is going, which is that you're bring DeFi is increasingly becoming a backend. We're packaging it up through vaults in a way that's simple and easy to use. There's no um there's not a lot of active stuff

that the user has to do and then you're delivering it in the same fintech channels in the same apps at the user's fingertips without the need for ledgers, self-custody, 17 different websites and everything else. >> Yeah, very interesting. I think Sun's point around um you guys are really just a tech platform is kind of shifting. That's a that's probably my takeaway of the episode so far is most of DeFi will really just become a backend >> and yeah maybe a few will survive as frontends but those if that's the case you end up really trying to compete on distribution with yeah Robin Hood and Coinbase and Kraken and you've got to that's a hard game to win.

>> Keep going New Bank Revolute then you get into the traditional banks like DeFi. So I'll go a step further and say this is not just beneficial to DeFi and complimentary. This is actually the only way that DeFi succeeds, right? I think you know I've been building in the space for a while. We all have. There was a pipe dream that we would invent this entire independent financial system and just migrate everyone over like everyone's going to leave the banks, leave their their exchanges and fintex and move on chain. But that was always a pipe dream, right? And where we're at now is a land of compromise where there's tremendous value that DeFi has created. I mean, just like we haven't explicitly said this, but you have Kraken users, millions of users on this exchange who with a single button are

earning yield on Inc., Ethereum across multiple protocols. They can see their assets at all times, right? It's all on chain. They can get those assets out whenever they want, right? It's they're they're getting the best most competitive yields that exist. That is an amazing product experience. And so I think this is this is actually necessary and it was inevitable. I think it took people a while to realize, but this is phenomenal for DeFi. >> Yeah. John, can you talk a little bit about um the learnings from Coinbase? So we haven't talked about this, but you spent like five years at Coinbase. You're running a lot of product stuff. I think you helped build out their staking CVE um vaults with Morpho. Can you talk [clears throat] about the learnings from your experience with building vaults at Coinbase and and Morpho? like what went

right there and then what also went maybe you could have been improved upon. >> Yeah, sure. I would say um so first off like you know uh I don't want to steal the thunder from some of the great people at Coinbase who continue to make these products awesome. Like you know being early and helping start a product 0ero to1 is just a small piece of the battle and there's you know tons of people in the trenches over there who continue to grind and make that thing better and better and even you know my role was pretty small. there was Andrew Halt, uh, Mara Vila, like my, you know, co-founders, product co-founders from the engineering and design side who are super important. Um, but like to to speak maybe directly to your question of lessons. Um, one of the things that Coinbase does really well is that they

favor firstparty products to provide a more integrated experience, more like the Apple model than like the Android model, so to speak. Um, and so with the Coinbase approach, it was, you know, a vault provided by stakehouse built on Morpho, which is a Coinbase ventures portfolio company on top of base, their L2, delivered to customers, uh, using USDC, which is their pretty much their like first party token, you know, with Circle, they're both like co-owners of it. Um, so the the very like up and down integrated nature of it made it quite easy to use, free gas for the users, um,

uh, and and a pretty slick experience using their own server signers for the, uh, embedded wallet of it all. >> That that one of the things I learned building that product was the relentless focus on being the easiest to use. Like Coinbase had this saying always internally that Coinbase wanted to be the most trusted and easiest to use and that was like as Brian would always say those are like our two differentiators. Those are the things. So, you know, you try and bring that you you bring that into all of your products. And I think those lessons really have influenced me in becoming a product leader of, you know, th those are necessary for everything like you always want to hammer and and hammer on the user experience, always try to make

it easier to use and improve upon it. Um, and you know, the whole um Coinbase DeFi suite has been doing quite well. I mean, if you look at their borrow product, there's um some Dune dashboards we could put in the show notes or something. I can send it to you. But, you know, they're up to, I think, 1.9 billion of collateral in the borrow product with about a billion of loans issued against that. That's the D5 borrow side. Of the lend side, I think they peaked at around 475 million of TVL. It's come down a little bit as the yields have trailed off. Um, but it's been, you know, by and large, I I would call, you know, a successful suite of products at Coinbase. and I think they're just getting started, you know, hats off to them. Um, but, you know,

putting I have, you know, swapped my uh my my team blue for team purple. And, uh, the thing I love about Kraken is that, um, we have an opportunity to use providers like VETA where it's not all just first-party, you know, products and services, but we can really source the actual best in the industry. Um and uh and you know the vaults that we have here that we're that we're launching with I mean we were just going through the demo uh before we got on air and the yields are substantially better and one of the reasons why they're going to stay better is because of this model of going multi-protocol

