Editor's Note: DeFi, as one of the most transformative areas in the crypto industry, is evolving from early experimental protocols into a critical part of the global financial infrastructure.

This article is compiled from a roundtable discussion during Token2049 in 2025. The forum was hosted by Dragonfly partner Haseeb Qureshi and featured three representatives from core DeFi protocols: JEFF (Hyperliquid), GUY (Ethena), and STANI (Aave).

The three guests delved into topics such as the generalization trend of stablecoins, the future of perpetual contracts, the mainstreaming path of on-chain yield products, the convergence of DeFi and CeFi, systemic risk management, and the "corporatization" evolution of DeFi protocols, sharing their insights and perspectives on industry hot topics.

Below is the translation by BlockBeats:

The Surge of "Stablecoinization"

Host: Hello everyone, welcome to this heavyweight DeFi roundtable discussion. Today, we have the three most important representatives in the DeFi space: Hyperliquid, Ethena, and Aave. Let's dive right in.

One significant trend this year is the surge of "stablecoinization." For example, Hyperliquid recently launched USGH, Athena collaborated with MegaETH to introduce MUSD, and Aave has its native stablecoin, GHO.

Will this trend accelerate? Will every DeFi protocol have its own stablecoin in the future? If not, what kind of ecosystem is large and coherent enough to warrant its stablecoin? Will we see consolidation or the widespread expansion of stablecoins? Jeff, what are your thoughts?

JEFF (Hyperliquid): Our view is quite neutral. Hyperliquid is not a singular application but a network, a system collectively built by the community.

Our model is a platform that hosts all financial activities. From a financial standpoint, stablecoins serve as a bridge between traditional finance and DeFi. Therefore, we place great importance on the infrastructure development of stablecoins. We believe the boundary between infrastructure and applications is blurred, and our core contributors have their own views on this. We envision Hyperliquid to be a natural platform for building these stablecoins, ultimately achieving liquidity integration.

Host: Guy, what are your thoughts?

GUY (Ethena): I believe the week of the USGH proposal and MegaETH announcement was a "before-and-after moment" for stablecoin generalization. We have recently engaged with nearly all mainstream chains, applications, and wallets, and everyone is now thinking more seriously about this issue than ever before.

I think the question is: Do we really need every application, wallet, and chain to have its own savings account? The answer may be no. But the incentive mechanism may drive us towards this outcome. If you control the user distribution channel, why not issue your own stablecoin and earn revenue? This could pose a challenge to companies like Circle, as the distribution platforms may choose to internalize these profits. I believe this trend will rapidly accelerate in the coming weeks.

Host: So you think we are currently in an expansion phase, where everyone is issuing their own stablecoins, and then we'll see who can survive?

GUY (Ethena): Exactly. Regarding what kind of platform is suitable for issuing a stablecoin, I think chains and applications are different. Applications like Hyperliquid can force users to use their stablecoin through stablecoin-priced trading pairs. Whereas the chain itself cannot force an application or user to use a specific stablecoin because the ultimate decision-making power lies with the application. This difference may create some tension between chains, applications, and wallets.

Host: Apps are easier to push, while chains are more challenging.

GUY (Ethena): Yes, proximity to the user is a key variable.

Host: Understood. Stani, what are your thoughts?

STANI (Aave): From our perspective, the launch of the GHO stablecoin was based on user demand. Interest rates in other markets are usually floating, while GHO provides a predictable borrowing cost, which is a core user demand.
After GHO was widely adopted by Aave users, we found that DeFi lending is actually a low-margin business. Currently, we have $700 billion in net deposits, $300 billion in borrowing volume, and GHO's circulation is only $100 million, yet it can generate the same revenue as $1 billion in external stablecoins. This allows the Aave protocol to pivot to a higher-margin business, increasing profits by about 10x.

