Unchained - Why the Founders of Aave and Sky Are Still Bullish on Ethereum DeFi - Ep. 781

Episode Date: February 11, 2025

Despite the ups and downs of the Ethereum ecosystem, two of its most influential builders—Aave’s Stani Kulechov and Sky’s Rune Christensen—remain bullish. In this episode, they discuss whether we’re witnessing a DeFi renaissance, the challenges of building on Ethereum vs. Solana, and why DeFi adoption isn’t growing as fast as some expected. They debate stablecoins, whether Solana is truly innovating, and how AI could transform DeFi by automating governance and risk management. They also respond to some hot takes—including whether Aave is falling behind Solana-based Kamino, and why Sky deployed its USDS stablecoin on Solana despite Rune’s long-standing Ethereum advocacy. Show highlights:  02:33 Whether Sky and Aave are experiencing a “DeFi renaissance” 11:49 How Stani and Rune are trying to appeal to a simpler audience 23:00 Whether developers overlook how easy it is to build DeFi on Ethereum 27:40 Why Stani believes there is not a lot of innovation in Solana 32:17 What would need to happen for Aave to be in Solana 33:27 Why Sky deployed USDS on Solana 40:30 Whether the Ethereum ecosystem should be worried about users going to other chains 49:19 Why Rune praises Solana’s culture 51:38 How USDS’s growth on Base happens organically, contrary to Solana 59:35 Why they believe that the combination of AI and DeFi will be so powerful Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Mantle RockWallet Kelp DAO  Guest: Stani Kulechov, Founder and CEO of Aave Previous appearances on Unchained: Stani Kulechov on Why Aave Is So Successful - Unchained The Chopping Block w/ Stani Kulechov: Operation Chokepoint 2.0, Ethereum Innovation Push, & Polymarket Whales - Unchained Rune Christensen, Co-founder of Sky Previous appearances on Unchained: Can Maker’s Rune Christensen Fix the Sad State of DAO Governance? Rune Christensen of MakerDAO Part 1: How to Keep a Crypto-Collateralized Stablecoin Afloat Rune Christensen of MakerDAO Part 2: How Dai Stayed at $1 While ETH Crashed From $1,400 to $85  The Chopping Block: How to Manage MakerDAO, With Hasu and Rune Rune Christensen of MakerDao on Its $15 Million From Andreessen Horowitz Why It’s so Hard to Keep Stablecoins Stable Links Aave 2030 roadmap Alex Svanevik of Nansen tweeted: “When Aave on Solana?”  Qiao Wang of Alliance DAO commenting on why he recommends people build on Solana  The First Non-EVM Deployment of Aave Protocol: Aave V3 on Aptos - General - Aptos Forum Learn more about your ad choices. Visit megaphone.fm/adchoices

If I would talk to a new developer where they should start, if they want to get serious about DFI, then it's on Ethereum. And I would love to build on all of this. So if there's users and there's ecosystems, I will be happy to contribute. So I'm not really like kind of like tying myself into a blockchain. That's just stupid. Like no one should think like that, right? My goal is to build something that is secure and resilient. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. We are now featuring quotes from listeners on the show. Today we have one from Josh M. Dona on X, responding to my recent interview with former Silvergate Bank chairman Mike Lempress. Josh Mdona writes, such a messed up story. I don't know how Mike and others in similar positions. Caitlin Long comes to mind. Keep persevering through all the evil levels of injustice thrown to them over the years. They're true heroes to me.

for shining a light on the story. To have your comment featured, write a review of the podcast overall, or leave a comment on our video on YouTube or X. This is the February 11th, 2025 episode of Unchained. Mantle is building the largest sustainable hub for on-chain finance, launching three new products, enhanced index fund for optimized crypto exposure, mantle banking for seamless daily financial experience, and Mantle X for AI-powered innovation. Learn more at group.com. mantle.xyZ. I'd like to introduce you to Rockwallet. This is a digital wallet that puts your crypto under your control. Using Rockwallet is quick, easy, and secure. Visit rockwallet.com slash welcome slash unchained for an exclusive welcome offer for Unchained listeners.

Today's topic is the future of Defi. Here to discuss are Stani Kulachov, founder and CEO of AVE Labs, and Roon Christensen, co-founder of Sky. Welcome Stani and Roon. Glad to be here. Both of you are OGs in the Defi space. and both of your protocols are in the midst of some big changes, while defy and Ethereum themselves seem to be at an inflection point. So, Roon, you launched Maker, now called Sky, 11 years ago, which is like just an eternity in crypto. And Stani, you're now celebrating the fifth anniversary of Ave.