multi-chain using someone like beta allows us to source the best yields from across the ecosystem. So like fundamentally and long-term this is a more advantaged approach. is a smarter, better strategic approach because you're going to long-term have better riskadjusted yields when you have more diversity and opportunity. >> Yeah. For someone who's listening who says, "Uh, I've heard this story before. It's called BlockFi. It's called Celsius. I open up the platform. I get 7% yield. All good. No risks." What uh how do you how do you talk about that?

>> Maybe I can take this one. Yeah. >> So, there was things that they did correct block five Celsius in that the product experience was great, right? And clearly people want yield. Like that is a no-brainer. It's a universal demand. The implementation was totally wrong and it's night and day. And this is why DeFi is such a superpower because the difference is when you gave your money to BlockFi, you have you had no idea where it was going, right? You had no real claim over those assets. They could do whatever the hell they wanted with it. And they did. They did crazy [ __ ] with those assets. With this model, I'm not going to say there's no risks, right? Because everything involves risk any financial product. And obviously crypto and DeFi involves its own kind of unique set of risks, but you know where

your assets are at all times. It's all on chain. Even if Kraken goes down, there's a global outage, right? Your your you lose your phone, you can literally go to the blockchain and see your assets. And not only can you see your assets, you can see your claim to the set of assets that are in that vault. >> And only you can redeem your assets uh your you only you can redeem your assets from that vault. So it's just totally night and day, right? take this universal demand which people want high yield savings accounts that's just like a killer product but you build it in a way where it's transparent right it's it's truly non-custodial and um most importantly right like it's all public everyone can see it right um so that's what I think is fundamentally different

I think those uh those set the industry back long time but also it's probably necessary because people now really value the important things like transparency >> those weren't DeFi >> you know they were CFI they were like overlevered risk-taking private books that were making [ __ ] loans to [ __ ] counterparties and they got screwed. >> Yeah. >> You know, and then and then the customer suffered and but you know, remember when like all of that happened last, you know, the last turn of the tides when we went from bull to bear in I guess was it 2022 and through that just bloody year?

Um >> all of DeFi went unscathed. >> Yeah. >> You know, because it just functioned and operated as it was supposed to. These were overcolateralized loans. The collateral was there. The the risks were managed and when those liquidations happened, they happened in an orderly way and uh the users, you know, everything was functioned as it was supposed to. >> Yeah. So, so you were showing me a little sneak peek of the product which looks great. People should try it out. Um, by the way, side note on Kraken's product. I've been it's been getting uh marketkedly better over the last probably 18 months, I'd call it. So >> yeah, there's like I I would call it the Arjun effect. Like Arjun's our CEO who's been on the pod.

>> It's nuts. It's Arjun the things Arjun has done for Kraken I think have been unbelievable. >> He's he's a great leader in the sense you every leader is very different and um the joke I say to some people is that I can't imagine two different people than Brian Armstrong and Argenti. >> Tell me why. >> But both are incredible. Like I they're so different and in so many ways I don't even know where to begin. But like one of the ways um and one of the thing maybe I to reframe it and just like one of Arjent's superpowers is that like it can we can always move faster, we can always be better. We can always be leaner and we can always be hungrier.

And so it's this constant drive to move faster and to do more with less >> that reminds me of this like it's it's it's that feeling you get when you're in a smaller stage startup that's really working that's in product market fit mode and um it's awesome. Like it's just it's just such a refreshing change of culture because it is >> no process for process's sake. There's no big quarterly planning cycles. There's like you've got a one OKR which is like your revenue number at the end of the year you have to hit and like grind and tell me what you need to what resources you need, what you know financials you need, what whatever you need to make it happen and you know mountains can move around you to get

what you need and to move fast. >> Yeah. How does something like this vault product get approved at Kraken? This is bottoms up. You guys go to Origin, you're like I think we should do this idea. We should work with Beta. Is Origin like we need an earn product? >> Yeah. So I mean we have so so even when I was um hired you know Arjun was you know pretty closely involved in my recruiting process and this is one of the things that they were already starting to talk about and was like it was already starting to be built. Um but there was a lot of um lack of clarity in how it was going to get structured, how it should be designed, how it should be engineered. And so there had been this view and there had been a lot you know

Arjun had brought in a couple of these strong more onchain cryptonative individuals that is also I would say like a superpower of Kraken. You've got all these like really like OGs cyber punks like really like early early and and um uh ev evangelist kind of of people in the crypto space. Uh so there was this knowledge and this understanding like we wanted to do this but there wasn't really an understanding of how to do it. And um I'm really happy with where this product landed, but it's just the first of many. Like there's a whole suite of onchain defy oriented products coming our way. And um I guess that's you know probably where I should leave the teaser and a cliffhanger for you know for the next one.

