The Wolf Of All Streets - AI Agents Will Disrupt Crypto & Finance, Here Is How | Rune Christensen

Episode Date: February 9, 2025

Join me on The Wolf Of All Streets podcast for an insightful discussion with Rune Christensen, co-founder of MakerDAO and CEO of Sky Protocol. In this episode, we dive into the evolution of stablecoins, the transformative power of AI in DeFi, and how these innovations could shape the future of finance. Learn how decentralized governance, AI advancements, and scalable solutions are pushing DeFi closer to mainstream adoption. Rune Christensen: https://x.com/RuneKek ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://archpublic.com/  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. Use code '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  Follow Scott Melker: Twitter: https://x.com/scottmelker Web: https://www.thewolfofallstreets.com/ Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #investments  Timecodes 0:00 Intro 1:46 Rune’s Bitcoin Journey 3:26 The Evolution of MakerDAO 5:09 Launch of USDS 7:16 Centralized vs. Decentralized Stablecoins 9:28 Generating Sustainable Yields 11:55 Defi Adoption Challenges 14:54 Spark and Scaling Governance 17:10 Institutional Involvement in DeFi 20:23 Asia’s Role in DeFi Growth 22:31 AI and Defi: A Perfect Pair 25:16 Regulation’s Role in Trust 29:29 Lessons from Past Collapses 33:07 Transitioning to Blockchain Finance 36:43 AI’s Role in Mainstream Adoption 40:59 Sky Protocol’s Vision 45:14 Building a Decentralized Future 50:57 The Impact of AI on DeFi The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

A turbo nerd in his basement that suddenly learned about Bitcoin tomorrow and is like, oh my god, and then he becomes the next big crypto whale. To be honest, if Trump he said tomorrow, hey American banks, you can YOLO on Trump coin and Dogecoin. Trust me, don't worry about it, right? We're driven by speculation and greed still in this market. We've seen it over and over. You lose your keys and you could lose all your life savings and that kind of stuff, right? Which is just scary too. But with AI, suddenly you will see this population sort of explode, not because of more humans, but because of agents. And that economy will just like love DeFi so much more than TratFi, right?

Stablecoins have long been described as the killer app of crypto, but all stablecoins are not created equal. We have centralized stablecoins like Tether and USDC, but the first and most popular decentralized stablecoin was DAI from MakerDAO. I spoke with Brun Christensen, the co-founder and CEO of MakerDAO, which is now Sky, about the future of stablecoins, why they're so important, and how we reach mainstream adoption. Spoiler, it's through AI and AI agents. If you have any doubt about the power of AI and crypto, then you should listen to this

conversation and listen to it again. I've long made the argument that stable coins are the killer app for crypto. It's not the most popular sentiment, I think, with Bitcoiners, obviously, to say that tokenized US dollars, which they're sort of fighting against, are the killer app. But we've seen this insane adoption curve of stable coins and really, I think, a meaningful level of understanding of them and will probably lead to some comprehensive regulation and legislation. Stablecoins are here to stay and you're one of the early pioneers in this space. So maybe give us a bit of background and then talk about sort of the state of the union now for Maker? Yeah, it's funny you should mention that

because the way I got into crypto was that I discovered Bitcoin really early and just got totally rabbit-holed by the kind of, you know, the ideology and the futurism of how cool Bitcoin was, especially in the really early days. And then I just put all my life savings into Bitcoin right before one of the really early days. And then I just put all my life savings into Bitcoin right before one of the really early bubbles,

like all the way back in like 2000. I mean, I bought my first Bitcoin in 2011. And then a couple of years later, there was a big bubble. And I made a lot of money from that on paper, which I then lost again, right? So totally roundtrip all of that. And I think everyone that's tried round tripping stereo as well knows that it really sucks right it's much worse than if you just never

made all that all those paper games in the first place so that's kind of what taught me about the problem of volatility and got me into stable coins because i realized that this is you know this is not like you won't get normal people using this stuff if they get to experience, you know, round tripping, lots of money and that kind of stuff. So that got me into stablecoins. Eventually, after checking out all the different early stablecoin designs back in 2014, me and a couple of others launched Maker in 2015. And yeah, I mean, nowadays it's known as like the first

decentralized stable coin right and the the oldest defy protocol uh it has a really long history right of of um at this point it's older than 10 years and it's had the protocol been live more than seven years there is uh six billion stable coins in. There's a lot to it because it's such a big and old project, right? So Maker was launched in 2015, and then DAI, the stable coin of Maker, was first launched in 2017. Then the kind of version 2 launched in 2019, which had the kind of full final set of features, which is the protocol that's live today on Ethereum.

And it grew to around 5 billion DAI in circulation around the DeFi summer, basically, in the bubble following DeFi summer. But then from there, it had a really long time, really hard time expanding further and sort of compounding this initial growth. The main reason for this was because of this total, you know, unwavering

commitment to decentralized governance that has always been kind of baked into the DNA of the project since the very beginning. And the problem is, it sounds great on paper, but it's just incredibly difficult to pull off in practice. So the system very much basically stagnated, getting caught up in all sorts of like politics and bureaucracy following this like massive growth and then just like a sort of a somewhat naive decentralization of its governance and that basically led to then where the project is today it's been transformed into the sky ecosystem right so maker rebrands the sky and there's a new stable coin that launched last September called USDS. And the goal here is basically that USDS is meant to appeal more to regular people. So it's not so crypto insidery as DAI kind of was, right?