STANI (Aave):
We also view stablecoins as a way to capture revenue beyond the core application and integrate them into various financial applications and infrastructure. We focus on Esco (savings products), where a portion of the revenue generated by GHO lending is distributed to Esco users. These products can be further integrated into fintech and a broader ecosystem. This not only increases Aave's profit margin but also allows the revenue to be shared with Esco holders without locking or cooling-off periods. This is a strategic business decision for us and a way to extend the protocol's economic model beyond Aave.

Host: So the economic model of stablecoins is largely appealing due to the interest rate. For example, Tether is rumored to be valued at 500 billion dollars because they earn the Fed rate by holding assets, which is the attractiveness of stablecoins.

Of course, when DeFi was first born, the interest rate was almost zero. Today, interest rates have soared, and we have gone through cycles of low rates, high rates, and back to low rates. But your protocols have basically only experienced a high-interest-rate environment. Now, as rates are coming down, the Fed's dot plot shows continued rate cuts over the next few years. What does this mean for your protocol? If we enter a lower interest rate environment (though not necessarily back to zero), what changes can we expect in DeFi?

GUY (Ethena):

For us, this is actually one of the biggest differences between us and traditional stablecoin issuers. The interest rates in crypto DeFi are often negatively correlated with real-world rates. A similar situation occurred in the last cycle: when the Fed rate was zero, crypto lending rates skyrocketed to 30%-40%, lasting 6 to 9 months (in 2021). The key is the interest rate spread between DeFi rates and the Fed rate.

For us, this is actually a macro bullish signal. While our competitors will see a rapid decrease in interest income as rates fall, we believe that Athena's product rates will either remain stable or increase with market demand. This means we can retain users, expand market share without increasing costs, while competitors relying on interest income will struggle to maintain their position. This is one of our biggest advantages, and I believe Ethena is one of the most responsive assets in the crypto market to interest rate declines.

Host: In other words, if your revenue source is not the Fed rate, that's a good thing.

GUY (Ethena): Exactly, this also applies to Stani's business.

Host: Stani, what are your thoughts?

STANI (Aave): When we look at the data, we find that Aave's average yield has always been higher than the US Treasury bond rate. Achieving this in a high-interest-rate environment is already interesting, but even more so in a low-interest-rate environment. Every time a central bank cuts interest rates (whether it's the Fed, the ECB, the Bank of England, etc.), it creates arbitrage opportunities for DeFi rates.

So I believe that as rates come down, we will see a bull market for DeFi yields. This means that global users — whether in the West, Asia, Latin America, or Africa — will have equally attractive financial opportunities. This is a huge shift. The last time we had a low-interest-rate environment was before DeFi Summer, when early DeFi users flocked in because real rates were almost zero, and DeFi offered higher returns. Coupled with the pandemic, people had time to explore these technological opportunities.

Today, we have built a very mature DeFi infrastructure. Aave has undergone years of battle testing, and projects like Athena and Hyperliquid are also in development. We are entering a phase where DeFi can integrate into a broader financial and tech system, distributing rewards.

Especially for traditional finance and fintech, when they see real interest rates drop, they will start looking for alternative revenue streams to retain users; otherwise, users will move to other platforms. This will be the foundation of the next major DeFi cycle.

Host: Rising yields, falling rates, increasing risk appetite, all favorable for Aave.

STANI (Aave): Yes. But I also want to add that the Federal Reserve rate and DeFi rates are not entirely unrelated; macro factors do indeed impact these rates. All financial systems are interconnected.

GUY (Ethena): I would also like to add to Stani's point. In the previous cycle, we did not have mechanisms connecting DeFi to traditional finance. Everyone was working hard to establish credit funds, hoping to find a channel for the entry of USD into the system.

But now things are different. Whether it's DATs debt financing entering DeFi, ETF or ETP products, or Stani's products integrating into Web2 fintech applications as backend infrastructure, these channels now exist. In the last cycle, we couldn't bridge these credit spreads, but now we can achieve this on a larger scale. This is the biggest macro bullish case for DeFi.

Host: Well said. Jeff, how do you see the rate changes affecting Hyperliquid?