>> I I remember actually the day that John joined Kraken because we'd been chatting we've been working with the Inc. team and obviously you know everyone wants an earn product and we were talking about things but I remember John joined and [ __ ] just started moving right it was like so more credit to Arjun finding the right people to come in and build the products that the company views as important. >> Did you know for this product that you wanted to use beta or did you talk to Morfo too or and and other people? We um there were some thoughts and some different opinions inside the company as there was always a ton of different opinions and I think we just had to all work together to come to common sense of what was going to make a lot of sense and beta was a very obvious choice

because of you know some of the great what we keep saying is this you know crosschain cross protocol um opportunity to deliver sustainable higher yields than you can get elsewhere. M uh the yields you showed me were like I think there was one that was like 2%, one that was 3%, one that was 6%, 6 and a half, something like that. Did you ever think about a 20% uh 30? Like you can you can loop you can you can get to kind of the percent you want. There's just increased risks. So >> yeah, as long as we don't start getting, you know, um uh Teral Luna tattoos on our shoulders and start talking about 20%, you know, like that I'm going to get flashbacks. Should we go, [laughter] you know, like the Chihuahua meme?

thought that if you want to give the user the best experience or the if you want to give them all the options which is this open beta model of like get you know just serve anyone anyone everything you should serve them 15%. You should serve them 50%. >> I'll bring bring that question back to you. It's very similar to like how much leverage do you let someone trade with. Right. >> Like I like that you can take the slider to 100. I don't go to 100 but it's I feel good as a user that they don't stop me out at you know 10x or something. What I'll say is like we have very much an intention to add more vaults over time. Yeah.

>> So this is the version one, right? Like this is our, you know, planting our flag on fresh virgin territory and saying, you know, we're here. We've got a lot more coming, you know, come work with us. And so, you know, anyone who's out there listening to this pod like who, you know, is a risk manager, who has any differentiated strategy they want to, you know, uh, pioneer or bring, like, come talk to us. You know, we're not hard to find. you can DM me on Twitter or son and like let's start talking and figure out you know what additional uh opportunities we could offer because you know >> what's the interesting pitch if someone comes and slides into your DMs what is the interesting pitch is it their track record is it the AP API they can deliver what is the >> yeah like show me what you're doing and

why it's differentiated show me that you've been doing it before and that it's not like you know a track record over two weeks and explain why this is going to last over time Yeah. >> Yeah. I have a question for you actually. All right. >> So, you um you put out a tweet, right, about your prediction that vaults will be huge, right? And we we kind of discussed this. What made you what makes you so bullish? I don't think we've heard you like kind of articulate that. >> I was at a holiday party with um there's there's two thesis. One is the one that we've talked about a lot, which is the DeFi mallet. And I see what's happening with uh everything from like Coinbase to now Kraken to like if you go on the world app, there's like vaults powering. It feels like every single one

of these fintexs will launch that. I'm fully on board with this thesis. But the thing that like really kicked me into that was I was at a holiday party and one of the largest asset managers in the world was there and they said uh to someone else who was at one of the largest uh they service the asset managers two they're probably like 50 55 years old as traditional tradies as it can get wears a suit and tie to a holiday party and one says to the other have you heard of these vaults the guy says vaults were I was expecting him to say what are vaults he goes vaults we're all over vaults they know steakhouse they know gauntlet They know Morpho, >> you know, like they I'm sure they know Veta. Like they were they were deep and uh they're they both of them in

different ways were said they're coming into the vaults business. >> The suits are coming. >> The suits are coming. So I'm a little less optimistic than you are that they will be able to compete with Gauntlet or Steakhouse or Chaos. Um >> because uh they own distribution but in a very different way than like Robin Hood owns distribution. >> Uh like Robin Hood owns the user goes to Robin Hood and can click a button. The user goes to Kraken can click a button. Black Rockck is like Black Rockck actually doesn't really own the distribution. I think Black like Charles Schwab owns the distribution and you could buy the Black Rockck products through Schwab. I mean, you can also go to Black Rockck if you want to, but >> it feels like a very different.