DAI is still around, but USDS is now the core stable coin. And DAI basically works as like a wrapper on USDS. And there's been some pretty decent growth. So now there's a total of 6 billion USDS in circulation with 4 billion of that being died. The main thing that's really the focus with Sky, other than this, just making it more understandable and appealing to the regular people,

but with simpler branding, but is then also like trying to basically solve this whole problem of scaling up the governance, right? That Maker original got caught up in. And what we've identified as really the key solution is basically twofold. The first is kind of making the protocol itself really simple, but then splitting it up into these components called stars that they're referred to. And they're basically sub-DAOs,

they're like sort of sub-protocols that are split off from the main protocol, kind of like L2s, but for governance rather than for blockchain. And then this really helps with the coordination because now you have these smaller, more flexible entities, including something like Spark, which is the second largest lending market in the world after Avid. And so Spark is the very first sky star, right? That's built out of sky and basically built on top of sky. Then the other core tenet of sky is applying basically AI to how governance works. Because through AI, you can really open up complex governance processes to normal people so they get to actually participate and it doesn't just become a bunch of politics so there's a lot of stuff been going on and we have

so much more super exciting stuff coming out over over this year but i think the main thing that's just interesting right now is just how usds has actually launched it's live right this new website sky that money and all of these features and all of this stuff is really finding its footing now after it's been worked on for so long and then finally launched last September. You talked about how you got to roughly $5 billion in a previous cycle and then the growth stopped. Do you think there's an element of that to the proliferation of centralized stable coins like Tether and USDC and those becoming

massively popular. And as we reach sort of another level of mainstream adoption of those people caring or understanding less about decentralization. I mean, what you guys originally built was sort of a bridge between the Bitcoin ethos and a tokenized dollar, right? You still had the true decentralization that came with a Bitcoin and that ethos. And now it's just deposit the money in the bank, earn money on treasuries and mint tokens accordingly with Tether and USDC and the others. So is there a battle now sort of between centralization

and decentralization? And how much do you find that people who are actually using these care at the core and the others. So is there a battle now sort of between centralization and decentralization? And how much do you find that people who are actually using these care, you know, at the core about the governance? Yeah, so I think it's more complex than that. Because I, you know, the thing that actually caused dye to grow so much in the last cycle was because there was an influx of demand, but it was still very small initially, right? So when the cycle began, it was about 50 million DAI in circulation. The demand started increasing, but because it was fully decentralized and backed only by Ethereum, it just couldn't keep up with the demand. It wasn't able to issue additional DAI to keep the

price stable because there just wasn't enough ETH to back that DAI. So then the governance made at the time the controversial move to add USDC as collateral. But then once USDC was added as collateral, it acted as this buffer, that now you could have this massive inflow of dollar demand that people would hold DAI and it would be backed by USDC. And then that USDC would sit there

and allow other people to come and basically use more ETH to generate additional DAI. So I think actually the growth of DAI and also the growth of USDS very much piggybacks on the growth of centralized stablecoins. So really, it doesn't really directly compete with them. It more complements them where the really basic centralized stablecoins, what they offer is they just really act as like digital cash for people.

And you're right. Like nobody cares about like decentralization or. Now, if you're sending your friend 10 bucks, 10 bucks for dinner, right? You don't care about the decentralized side. You just want to send somebody quick and cheap. Yeah. And I even think like when, when large businesses, they use USDC and USDT and they send transactions.

I think they also like, they consider think they actually consider sort of the, they do like a proper risk assessment, but they just don't understand decentralized technology yet, right? So it's like it's risky because it's still new to them, right? So I think when people use USDS, mostly it's because you want to use some kind of advanced DeFi functionality. And obviously the most popular thing to use it for is the USDS savings rate, which right now sits at 12.5%.

Although I think general rates are a little bit lower and typically it would follow the general rates that might go down unless the rest of the on-chain economies rates start going up. But right now it has these very high rates, very attractive rates. And what's actually the kind of the superpower of Sky and USDS is how it's able to generate the savings rate sustainably through how it deploys its collateral by really just having a very diversified approach on how it deploys its collateral by really just having a very diversified approach on

how it deploys collateral. So actually in the last bear market, rates in crypto was super low. And then DAI was really popular and got really widely adopted. Lots of people started earning the savings rate before USAID even launched. So just the DAI savings rate at the time, because Maker at the time was really the first major DeFi protocol to sort of open up for treasuries and letting people earn a savings rate that was based on diversified allocation into treasuries.

But now where DeFi rates are super high, then Sky just adapts and starts mostly deploying into DeFi yields. So you get kind of like the best of both worlds, right? You get wherever the best rates are on a risk-adjusted basis, Sky dynamically allocates into it and then is actually able to credit enhance, right? To kind of add risk management and capital buffers that ensure that the final stablecoin is still very safe to hold and comfortable to hold without having to kind of monitor it or risk being afraid that they're going to lose all their money.