JEFF (Hyperliquid): This is not directly relevant to Hyperliquid as we are a protocol aggregator. I think the point you brought up is very valid. I remember in 2020, the reason for the existence of the spread was actually the lack of free capital flow. The market itself is efficient, so I am also curious about what will happen this time. I predict rates will eventually converge, but as you said, there is now a connected "organizational structure."

The development of Athena actually started from this "accessibility challenge" — capital chasing returns but not knowing how to enter the crypto orbit to capture these obvious arbitrage opportunities. So, I think there will be scalable growth this time, but rates may eventually converge.

However, I also believe that there is no strong correlation between general market activity and rates (please correct me if I'm wrong). Rates more greatly affect businesses highly tied to rate fluctuations, like lending. My guess is that trading volume will increase because trading volume and asset prices are correlated in the long term.

Overall, I believe financial activity is here to stay, and the demand for capital allocation is real. Hyperliquid's stance is neutral; we simply aim to build infrastructure that can upgrade the financial system.

Host: Stani's viewpoint is that the demand for "speculative returns" will rise, and I guess this is a positive development for all trading-related businesses. Do you agree with this as well?

The New Trends and Risks of DeFi

Host: Alright, let's discuss the potential new trends in DeFi.

Currently, the three of you represent DeFi's three core directions: trading, stablecoins, and lending. I remember back in 2017 when uidx's whitepaper first introduced the concept of Perpetual Futures. When I read it, I was convinced that this would be a big deal, but it wasn't until a year ago that Hyperliquid truly scaled it. So, it was "obvious" a long time ago, but it took a while for it to become a reality.

What do you think the next similar trend will be? Something that seems "inevitable but not yet here."

GUY (Ethena): For me, it might be perpetual swaps on equities in the stock market. You know, Robinhood's core business is actually stock options trading flow. And I believe that many retail traders' real need is to leverage long a specific stock rather than pricing volatility or option Greeks.

We can refer to the experience in the crypto market: in the crypto space, perpetual contract trading volume may account for 95% or even more of options trading. That is to say, when users have a choice, they tend to use perpetual contracts to express their leverage views on the underlying asset.

Therefore, I believe this is a very appropriate product form, and there is a clear market demand for it. You can see this demand in the crypto market, and the asset size of the US stock market is 30 times that of the crypto market. Thus, I think a "stock market version of Hyperliquid" will be the next huge opportunity.

Host: Why has this trend been slow to materialize?

GUY (Ethena): Mainly because in the US, the legality of such operations has always been unclear. But I think within the next 12 months, the US may allow the introduction of stock perpetual contracts. For example, Coinbase recently launched a product similar to "perpetual-style" futures, which can be seen as an indication of regulatory attitudes. So, we are just waiting for regulatory clarity for this product to come to fruition.

Host: Jeff, what are your thoughts?

JEFF (Hyperliquid): I believe perpetual contracts are one of the greatest innovations in the crypto space. While the concept may have been proposed earlier, it was truly propelled by BitMEX and its successors, who continuously optimized the technology, turning it into a more superior derivative tool.

I think regulation, although lagging behind, will ultimately be driven by "good products." The mainstream market trading volume is now mostly on data-driven futures, but that doesn't mean it has become the norm. Perpetual contracts could be one of the unexpected paths for traditional finance to move on-chain.

For example, Real-World Asset (RWA) tokenization has not yet been widely adopted, mainly due to the complexities of offline processes. Perpetual contracts, however, can bypass many of these obstacles, reducing friction between on-chain and off-chain.

Host: So now we have two perspectives supporting "perpetual contracts."

GUY (Ethena): Yes, and another interesting point mentioned by Jeff: when the market shifts from "Monday to Friday" to "24/7 all day," how will user behavior change?

For instance, if you are a stock analyst and on a Sunday night, you see Jeff Bezos at a nightclub (of course, this is a fictional example), you might consider shorting Amazon the following week. You almost have a "fiduciary duty" to trade over the weekend, but the traditional market is not open.