>> It is different. You're right. They have to go and talk to people. >> Yeah. >> Right. They go and talk to people and convince them. >> It's like a product that's sold by financial advisors as opposed to something that is like I think Charles Schwab owns distribution. Uh TDM Trade owns distribution. So, and I think on all of those platforms, that's where you'll see these. >> Yeah. Like like would a Terrun ever go work for a Black Rockck? Like I don't think so. like you know like someone who's like as deep as it comes. See Tun founder of of um uh >> Gauntlet. Um but you know >> you kind of require someone who's like deep on like oh yeah well Athena is right now paying you know this good yield but as soon as ETH starts to tank you know that's going to disappear and

we got to be ready with our strategy over looping on Oiler. Don't worry Oiler's good again. It's like, you know, it got hacked before, but it's safe now. And, you know, oh, we're going to go over here and then go to do some you looping on a with, you know, some LSTs, LRTs. I don't know. I'm I may be also am skeptical that like that level of crypto forward individual has a, you know, would want to go work in one of those big institutions. With that being said, I have uh >> another another meeting I had. It was a dinner actually with one of a huge hedge fund portfolio manager and I was like, "Are you into crypto?" He's like, he's like I He's like, "You wouldn't believe the looping that I'm doing." I was like, "Oh, what are you doing?" He's like, "I've got, you know, I'm lever to the

nines on Superstate with us, it was US, what's their thing? USC." >> Yeah. >> He's like, "I'm looping USC like seven times right now." And so where I think these folks are smart and it's not cryptos crypto and traditional cap capital onchain capital markets crypto cap or traditional capital markets will eventually converge, >> right? >> And they'll they'll they'll just call them capital markets one day. >> Yeah. I mean like the set of yield and primitives that exist today is going to change over in the next 5 years, right? RWAS are going to move on chain. There's just a much larger asset universe that exists outside that I agree with you. I think things are going to emerge. That being said, I definitely think the people who are here today who have that expertise, they're going to be big as

well, right? I think there's enough room for all the people who are forward thinking to win. >> Yeah. Um, can we talk about maybe the behind the scenes of what's happening here? So, in uh upand cominging, every time in crypto there's like these the new up andcoming space there's only a few players. There's all these crazy backdoor games and dealings and I'll you know what I'll give you like my first three years of revenue if you do that. There's all these Can you tell me about some of the games that are being played? >> Yeah, it's a good question. I can tell you that it's a similar dynamic in that there are a few live players, right?

We've talked about a number of them. There's a finite universe of um players on the other side, right? People who are as credible as Kraken and who are worth pursuing aggressively to try to win business from. And then there's just the levers that each everyone has, right? A lot of projects, token projects have large amounts of their token supply earmarked for these kind of deals. Yeah. Right. And like the trend that we're seeing, people, you talk about urine back in the day, right? People used to pay for liquidity. >> That was what token incentives were for. Now token incentives are for paying for distribution, >> right? It's a very different model. I think it's a it's a better model. Um, now look, my my view is truly I know this is kind of a cliche, but like the

best product will win over the long term and everything else is short-term. You're trying to establish credibility. Maybe you're trying to raise money, but at the end of the day, you need a product that will allow your partners to out compete their competitors. >> Um, so that, you know, beta doesn't have a token, right? We don't have a massive uh war chest that we can use to to throw money around. Like you see these things with >> You guys raised though, you raised 18, I think last. >> Yeah. Yeah, we raised our series A um you know early mid mid last year. >> Yeah. >> Uh but you know we're not >> who led that >> coin fund. >> Nice.