Yet you can still get this quite attractive yield. How are those yields generated exactly? What's being done with the obviously collateral and the assets to be able to provide 12.5% safely? What's cool about DeFi is all of this stuff is completely transparent, right? And you can watch it in real time. And so if you go to info.sky.money, you can see sort of the real-time view of the system's health, basically, including the collateral base of the USDS stablecoin. And so right now, basically about half of the collateral

is in a mix of stable coins and then what we call cash real assets. Stable coins that is almost entirely USDC sitting in Coinbase custody and then earning the Coinbase custody reward. While cash RWA is treasuries diversified across some different maturity dates. And just making like a diverse portfolio of treasuries.

And so these yields are just like tri-part yields, right? That right now would give, I guess, around 4% or 5%, right? But that's basically, that's the part of the portfolio that provides the liquidity, right? So the other really major feature of USDS is that you can always pull out. I mean, right now you could actually cash out 2 billion USDS one-to-one with USDC. So if you wanted to convert 2 billion USDS into US dollars, you could do that by going through USDC with actually no slippage, no spread whatsoever. So that's the TradFi portion of it. And then the DeFi portion is basically a mix

of what's called the SparkVaults and then the Cobalts. And so these are DeFi basically lending positions with the Cobalt being basically like the original, like the original Megavaults. So basically the system I mentioned earlier that was launched in 2019, like I said, it's still live and people still use it directly. Uh, although now it's like a, and it's this direct use of the original system is now, uh, it's like a smaller portion of the overall collateral portfolio.

The other half is, uh, the so-called allocation vault to Spark. And the allocation vault is kind of one big position, basically, where Sky, instead of lending out to individual users, it lends to the Spark stock. So this sub-protocol of Sky, basically, that's kind of its own protocol with its own team, its own community, and eventually have its own token. What Spark does is it then deploys this capital further on into various different projects.

The biggest one being Spark Lend. So that's like this is the big lending protocol was mentioned earlier, right? That's the second biggest in the world. You can use it on Spark.Fi. It's a really good place to borrow DAI or USDS with ETH and Bitcoin and this kind of like so simple, but also kind of, you know, secure and easy to use DeFi product, right? And what Spark also does in addition to lending directly to end users is allocating into projects like Athena, Pendle, and this kind of stuff. And again, the strength is really the flexibility of this approach that there's no single protocol or single product,

a single front end where all of the lending or all of the capital allocation happens through this. It's much more dynamic with Sky having some direct allocation into TradFi, some allocation into the Cobalt, some allocation into Spark, which then further diversifies it onto various targets. Because you were talking about the rates, like how is it possible to actually offer 12.5% rates, right?

So all in all, the DeFi portion of the portfolio generates, I think it generates a return around the rate of 12.5%. And then the tri-file generates maybe like 4% or so. The blended rate, obviously, of the whole portfolio is below 12.5%. But there's also only about half of all the circulating stablecoins that are actually actively receiving the savings rate right now. I mean, all in all, for the feature that USDS provides to users,

the savings rate is very, very high. It's sort of artificially high, you could say. Especially considering that not only does it provide this high return, but it also gives you this amazing liquidity and ability to cash out to USDC. And then on top of that,

it's actually massively profitable. So it's generating a huge amount of profits. And that's because there are all these USDS in circulation that are not earning the savings rate, but where it represents about half of the portfolio, right? So you're amortizing it to the people who are actually earning the yield. They're getting the benefit of the yield from everybody who's not necessarily earning yield as well. So just the fact that it's not all earning, those benefits are amortized to the people who are. So it makes that artificially inflated rate that you were talking about

effectively. Yeah. Or you can think of it as the half of the portfolio that's earning a savings rate, they get the return that the half of the portfolio deployed into DeFi. I mean, it is possible to get around 12.5% return right now in DeFi. I think when people borrow in the Core Vaults and they borrow on Spark, they pay around 12.5%.

So yeah, it's actually more like Sky itself gets a really nice surplus from the half of the portfolio that is not where the users have chosen not to earn the savings rate for whatever reason. Yeah, that makes perfect sense. I'm curious as to your thoughts on DeFi generally and its current iteration and adoption. You alluded to the DeFi summer of many years ago when you guys exposed as the darling stablecoin for participating in DeFi,

but we all know that that was for very, very deep crypto natives. Obviously, those were people who understood it. We're yield farming. We're flipping between protocols. I would say it was the first testnet for what DeFi could be. Are you happy with where DeFi is as we come into 2025? Are you happy with where DeFi is as we come into 2025? Are you surprised that there's as much adoption as there is? Would you have expected there to be more adoption at this point? Looking back, and what do you think sort of the future trajectory is for the current iteration of DeFi? Yeah, I mean, I think really amazing things are happening with DeFi. And there is this consistent, sustainable growth as I see it.

There's clearly... I mean, I thought, let's say a year ago, I would expect that there would have been more of a crossing the chasm in terms of making the user experience simpler. I think that still is yet to happen. And it's just incredibly hard because people are just used to completely different user experiences. And there's this persistent issue of you lose your keys and you could lose all your life savings and that kind of stuff, right?