If perpetual contracts can make the market run 24/7, it will "compel" users to express their views even on non-trading days. This mechanism will attract traditional finance to actively participate in this product, rather than passively opt-out.

JEFF (Hyperliquid): I believe this doesn't just apply to a specific asset class. Perpetual contracts are actually one of the most effective ways to express a "Delta One" view (directly reflecting the underlying asset's price movement). It is a core financial primitive, almost a mathematical structure. The market should be efficient, allowing for efficient price discovery.

Host: So Jeff's point is: this is a kind of "mathematical elegance."

JEFF (Hyperliquid): Exactly, but we also need to look at this issue more holistically. Finance is not just about a hot asset or a certain identity; it's about human collaboration, price discovery, and liquidity provision system. We need to ensure that liquidity efficiently serves those who truly need it. That's the beauty of finance.

Host: Stani, what are your thoughts?

STANI (Aave): I agree that the "Everything as a Perpetual Contract" is a very interesting direction. It will continue to grow much like derivatives in traditional finance.

I believe that tokenized assets will also have their own space for development as long as certain restrictions can be loosened. Both of these product forms will coexist, but the share of derivatives will be larger, as has already happened in traditional finance.

These products are particularly suitable for "advanced users." However, I believe the real opportunity is to bring this technology to mainstream users. For example, providing on-chain yield strategies in a simple form to ordinary people so they can participate as well.

Athena's approach is a good example: packaging on-chain native strategies or cryptographic primitives into an "economic opportunity" and offering it to a broader range of users. The conversion of "on-chain yield → mainstream users" will be a very important trend.

In the lending aspect, we are also exploring how to enhance "predictability." Fixed-rate loans are a key direction we are researching.

We are also considering how to break through the "overcollateralization" model—where users must provide crypto assets as collateral. We hope to extend the credit model beyond pure crypto collateral. Tokenized assets are one direction, but we aim to go further.

The benefit of fixed-rate loans is that they can bring predictability to both lenders and borrowers. For lenders, this is an opportunity in the fixed-income market; for borrowers, they can better hedge against interest rate risks.

In the past, the development of fixed-rate loans in DeFi has been slow due to the high efficiency of floating rate pools. For example, Aave's lending pool efficiency is as high as 88%-92%, with little room for optimization.

However, once fixed income and lending are introduced, more complex credit and investment products can be built on existing infrastructure. I believe this is a very noteworthy area that will see significant growth in the future.

DeFi "Aggregation": Does It Go Against the Decentralization Premise

Host: Let's switch topics for a bit. Each of you represents the trading, stablecoin, and lending sectors, but you are also involved in each other's areas.

For example, Aave has launched its own stablecoin; you support the Athena-driven exchange (Texas); and Hyperliquid also has USDH and lending protocols. Are you becoming a new DeFi conglomerate? I recall there were discussions in the past about Sushi and Yearn Finance being a "DeFi conglomerate," but ultimately it did not succeed.

But now it seems like you are really driving this model forward. How do you see this trend? What is the ultimate goal?

JEFF (Hyperliquid): Personally, I think the term "DeFi Group" is a bit self-contradictory. The original intention of DeFi is like Lego bricks—each team focuses on a specific module, takes it to the extreme, and then allows others to access and combine it through APIs.

This concept may have seemed more like a "meme" in the previous cycle, but now it is gradually becoming a reality.

Everyone may have a different view of the vision, but for Hyperliquid, we place great emphasis on building core financial primitives on a "trust-neutral" platform.

For example, spot trading, tokenization of crypto assets—these are core businesses in the eyes of traditional groups (such as centralized exchanges) that they must do themselves. But at Hyperliquid, we hope these functions can be built by the community and remain open.

Initially, many people doubted whether this model was feasible, but I believe we have already demonstrated that it is achievable. We will continue to iterate on this process.