>> Okay. Um >> but just maybe to to follow on that point like I think where some of the games get played are often in those token incentives. >> Yeah. >> And where they come from. And so >> and is this like sorry to interrupt you there, but like is this uh everyone's competing? Everyone wants Robin Hood, right? Everyone wants to be the vault on Robin Hood. So then you go to Robin Hood and you're like, we'll give you like $6 million of our token if you choose us. >> It's all it's at all the layers, right? It's like so it's like it's like the borrow lend protocols will go to the risk managers and the curators and be like well come deploy with us and we'll incentivize it with our own token and then you know the nice thing if you're a Kraken user is you don't have to deal

with any of that. You're just getting USDC on USDC. So it's you know all being handled. So a could go to stcast and be like guys like put your vaults on a instead of on I don't know >> in theory. Yeah. And they could like issue them you know a tokens and you know a it has to I think be approved by the DAO and so there's some of that but the other protocols might not be you know as you know might be more um independently driven some of those decisions. Yeah. >> And then you know so like that's that's a area where the games get played. Um, but there's also like that in that token incentivization can also happen at the distribution layer. Like so I was just popping open the uh Coinbase lend product, you know, similar to um a competitor to what we're offering with

uh Kraken's DeFi Earn. And in the Coinbase version right now, the yields are at about 3 and a.5% but if you pop it open, you can see that 75 basis points of that is coming directly from Morpho as a extra boost that you're getting in term in Morpho token. So it's like, well, that's not really the thing I came here for. I'm, you know, coming here for USDC and I'm coming here for USDC yield, but that's, you know, indicative of kind of where a lot of these things are. >> Oh, it gets paid in more token. >> Yeah. >> Oh, interesting. >> Yeah. I think you can convert that into USDC, right? But but that's speaking of like token incentivization, that's a big thing. The nice thing is that for all the customers here who are, you know, just can't wait to come use the Kraken

DeFi earn product. It's just, you know, straight USDC on USDC. It's pretty simple. >> Son, what's the craziest like backdoor thing that you saw where you're like, I'm I can't be involved in that game. >> Uh, I don't know that I can say the craziest things, but I've seen people offer insane amounts of equity for a single deal with zero guaranteed revenue ever. >> And it's it's very common. And honestly, it might be worth it, right? Yeah. >> Because like you get one of these major partnerships and each one of those builds credibility for the next one. >> Right.

>> Right. because this is it's ultimately about trust, right? These large institutions, they want someone who is it's derisking. They want someone who's done it before. >> Uh so I get it, right? Um but yeah, it it is crazy and you're you're right to to observe that uh there's definitely some aggressive deals going around. >> Yeah. Um we haven't talked about risks. We've talked about risk a little bit. What What how do you how do you think about the risk? Is it smart? If there's no because it's all over collateralized, there's no like underaterized lending risk. So then is it just is it really just smart contract risk that we're talking about here?

>> I like to break the risk into three buckets. Um so the three buckets I have are you've got uh the risk of bad debt expense. I think that's number one. We'll talk about bad debt risk, liquidity risk, and then smart contract risk. And those like cyber security risk was kind of the same thing. So like we'll work backwards, right? Um so when you first talk about the cyber risk it's like you know could the protocols could the a could the morphos could they be jeopardized and there could be some critical bug you know at this point with how battle tested with how lindy those are I'm don't think that's big of a deal but it is something like you know that that risk is very much there and true and for all the great work that son and

the beta team have done like I'm sure you would agree that there's always some level of risk too even with you know the vault contracts that you guys offer. So that's like one layer of risk. Then I would call liquidity risk is kind of the framing of can I get my money back when I want it. And so this every vault handles this differently. Some will like in different protocols will the you can only withdraw from the vault if there is liquidity there ready for you at that time. Other ones can say like, oh, there's like a one-day wait time and then at that point there, you know, it'll be queued up and then be delivered back to you. So that's kind of like the liquidity risk. Can you get your assets back from the vault when you want them?

And then the third and probably most, you know, DeFi native one of these is the bad debt risk. [snorts] And if we go back to like you know earlier in the pod we were talking about the where does the yield come from it's ultimately from those borrowers on the other side that are paying a yield to borrow the assets from the protocol. They are posting collateral and that's why it's over collateralized lending. You know they're maybe putting down a hundred bucks to borrow out 50. If the hundred bucks that they put down, which is in the form of Bitcoin or something drops precipitously and faster than the solvers can go out and fill the loan,