Which is just scary too. It's not going to, you know, it doesn't work for normal people, right? And so I actually think that the way that DeFi will end up getting broadly adopted really is that the institution can become more and more comfortable with it. Just a good example is something like Athena. They're doing this major strategy to try to get

institutional funds and so on to hold the PERPS yield-back tokens. That are basically these pretty exotic stablecoins. I think they call them synthetic dollars, in fact, so that? That are basically these pretty exotic stablecoins, right? I think they call them synthetic dollars, in fact, so that they don't have to call them stablecoins and be confused because it really is kind of a different product. Yeah, exactly right.

But it does offer a different kind of risk-adjusted return profile than what you can get anywhere else. And as the institutions become used to using that kind of stuff, they will start to more and more just arbitrage across whatever the good opportunities they can find in DeFi. And over time, it'll be incorporated into the products that are then provided to normal people when they save up their money. My guess is that in Asia, they're obviously at the forefront of everything and they're sort of going to lead the next century of technology. And I wouldn't be surprised if you saw that banks or financial institutions there, like,

you know, increasingly would find ways to open up to give regular people access to this kind of yield if the return remains just on average really attractive on a risk-adjusted basis as it is now. And this is how I could see DeFi could get this rapid burst of adoption. Because if institutions start doing it and then regular people, they get access through like, you know, C-DeFi and C-Fi and all this kind of stuff where it's like centralized products,

where it works like a normal app or a normal product you're used to, but it's hooking into the value creation of DeFi. That's the kind of thing where once it takes hold and you know that you can just get a better deal doing this, you might see a lot more consumers jumping into it. I mean, the other major growth factor I see is like AI, right? Like AI finance, AI economies.

They're going to be much more like DeFi native right out of the gate, right? So that's kind of like the crypto natives. It's like there's been there was this like boom in the crypto native cohort that happened in the last cycle but it feels like now the total population of people on the entire planet that could become crypto natives has been sort of exhausted and the group of humans that can do this stuff it's it's pretty much as big now as it's gonna get and and further growth is more like yeah they found it yeah yeah right right it's like the additional growth is not

there's not going to be some like turbo nerd in his basement that suddenly learns about bitcoin tomorrow and it's like oh my god and then he becomes the next big crypto whale right like those people are already long ago in crypto but with ai suddenly you will see this population sort of explode not because of more humans, but because of agents, basically, and like virtually managed capital, right? And that economy will just like love DeFi so much more than TratFi, right? Because DeFi is where all the data is, right? That's where you can get all the transparency, you can really figure out the risk, and that's going to really appeal to automated algorithmic systems. So I think that's going to be another major growth factor. When you talk about institutions in Asia adopting this and

offering it to their customers, I think people get instant PTSD from Celsius and Voyager and the others where somebody was effectively being trusted to actively manage your money. You were being told that they were participating in DeFi, but really potentially some of them huge Ponzi schemes, obviously. And so I definitely understand that if you could just hit a stake or an earn button that people are going to want to do that, but how are they going to know that their counterparty is not taking on additional risk that they don't know about like we've seen sort of in past cycles? I mean, the good side of that is that DeFi, for all of the shit it gets, hummed through the entire bear market. It worked. Liquidations were orderly. Everything, you know, worked. I mean, smart contracts were brilliant

and CeFi collapsed. But I think that it was kind of a stain on everything that said yield or earning as a result. Yeah. And the thing is, what it really requires is regulation, right? Like regulators actually understanding

how crypto works. And that's one of the things that's really holding back the industry, right? regulators actually understanding how crypto works. That's one of the things that's really holding back the industry. I think we're seeing this just now sadly with the Trump admin as well. Politicians and boomers and all the power brokers they just view crypto as either you just let the free market do its thing or shut it all down.

There's no concept of audits, crypto economic analysis, risk management. It's like crypto bad or crypto good, right? And the reality is with everything else, it's more like it can be used for bad and it can be used for good. So until there's some concept of that, it probably, you know, like it will be sort of stuck, right? So yeah, I mean,

and the reason why I mentioned Asia then is because Asia is where you've had actually smart regulators. Maybe even now that I think about it, you know, maybe even the UAE, right? That's perhaps the most proactive, like most cybernetic jurisdiction currently. But it's more like, I think if somebody starts figuring it out and is like, you know, here's how you figure out if something is a Ponzi scheme or not, right? The team, the, you know, the code quality, like virtual economic analysis.

Are they regulated? Yeah. Not that regulation necessarily says it, but if it's a huge bank, you've got to imagine that they're not, like, YOLOing, you know, 100x leverage on perpetual swaps with your money, right? Or something crazy, or launching a token

and borrowing against their own token. So maybe it's just that trusted entities, yeah. To be honest, if Trump he said tomorrow, hey, American banks, you can YOLO on TrumpCoin and DogeCoin, they'd probably do it. You know, like, it's not like trad buys. Has somebody literally filed

for a Trump ETF, a Doge ETF, and a Bonk ETF already? It's not enough that... Yeah, you can't... I mean, there's FTX as well, right? They were, like, trusted like trusted as like the big brand the smartest guys in the room or you know enron before them right so you can never really like you've got to have a check like you've got to have an institution like the governments themselves have to regulate this stuff because if they don't then great like whoever's the

greediest ends up being the one that can speak to the masses and then it slams to the slaughter, right? It's interesting to me that at the core, this is decentralization and reinventing finance. And at the end of the day, if it's going to be done by institutions in a mainstream way, it requires centralized regulation to do so. There's some irony there. Yeah.