I firmly believe that the original idea of DeFi is the right way to build a financial system—more resilient, with less systemic risk. Because when risks are isolated in various modules, the overall system is more secure. This concept resonates in both traditional finance and DeFi.

GUY (Ethena): I think part of the issue is that there are actually few business models in the crypto space that can truly support billion-dollar scales. The three directions you mentioned just now (trading, stablecoins, lending) are basically all there is.

So when you try to expand your business, look for new revenue streams, you naturally step into other teams' areas, leading to "toe-stepping" situations.

Our own strategy is: first focus on taking one thing to the extreme, and then consider other directions. Sometimes there is indeed a temptation to do a little of everything, but there have been many failures in the history of "DeFi super apps"—each feature was not done well enough, and in the end, no one really cared about them.

Our philosophy is: focus on taking one product to the extreme. We even feel that we have not yet fully realized the potential of this product.

We are not a platform like Hyperliquid, but there are indeed some applications built on top of our core product. We do not intend to run an exchange ourselves; instead, we open up our product for other teams to build their businesses on.

For example, USGH runs on Hyperliquid, but it is not a native product of Hyperliquid; it is built by another team. This relationship is reciprocal, as we also have teams building products on Hyperliquid.

So, getting back to your question, the issue is this: there are not many truly profitable areas in the crypto space. Therefore, the largest participants naturally tend to "do a bit of everything," such as centralized exchanges also creating stablecoins or launching their own chains. This pattern is repeated throughout the industry.

Host: Yes, Jeff's perspective is: Traditional financial groups tend to "serve themselves," being closed-off, unconnected, and non-composable. In DeFi, we have openness and composability, but there is still competition across ecosystems. How do you view this issue, Stani?

STANI (Aave): I actually think that Aave's growth is to a large extent thanks to what these teams are building, which is also a very important part of Aave's story.

Composability is key. Collateralization is one of the core aspects of the entire DeFi product ecosystem. Collateral and yield opportunities may occur in other protocols that require liquidity support. Aave is the place that can serve various innovations.

I believe Aave is unlikely to do what these teams are doing because we benefit from this composability. This is also one of DeFi's value propositions and why many people enjoy building products in this space—you don't need to call various APIs; just build an interesting product, and it automatically integrates with other protocols to form a complete product.

This is what makes this space so exciting. We will continue to focus on lending, delve into how to manage collateral more efficiently, and securely access more opportunities. This in itself is a massive undertaking.

Host: I'd like to delve deeper into this topic. Do you remember the early days of DeFi? Back then, everyone thought DeFi was like MakerDAO v0, completely on-chain, endogenous, with no connection to the external world or fiat.

STANI (Aave): Oh yes, we've come a long way.

Host: Now, looking at Aave, there's Horizon, a permissioned RWA protocol; you even collaborated with BlackRock to launch products. Hyperliquid's USDH is issued by Stripe/Bridge—a large fintech company.

It is now clear that DeFi is not separate from CeFi (or the broader centralized world), but rather a continuum. You are constantly moving back and forth within this continuum. How do you view this trend? Are we moving towards a future where DeFi is deeply integrated with the centralized world? Has the vision of "pure DeFi" come to an end?

JEFF (Hyperliquid): I believe that DeFi is fundamentally a technology, not a "world." The past few years may have made it seem like it is a separate ecosystem, but I believe fundamentally, blockchain is a technology that enables global users to reach state consensus.

This is a superior technology used to handle the most critical aspects of human collaboration—money and financial assets. So in my view, this is not a fusion or competition of two worlds, but rather the entire financial system upgrading its technology stack. And better technology always prevails.

GUY (Ethena): I think the kind of "pure DeFi" you just described actually exists now only in a very small number of applications. The issue lies in the difference in user groups: there is a class of users who care deeply about "full decentralization," they are early adopters in the crypto space.

But most people who later entered this space are more pragmatic. They believe that certain decentralized features are important, but not everything needs to be decentralized. They care more about whether the product can scale, and if it has a good user experience.