>> which is kind of how those, you know, things work in the background, then you could be in a situation where there ends up with what's called bad debt, where the collateral has sunk so fast that it is now lower than the total amount of loans that are outstanding, and the protocol then has to take a haircut. Every borrow lend protocol deals with this differently. Like a has like the umbrella insurance or the umbrella policy I think is what it's called. Something like that. But it's basically you can get paid a yield for being that kind of um uh uh stand in that that backs stop. Back in the day if you remember like the earliest you know some of the one of the earliest Barland protocols was actually Maker now. And so you remember when it was um you know users were putting up their ETH and

taking out Dye, but the MKR token was the one that then was the back stop, right? So there's everyone's kind of figured out a different way to handle the bad debt, but ultimately that is probably the real risk and why it's different from just you know sitting on tea bills. >> Yeah, it's a it's a great question. So there's there's two dimensions to it. You're right that more diversifying in some sense is not always good, right? If you diversify over garbage, you're in a worse position than if you put all your assets in one secure protocol. So that's the like, you know, protocol layer. From a smart vault, smart contract perspective, this is its own like deep subject, right? Like not all vaults are the same infrastructure. They have different trade-offs. They have

different permissions, different ways they do calculations. Um there's a vault exploit this past week um from some curve pool that had some pricing issues. Um, so that is something that we think about deeply and there is to some extent a trade-off between like how expressive these vaults are and the surface area for where things can go wrong. Uh, so you're right like the simplest vault is it doesn't do anything, right? It maybe sits on top of a Yeah. And that's it. And there's minimal smart contract risk, but there's no product flexibility. Uh, we've thought about it a lot. What I can say is it exists, but this is why it's super important to be battle tested.

It's why we sprinted to get to multi-billion dollar scale and stay that way and prove that our infrastructure is secure because you can't put a price on that. Right. >> Right. >> You're at you're at like almost two billion today, right? >> Yeah. And our our peak TVL was it's going to sound insane, but six billion. >> Yeah. >> Yeah. >> How did you get the TVL? >> The six billion was during the height of plasma. >> Which is nuts. >> So you were one of the main plasma. >> We were the We are We're effectively plasma as well. >> You are. Okay. Yeah. >> Huh. Um, how do you think about correlation risk across strategies? So like if there was like a March 2020 uh like you know liquidation cascade or 1010 or something like that um more March 2020 um because it's a little more

tied into DeFi. Are the vaults >> actually diversified or do they all blow up together or is that not your problem? That's on the risk manager to figure that out. >> I mean it's it's our problem in the sense that we're in DeFi and like it's our business, right? Um and it happens, right? In fact, a couple of months ago, there was a a company called Stream Finance. I'm not sure if you guys heard of this. Uh that was kind of a mini contagion. Yeah, it was one asset, Stablecoin. Again, we could talk about that how people call themselves stable coins and [snorts] it's all [ __ ] >> Um but it went insolvent and this was there was a set of morpho markets that users just couldn't withdraw from. They incurred bad debt. What ended up happening was that fear spread to all the morpho markets and for a period of

like I don't know 15 minutes or something not that long even healthy markets and healthy vaults had liquidity and withdrawal issues. >> So sometimes it's not just like the economic spread sometimes even fear and FUD can cause these kinds of disturbances. Uh it's definitely something something I think about. It's one reason why diversification makes sense like a was fine right during that event. Maybe there's future events where AB is not fine and Morpho is fine. But yeah, it's really on the risk manager, but you got to be mindful. >> What do you think? Maybe picking on the Morpho competitive dynamic there. Like Morpho has this I think Morpho has permissionless vaults, right? So like anyone can go to Morpho and spin up a vault. You guys have more managed curated strategy. What's the How do you

think about that? Like why why is that? >> They're very different models, right? So Morpho's model, as far as I can tell, I don't think they're monetizing their vault layer. It's just like it's an instrument for getting capital into the lending protocol, but the lending protocol I don't know that >> whereas you guys are just a vault provider vault tech, >> right? And this is what allows us to invest in building the best infrastructure, right? Versus vaults are always secondary for protocols, right? They're only as good as they need to be. They're not as good as they should be. >> Do Morpho vaults allocate to lending pools outside of Morpho and No. Okay.

And then would you guys ever allocate your vaults to Morpho even though you compete with them on the vaults layer? >> We have Veta vaults that allocate to Morpho vaults, multiple Moro vaults, right? Let's say you want to allocate to two different morpho curators. Yeah. Right. How do you do that? Well, that's a beta vault. >> Huh. >> It's the beauty of Veta. >> I like your model. That's cool. That's really cool. >> Um, do you get worried about a launching native vault products? I think a like everyone's going to do vaults. But is a g going to launch a vault that lets you allocate to Morpho or Oiler or Pendle or Uniswap? No, they're not because that's not their business.