But it's just, I mean, look, most people, they just, you know, they don't know this stuff, right? They're, they have like the simple people, many, many other, or they're just not finance nerds, right? So they're going to need somebody to tell them what to do. And if you, if you just let companies like say whatever they want, they will just lie and cheat and push it to the limit and so on. And I guess actually, I mean, so who knows,

maybe we will never see like DeFi regulation that makes sense and promotes like participation in DeFi by regular people, even though whoever pulls that off, like whichever jurisdiction, whichever economy pulls that off, you know, would like see massive growth, right? And get like huge inflow of like more money right like much better allocated capital and like a wealth effect and if it happened you would see other countries follow suit right but then the other option if that doesn't happen right then i guess this the the stand-in for the national regulator that actually enables the connection between DeFi and, and TradFi.

The kind of the alternative to that is just personal agents, right? So the AI aspect of like the AI is not a deal with it. And then eventually everybody can download some free AI that, that actually helps them sensibly figure out, don't put into the shitty scamming protocol, put it into the, you know,

the Lindy protocol that gives you like a decent yield. And here's how you protect your keys. And here's how you back up your key in a way where it doesn't get backdolled or something. How damaging do you think that that CeFi collapse was? And then I guess some would say that that was largely triggered by Luna, which was advertised as an algorithmic stablecoin that was over collateralized by crypto assets. Do you think that we still deal with the fallout from those collapses or do you think that we're past it and can sort of move forward with safer products? I actually think we may not even have seen that. We may still see more stuff like that happening in the future.

Like, I think in hindsight, it was unavoidableoidable like it was always going to happen what happened like the way it played out was just because crypto is such a transformative technology but it also just hits as technology is transformative but then it happens to be concerning itself with finance which is like finance is the most powerful human construct that exists, right? So you just, it's just such a volatile, you know, crazy mix of things that are getting mixed up. And you're always going to have crazy scams, crazy Ponzi schemes, collapse. It's like all this kind of stuff is in the DNA of crypto's early decades, right? Which we're still in, we're still super early in crypto, right? The way something like the CIFI collapsed,

FTX and so on, like this is what I was just, the point I was just making earlier, that the only way that could have been avoided was by having, you know, super intelligent, superhuman, altruistic national regulators that somehow got ahead of crypto and made all sorts of sensible regulatory frameworks

that, you know, enabled innovation and dealt with the risk. But regulators can't do that. Governments are incompetent. There's no way they're going to get ahead of crypto and figure out how to deal with it. We're still suffering from the collapses that happened, but it couldn't have been avoided. And it happened because the technology is so crazy powerful.

So it's the power of the tech that also leads to its risks and it's the bad side of it. But you have to kind of accept that if you want to build the really cool stuff that's possible. That's how we view ourselves in Sky, right? But like, it's like, I mean, there's a, there are a number of like, of these like large, legit, established, proven projects, right? like it's like uh i mean there's a there are a number of like of these like large legit established

proven projects right it's annoying to get lumped in with all the scams not well not even lumped in like it's kind of like especially uh this is something maker experience a lot right and then we still experience now which is that like oh it's not really it's not really pumping enough right it's kind of boring so people don't really like it. They much prefer some new AI agent narrative or Trump coin or meme coin, right? But it's that excitement and that transformative potential of being able to manipulate the pillars of finance,

which then results in all that insanity because of the speed of greed, right? The fastest you can go, right? We're driven by speculation and greed still in this market. We've seen it over and over. Utility always gets lost when there's some sort of hype cycle. And then that individual bubble bursts and everybody comes back to utility. Then there's another hype cycle that bursts and it comes back to utility.

So I think that that's the nature of any sort of nascent technology that's being adopted. And to your point, when it's finance, you're going to not only attract the most brilliant minds who want to build a financial system of the future, you're also going to get every scammer who realizes that this is like mail scams and Nigerian prince emails on meth or on speed. The same rails that make this more efficient for a superior financial system also make it better for hackers and scammers. Yeah. I mean, the good news is you haven't, I mean, in Sky you've got $6 billion of capital that's learned

and that's capable of tapping into something that kind of looks stupid to be true. I mean, basically 12.5% is like a pretty ridiculous high rate actually to get with the kind of risks that you're taking with USTS. And similarly, I mean, there's also several billions using ADA, right? And there's a couple of other of these major protocols. And all of this capital that's there, I mean, that's people that are not going to fall for some crypto scam, because now they know how to differentiate the solid stuff.