The truly successful applications in this cycle have almost all made compromises on the "decentralization vs. usability" axis. They are not entirely decentralized, but they have solved other more critical issues, such as scalability, ease of use, etc.

So the trend you mentioned will definitely accelerate. If you have global ambitions, you cannot only serve those 2,000 users who care about "extreme decentralization." The new generation of entrepreneurs want to build products that are global-facing.

STANI (Aave): My thoughts are somewhat different. I think the term "decentralization" is no longer quite accurate. What truly matters is "resiliency."

People initially cared about decentralization because it could bring system resiliency and avoid single points of failure. That is the core of what we really care about.

Governance is also a part of resiliency. You can design governance mechanisms that are resilient.

In the past few years, we have seen that decentralized lending did not really take off. While we started on-chain lending in 2017, many centralized lending platforms (such as Celsius, BlockFi, Genesis Lending) were also developing. They raised billions of dollars and built a fully centralized crypto-collateralized lending model.

However, these platforms are essentially "black boxes," with opaque risk management. Once the market cycle turns bearish, these centralized lending platforms almost universally collapse.

Now, almost all lending activity has moved on-chain. On-chain lending not only offers higher pricing efficiency but also lower operating costs. For example, while the interest rate on centralized lending platforms may range from 9% to 12%, DeFi lending costs only about 5%.

Therefore, my conclusion is: for traditional finance, fintech, or centralized players, directly integrating with Aave and providing services to users is much easier than starting a lending business from scratch and managing risks.
And the reason DeFi lending performs so well is because of its transparency, smart contract execution, and other features, all of which contribute to a more robust financial system. That's the result we see.

In the future, we will continue to move in this direction. For example, many stablecoins are now based on Real World Assets (RWA), and we have already crossed that threshold. Although we no longer have all the characteristics of a purely on-chain system as we did in 2020, we have retained some key attributes that bring better financial products.

Host: So centralization is not the goal but a means to an end. What we truly want is resilience, reliability, and sustainability. And these new systems can indeed provide that.

STANI (Aave): No one would use a financial product solely for the sake of decentralization, such as a system that requires 10 or 20 people to argue on a governance forum. What people truly care about is whether the system is stable and can effectively mitigate risks. If you can achieve risk control and system transparency, users can make better financial decisions.

DeFi Risks

Host: Let's talk about risks now, that's a great segue.

The current DeFi space has seen a proliferation of complex strategies, such as yield farming, Pendle's yield splitting, LST/LRT arbitrage trading, and more. Of course, there are also old issues like smart contract risks and forced liquidations.

What are each of your most significant concerns regarding risks? After all, this is the crypto industry, and there will always be the next rug pull, the next wild event. Where do you think the next "unknown risk" might come from? Jeff, what are you most worried about in the Hyperliquid ecosystem?

JEFF (Hyperliquid): This question is not easy to answer. I am considering it seriously. For me, the biggest risk is actually "execution risk."

Host: That doesn't count; I mean real risk.

JEFF (Hyperliquid): I am serious. We often tend to imagine some "black swan events," but in reality, most system failures are not due to sudden accidents but due to "chronic diseases."

Just like human health issues, what truly causes death is often not an accident but a problem that accumulates over time. This "slow and painful decline" is the biggest risk.

Of course, there is also the explosive risk you mentioned. In our protocol design, we try to ensure the mathematical solvency and not rely on the price of off-chain assets or collateral.

A good system should not rely on these external assumptions. The vision of DeFi is to build a mathematically consistent system that ensures the on-chain logic itself can maintain stability.

However, I believe that if Hyperliquid ultimately fails, the reason may not be technical or market-related but that as a community, we did not build something truly valuable.

As the project progresses, it's easy to become complacent, feel like "we've already succeeded," and then start resting on our laurels. This kind of arrogance is very human but is also one of the biggest risks.

This is not just a problem for Hyperliquid but for the entire DeFi space. We have come a long way, but there is still a long road ahead. We have not yet truly convinced the traditional financial system to take this field seriously.