>> Yeah. Um, what do you guys think happens to DeFi TVL as the DeFi uh DeFi mullet goes like probably mainstream/p parabolic this year? >> I think it explodes. >> Yeah, >> I think it explodes. And the question right is will there be enough borrowed demand on the other side that the yields continue to stay high and competitive >> because this is like you know it's like surge pricing right it's like it's constantly balancing these two things. >> It would be very wild to me if you know all these fintexs launch we bring in tons of USDC or you know other stable coins in and then the yields start compressing compressing compressing because there's no people wanting to borrow on the other side. I think when that happens, it just kind of spurs the

market like pulls from the market more borrow products that are built on DeFi. And I bet that becomes more and more um you know maybe uh a also another like hint at what is to come from Kraken and our growing suite of uh of DeFi and onchain products. >> Uh but that's I think the thing I would be looking for and curious about is like let's say this really does happen. We bring in a ton of incremental TVL. How can the industry then what maybe it's like a you know Jebvin's paradox kind of thing. It's like what then comes of all the new types of lending and like if lending is super cheap in DeFi I should saying borrowing if borrowing starts becoming very cheap in DeFi what are all

the new use cases that will come from that. Hm. >> Yeah, this is a fascinating. So I I'll add to that which is the user base historically in DeFi has been like a thousand people like realistically you look at the capital it's like you know Justin Sun and a couple other people and you get very interesting dynamics. >> The amount of teams are like how are you going to get your TV out? They're like oh like I know someone who's close to Justin Sun his eminency. >> Yeah. I think he had like a billion dollars in one of our vaults at one point. Um so those dynamics the markets are very interesting where you have a couple people that changes when you have millions of users when the capital base becomes diversified and more sustainable. Uh I think it's it's very interesting you have maybe less of this

stuff that we see in DeFi now this volatility and you you're actually able to build more interesting financial products with that user base. >> Yeah. Um as we think about wrapping up what do you guys think is one thing that listeners should like really pay attention to in the vault space? I think this trend, you know, I'll just reiterate it. This trend of flexibility and product always wins is something we'll see play out. What Kraken and John are doing is is truly amazing. Again, one click and you get all of this DeFi, right? It's not just one protocol, one chain, one asset. You get all of this exposure packaged up into this single simple, very easy to use product. I think, you know, that door only opens and it stays open.

I think the other thing I'm looking for or or watching out for is like what we call inside of Kraken is hybridization. Like DeFi and fintech are going to merge closer and closer and closer. And this is kind of what we've been talking about through this episode where DeFi is becoming more backend, more API, more of a um tool that's powering all these yields than it is actually its own user interface. And that is, I think, how we 10x the size of DeFi and just onchain users. How do we get to a billion daily active onchain users at some point in the future? It's going to be through the apps that are simple, easy to use, and

fit the same interaction patterns that people are used to. >> Yeah, there's I just remembered one thing that this is its own kind of topic, but vaults are we're talking about vaults as a product tool, but vaults are actually also a compliance tool. And my view is that in the long run uh vaults will be the only way that institutions uh regulated institutions you know trady institutions can actually interact with DeFi because you can't just throw capital into this permissionless you know open whatever layer you need to be able to impose your risk controls. So I think there's implications on regulation how DeFi actually gets um regulated. I think vaults are going to play a central role.

>> Yeah. Fascinating. Anything else we didn't cover? just that there's uh a ton more to come. You know, I think uh this my hunch of where we are right now is I think uh 2026 is going to be like a year for the builders. >> Um I think the speculators might need to sit this one out for a couple years until we get back into those times. But um this is the time for builders and for builder for users out there, for people who want a high yield, who want to use Kraken, like please come use the product, give us feedback. We're open to it. Um we've got a lot more products coming to you soon. And for those who are out in DeFi and who want to plug in to one of the most, you know, trusted, secure, well-known global cryptocurrency exchanges, our doors are open. So, you

know, please come find us. We'd love to talk to you about any sort of protocol or offering that you guys have, but whether it's new vaults, it's new DeFi primitives. Um, this is the big effort. We're we're hybridizing the exchange. It's one of the big ways Kraken is growing. Things like XStocks, bringing stocks on chain, all these different products we're doing. Um, we've got a ton of really, really exciting stuff on the road map. So, you know, anyone please just come knock on our door and we'd love to talk to you. >> Love it. John, son, thank you guys. >> Thanks,