And they're not going to go back to DeFi. It's just like an unstoppable force, right? Like slowly this kind of pool of, I don't know how to call it, like cyber capital, right? That can actually tap into Dey and uh allocate at scale that's only going to grow over time right and it'll just continue it'll set the standard eventually right and uh through whether it's through ai agents helping regular people or you know a new generation taking over in some of the most innovative governments around the world and then instituting good regulation,

eventually the whole world will switch over to something that looks like DeFi, to blockchain-based finance, because it is just inherently superior. Everybody knows it, right? The banks know it. People in crypto, it's obvious to us, right? It's really more like, how does that transition happen?

And how do you, yeah, I mean, how do you do it and then avoid everybody getting scammed left and right? So you have to move slow. And yeah. Yeah. I think we believe that at the beginning that individuals would opt out of the broken financial system and they would find their way into DeFi and they would become their own bank. The original sort of ethos of Bitcoin and certainly of DeFi. And now I think we understand that it's actually going to take the institutions switching their rails to bring, you know,

millions and tens and hundreds of millions of people at a time. It's just, I think, an evolution of the concept of how it gets there, what it's going to look like when this is the underlying technology for the entire global financial system, if that happens

yeah i also think it really it's really worth it to call it i mean we were talking about centralized stable coins right but it's also worth it to call out like the large and i mean large even does it just like the giga exchanges right which are like the new banks the new banks of the new world right that there's a lot of people who when they use crypto that means they use Binance. So that's actually an example of like, you know, a CeFi product that has kind of reached, but hopefully right, reached escape velocity and like won't collapse despite not really being, I mean, regulated in a way that financial institutions of that size have historically been regulated, at least in recent history. But it was just managed correctly. And in the end,

obviously Binance, they are benefiting way more from being who they are now than if they had tried to rock-pull at some point, even though they probably could have done it. But they didn't do it and it was worth it? And now they've secured a position as really a pillar of the financial system in the next century, right? I mean, listen, even in the United States, before we got Trump and this idea of deregulation, I mean, Coinbase launched Base, right?

You can stake on Coinbase and you could on Kraken. There were some legal questions around that that are still pending, but I think those go away. I think that as all of these companies become bigger, I think Coinbase and Binance, probably the best two examples, one for the rest of the world and one for the United States, they're definitely going to heavily participate in DeFi. So maybe this doesn't go through Bank of New York, Mellon and Goldman and Morgan Stanley and Charles Schwab, but that many more people just start to participate in Web3 through these centralized

crypto exchanges. And then as that happens, then you'll naturally see a greater awareness also of pure DeFi. So that's also why with Sky there was this focus on what has to be even though you'll never make something that is purely, well, free AGI. We won't be able to make something that is pure DeFi, but as easy to use as these kind of centralized exchange like things.

But there's no reason not to make it as close as possible to that experience. And I think a lot of people are doing that in crypto right now. And I think there's a lot of cool projects that are really just like, let's try to push the limits on user experience in DeFi. And Sky News, yes, is definitely a part of that. And then also, I mean, and then I keep getting back to this AI piece, right? That very soon, I think we will see that a major component of that is going to be like adding AI to it, right? Like so AI support. As regular people become more used to and more comfortable using AI to sort of help them navigate what they can do on

the internet, like very quickly it will naturally become a part of, I mean, you'll use it for regular finance. But then from there, it's actually a very small jump into then accessing real DeFi directly without middlemen, without extra fees. And that's a really exciting future, right? Because that's the point where we're sort of starting to see pieces of the original vision becoming realized. Yeah. I mean, you're just going to send your AI agent in there and you're going to see your return and you're not going to think much about what's happening,

right? And for better or for worse, that's what's coming. I think the AI agents change absolutely everything. And when I think about it, I don't think we're going to need, as you said, more people to be the turbo nerds from their basements trying to figure out how to yield farm. But then the question becomes, when it becomes PVP, player versus player, my AI agent versus your AI agent, do we open a whole new Pandora's box of risk? It's going to be different depending on different types of users. I think it could also just be supported in understanding and getting explained what's happening. So let's say you want to earn a good savings

rate on your life savings right uh and you don't like let's say you're in a country that doesn't have access to treasuries or something like that right then you know usds is a really really good option for this for people today right it's like it's kind of the no-brainer option for for a lot of people around the world today. But the reality is they're not going to be able to research how the protocol works, how everything works, and so on, right? But with an AI agent,

you can kind of have them do the research for you, right? And explain how things work. I mean, there's going to be people that will be like yoloing stuff with agents and maybe getting them to trade Jetcoins even, right? Or something like that. At the worst point, you have to completely write about your PVP point, right? That it will be hard to generate alpha that way.

It will be more like you can... Like the YOLOing into an AI agent and just letting it do its thing becomes like the new index fund or something like that of the future. That's kind of... That's probably the best case. Well, best case scenario is... That's index fund. That's a good case. Yeah, worst case is just gambling. Instead of like YOLOing into 100x leverage on Trump versus another agent that's shorting 100x leverage on Trump, right? Because

who knows where these things are going to go. Yeah. It can sort of replace the trust of the institutions of like when you go and put money in the bank and try to find then they you know they explain a bunch of stuff about risk and so on to you and you know you don't really understand it but it's also just an element of like you want to know that it's things been explained to you right and and and that uh at least if you look at it and if you spend the effort it would make make sense. And there's not some red flag that basically says, don't look further into me. Trust me, don't worry about it.