Host: So, the real risk may be complacency and relaxing vigilance. GUY, how do you see Ethena's risk issue?

GUY (Ethena): I think overall, the current system is much safer in many ways than the previous cycle. For example, as Vitalik mentioned on Matters two weeks ago, the proportion of TVL represented by smart contract attacks has decreased linearly since the last cycle.

From an engineering and technical perspective, on-chain security has indeed improved. Another aspect is the issue of systemic leverage. Although leverage still exists in the system, it is not as opaque in terms of balance sheets as it was in the previous cycle, where no one knew how much risk was hidden inside.

For example, as STANI mentioned, institutions like Genesis, Three Arrows, and others had very unclear leverage structures. However, in this cycle, similar leverage positions are not as prominent. In a sense, the collapse of Terra is also a form of leverage—it's USD that is a liability in the system without real backing.

So from a technical and leverage perspective, it is indeed safer now. But there is a caveat: we have also seen an exponential increase in system scale. STANI is the best example — the on-chain balance sheet of their protocol has grown 10x since 2021.

Now the scale of these on-chain protocols is nearing that of the 33rd largest bank in the U.S. These numbers are massive, and if something goes wrong, the impact will be severe.

But this is also the purpose of our existence — we are not here to build inconsequential things. We should be excited to build "systemically important" infrastructure, just in a responsible manner.

Another point is that when Ethena was first launched, many people expressed concerns about our risk model, worrying about how we would integrate into the entire system.

But I believe our current approach is already one of the safest versions in the "dollar system." However, at the same time, it has also opened the "Overton Window," allowing anyone to label "a loan to Ken's Bicycle Company" as a "stablecoin."

It seems like we are now packaging everything as a "dollar" and then calling it a stablecoin. I hope everyone takes a moment to pause and think during this process: have we pushed the idea of "what can be called a dollar" too far?

Host: STANI, what do you see as the biggest risk Aave faces?

STANI (Aave): I would worry about all the risks, so you don't have to worry (laughs). Mainly because there are too many modules in DeFi that need to be managed and monitored simultaneously.

Over the past few years, certain risk categories have significantly decreased. For example, smart contract risk — many protocols have been validated over many years and are highly mature. Asset-type-related risks are also gradually maturing, with many excellent risk service providers helping lending protocols manage these parameters, performing very well.

So from this perspective, I am not so worried at the moment. But I do believe that a lending protocol's true risk test is during a market downturn cycle.

In a stable or rising market, everyone easily gets excited to list various assets. But the real risk management capability is tested during a market downturn, when liquidations are triggered.

In the past five years, Aave has experienced over 300,000 liquidation events, with a total liquidated amount of $3.3 billion, and the largest single liquidation ranging from $200–300 million. This shows that DeFi can build resilient systems.

What I'm currently more focused on is "Counterparty Risk". For example, when a certain asset is integrated into Aave, we evaluate the protocol or asset risk behind it, how is it being managed? Is there some form of permission or centralization control?

This also ties into what you just mentioned about centralization elements. Some assets may have control logic at the smart contract level or centralization features behind them.

In contrast, I am more concerned about these centralization aspects. Because in a purely smart contract world, everything is visible and verifiable. But centralized assets require more transparency.

Credit to the team at Credora, they have put in a lot of effort in terms of transparency, allowing us to have a clearer view of how the assets operate.

I believe this is indeed one of the advantages of DeFi: you can really see "how the sausage is made".

Rapid Fire

Host: Alright, we're almost out of time, let's move on to the rapid-fire segment. Each person quickly answer a few questions. Who do you consider your biggest competitor?

STANI (Aave): Banks

GUY (Ethena): Circle

JEFF (Hyperliquid): We are not competing with anyone

Host: What do you think is the most common mistake made by most DeFi founders?

JEFF (Hyperliquid): Focusing too early on infrastructure

GUY (Ethena): Being too insular, only focusing on the niche DeFi user base

STANI (Aave): Ignoring composability

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