But rather that there is this ability to dig deeper. I think the big blue chip protocols and Sky and USGS are perfect examples of this. All the information is there. It's still not that easy to really get into. If you go, like I i said earlier if you go to

inside of sky the money you get to see the real-time uh data of the whole system right and then you can sort of click deeper right so you can click on like the pie chart of the collateral and then you can you know you can like you can sort of go deeper into let's say how is the um trash fire assets like how the treasury is secured? And then you can learn about the legal structure and you can even go and like see the, you know, see like actually see the individual trench of treasuries that are back in USDS. But like a regular person, it's not going to be easy for someone to do this.

It's also going to be kind of boring. And it's like, they wouldn't even know what they're really looking for, right? So that's the kind of stuff where if you have something, an assistant to kind of guide you with this, I think that there might be a lot of people, especially the younger people that are still somewhat risk averse, but with this kind of approach, it could bring them over the edge.

And then they'll be like, okay, I can get 12% or 10% or whatever, like a high rate if I have to trust this kind of stuff compared to my bank, which is ripping me off. And I actually probably know less about what's happening in the bank. I mean, for sure, everyone knows less what's happening in the bank. But you've got the trust of the government. Yeah, you were born programmed to believe that that's the most trusted institution there is for your money. Although, you know, you see, we obviously see cracks in that facade.

So Silicon Valley and Signature and such, but... Yeah, but I think as more and more, as DeFi evolves further and as we get these more trusted, halfway there rails like Binance and yeah, CeFi that doesn't blow up

when we start to see that scale. And then the DeFi protocols become easier and easier, gradually see more thoughtful branding and better marketing and better products and better design interfaces. And then also the AI assistance added to the mix. It just becomes a no-brainer. And then at that point, the banks really have no choice. Then they will switch their rails too.

They already want to do that now. But as the more DeFi becomes real competition, all the players in the game will start tapping into it. And this is why it's totally inevitable. The progress is moving in one way only. The world is digitizing and it's sort of blockchainifying and it's only going to stop when literally everything runs on blockchain and has the full liquidity and and it's fully digital and and cryptographically secured and all that good

stuff right which again is like pretty close to the original mission right but although as you mentioned also right it is in the end, the ironic thing is that the incumbents are being let in. It's no longer a revolution that's going to ruffle the system and build something new on the rubble. It's more like some, it's just like a big gigantic network that lets everybody in and everyone gets to be a part of the same network and gets to benefit from the economies of scale that unlocks. How much does regime change in the United States and potential deregulation affect what you're building and all of this as a whole? Obviously, we've had four years of extremely contentious regulation and legislation in the United States. It seems early that we're going

to sort of have a golden age here of the crypto industry being able to do whatever it wants in the United States. Does that affect your plans? Does that, you know, move our timeline up for adoption? What do you think of it? I certainly think that it does help with adoption in the short run, just because of the vibe of surrender, right? Like the general acceptance.

At the same time, I'm a little bit worried that the pendulum is swinging too far, right? So we're just going to see crazy meme coins and crazy scams and collapses that are all being cooked up now and then everything unravels in like six to nine months from today. And then we're back at like, oh damn, even though the president says crypto is good, turns out it's all a big scam, right? That would really suck if regular people ended up with that impression. So I'm just hoping that won't happen. By far, the most important effect isn't even on like adoption by users, because actually crypto is still so early that in some ways it's not even the user adoption that's the most important thing at this stage like what's the most important now is still just that there's more innovation to do

like there's still more bits and pieces of the vision that needs to be built out obviously i mean the adoption is like essential to make that possible obviously so i'm not saying like i mean and and we're not like obviously we're in like a later stage. We're in a later stage than we've ever been. I mean, that's, that's a given, right. But like the heavily anti-technology, anti-crypto where like China shut it down and the West shut it down and, you know, the EU becomes increasingly restrictive and America's like hates it. That really scared away a lot of really smart people that could have been innovators in crypto. And actually, I mean, ironically, made it so that way more people were like scammers who were comfortable being sort of in the gray area of the law in the first place, right? Dominating the space.

And so that's the bull case, I think, for what's going to happen now. That now crypto is like, it's legit, right? And it's mainstream and just like normal smart people, bright people, they're going to have no qualms like trying to innovate and make some cool stuff, some cool technology,

full math, whatever in crypto. And they're not going to worry about being sent to prison or something. And that's just like, I mean, that's where, even if this pendulum swings too far and crazy things end up happening during the Trump presidency.

And then in four years, we get some anti-tech, horrible Democrat government that just wants to straight up ban crypto. Even if you do that, there's no putting back like the four years of innovation. I just sort of the, the, you can't put the genie back in the bottle in terms of how much more free I

think builders will feel in the next four years. You also have an example of like Ross Albright being freed by it was like a very symbolic thing right but that's what also showcases how that there's just like a sense of like you have to you have to really nurture technology to grow as a civilization right you? You have to protect the people, build a technology. Like if you don't, you're gonna get screwed over by, you know, you're gonna get totally surpassed by the countries and the society that know how to actually evolve technologically instead of just stagnating. I'm really saying that with a chip in my shoulder because I'm European, right? So Europe is like the perfect example.

It's like a totally stagnant society, right? That's now like, you know, in serious trouble, just like from all angles because of how hilariously weak it became from just like absolute technological stagnation, right? And social stagnation

and this sort of anti-innovation, anti-technology mindset, right? And social stagnation and this sort of anti-innovation, anti-technology mindset, right? And it matters so much. Like, again, it's because like when you're anti-tech, then the only people who want to do it are the scammers. When you're like open to it,

the people who are actually interested in like doing cool stuff, then they'll do it because they want to do cool things. They don't want to be chased down by law enforcement, right? That makes perfect sense. So I know we're kind of coming to time here, but what are you most excited about for DeFi?

And obviously for Sky, you've talked about the endgame. Obviously, I know that you have a plan there, but what are you most excited about in the coming years? You know, it doesn't have to be the next six months, but what really gets you going, keeps you inspired to keep building in this space? Absolutely. It is how Sky will really pioneer applying AI to make DeFi accessible to regular people. So that's the process that's already being done. There's the rebrand, there's the USDS stablecoin. It's finally getting off the ground, right? Like USDS is getting some traction and some growth

just because it's a more accessible brand. But what's coming next is, like, that currently there's just one star. So kind of like these sub-agents, these sub-protocols created out of Sky. That's, you know, you can access it on Spark.Fi. It's hugely popular. It's the top two lending market in the world. But the point with Sky is that there is unlimited capacity to create more stars like Spark, right? There will be hundreds of them in the future.

And they're not going to be like the old, the hard lessons we learned in the space in the last 10 years was that decentralized organizations are very very hard to run if you kind of run them with human politics and paperwork and that kind of stuff right but that's why you need ai to run it if you start automating these things you start using ai you can turn all of the disadvantages of decentralized organizations into actual it's kind of you know the things that that sets them apart and allows them to be run much more cheaply and then to build products that are very bespoke for particular user groups, right?

So that's, I think this, like the, you know, the combined upside of kind of splitting up Sky into many different sub-projects that each pursue different strategies for how you can create growth, how you can reach end users, how you can make it easier for them to use it, right? Some of them will integrate with TradFi. Some of them will just go head-on and try to make DeFi

apps that people can actually use. Others will target niche communities or something, right? They'll all be able to have their own flexible strategy because they have their own governance processes. They can operate very flexibly and independently, but still share the network effects

of the whole ecosystem. They all have a single stablecoin, USDS, that they all generate their income from. And then you combine that with the fact that they can all actually run this with AI and they'll be innovating in various forms of AI. They'll use the cutting edge tools that are available to then apply to whatever their particular business strategy is. And I think that's going to be pretty exciting to see unfold when it starts rescaling. When

you've got more than just Spark, you've got 10, 20, 50 of them, right? And then every single time a new state-of-the-art AI model comes out, it'll be quickly incorporated into their governance AI systems, and you'll see results right away, like better hand-holding of users, better returns, better risk management.

Every time there's a technological advancement, the Sky ecosystem will be able to extremely rapidly integrate that advance and turn it into basically better results for end users. The more I listen to you, the more I'm convinced that AI is going to be the key to

supercharging everything we've been talking about for a very, very long time. It's going to get really, really crazy. I can guarantee you that. Yeah, I know. It's happening everywhere get really, really crazy. I can guarantee you that. Yeah, it's happening everywhere. But I think there's a good case to be made that blockchain and DeFi is uniquely the single highest leveraged way to apply AI in the economy and in society.

So it'll transform stuff everywhere, but it's like the fist of how AI reshapes the world is going to be through DeFi and blockchain because it's just like the purest possible way of how you take cyberspace and the digital realm and then have

that impact the real world. And that's exactly the kind of stuff that Sky has been doing for several years. Breaking through this barrier of how do you, you know, go from crypto and blockchain and the crypto land to financing real estate in the US or buying treasuries or providing liquidity so people can withdraw out of the bank and so on, right? And those rails have now been built. So they're there.

So now these AI native systems that can directly interact with DeFi, they already have the connection that then lets them also impact the real world. Love it. It's getting crazy. I'm more and more convinced that the growth we're going to see is going to absolutely shock people. I think we'll obviously see a net benefit, but we're going to see some ugly things probably happening in the process. Rune, man, thank you so much for doing this. Really a pleasure to talk to you and unpack. I wish we had a lot more time. Where can people follow you and find you after this conversation? Skyler Money, although the website's currently not available in the US.

Then there is Spark.fi. That is a really good place to use and interact with Sky Protocol and Spark.Fi. That is kind of the really good place to use and interact with Sky Protocol and Spark, as mentioned, which is a really cool project coming from Sky. And then you can follow me on Twitter at Runekeg. Love it, man.

Well, thank you so much for your time. I look forward to catching up down the road and seeing if Skynet has taken over and if we're all being dominated by our AI overlords.