Why don't you each fill us in on where your respective projects are in terms of recent accomplishments? Roon, do you want to start? Sure. Yeah. So like you said yourself, Sky, formerly known as Maker, is just an extremely old project and it's really been through a lot in the space. And I mean, it all started off with this idea that we could go beyond just Bitcoin and speculation and actually blockchain and crypto be used for something real. And then from our perspective, what was really important was stability because having a stable coin is like the foundation of all other, all the other cool use cases. in crypto, including something like Aver, which, you know, that whole, like, I mean, basically all the really cool defy primitives, they depend on having a stable coin that sort of is the, the unit of account that you make all the other interesting financial things happen sort of against, I guess you could say. You know, the development progressed quite slowly, but ultimately the first version of the stable coin die was launched in 2017. And then it was upgraded. to multilateral dye, which is the system that is live today still in 2019.

And then after its launch, we had Defi Summer, and there was this massive, just massive growth, huge demand for the die stable coin and massive growth of the protocol. And then what happened is that while the system really, you know, just grew incredibly fast and had such a huge inflow of users, it was really held back by the, like, basically being stuck in this sort of the questions of how. do you manage a system like this and how do you deal with kind of the the ideals of decentralization versus the reality of how it turns into politics and that kind of stuff and how it can be very difficult to manage this kind of stuff and that then actually kind of became the beginning of the transformation

into sky because increasingly what the people who were sort of the I mean who stuck with the project including me to try to make it like just continues to try to figure out how do we overcome this and sort of just make it this amazing stable coin that's a decentralized stable coin, but it feels like you're using a sort of a normal financial product, right? You feel really simple while being true to the ideals under the hood.

And increasingly, that turns out to be so heavily reliant and figuring out how to do decentralized operations and how to do decentralized governance. And that then led us into looking at things like splitting up the project into these multiple, basically multiple independent entities called sub-dows, which we now refer to as stars. So that's kind of the main category.

One of them being Spark is like a fork of Abe, basically that's structured as a star that has been one of the recent successes of Sky. And then also as a part of that, basically rethinking the branding so that on one hand we're doing this very advanced, upgrades under the hood, but to the end user, the brand and kind of the product experience should be really simple and straightforward, which then include the rebranding to Sky, and also rebranding and upgrading the Stablecoin product to USDS to make it more familiar to end users and developing an easy-to-use frontend on Sky.

And that we went through with that whole, like sort of the launch of this and all these upgrades September 18 last year. And now it's really starting to take off. So since the launch, like it just, it would just pass the milestone just like a week ago or so that there's now more like of the total supply of stable coins in the system, more than half of it is held as the new USDS, EURC 20 rapper. Yeah, I think it's so fascinating to look at the trajectory because I remember the first time anybody ever mentioned maker to me back in the day. Like maybe this was, I don't know,

2015 or 2016. And they made it sound so complicated. They kind of like didn't fully describe it because they were just like, oh, you know, and I think like what they were talking about was the original collateralized debt, whatever. I forget even the name of it, but CDP, which obviously when I learned about, I was able to understand it. But it was just like at that time, it was so foreign. And so it is just fascinating even to see how your system is now, you know, just connecting more with real world assets. Like it really feels like that vision that you had back in the day is coming to fruition. So Stani, Avey also has a ton of recent updates. Do you want to tell us about the highlights? I mean, a lot has happened over the time. And I think that's the way

that Ave works today is quite expansive. So I think when we started building Alvain five years ago and even Edeland two years earlier in 2017, we basically were approaching the space more from like experimentation perspective of what we can do, what kind of financial behavior we could create as primitives. on chain and then how we could actually make use of those and how we can get better, faster, stronger finance. And I think what you mentioned, Laura, about the complexity that goes to these early primitives, whether it's kind of like the maker's CDP or even what Alva used to be, Eitland, or the way Alva

works on the boring side. the reason that I think there's a lot of complexity is because these systems are empty and transparent. So when you're trying to explain Maker or let's say Sky or AVE today, you tend to explain everything around it. And I think that's the reason why, for example, we get into that complexity. But on the surface level, when you think about the main use case that AVE has, it's just a simple thing as earning interest on your doors that happened to be on the blockchain. And that's what's the majority of the use case.

And then obviously you can have, you're able to borrow and do different types of other transactions, but same kind of like applies to to makers. So it comes from the background that's how we build these systems of software on chain and basically how we marketed them to early adopters that actually were in the space and were because of that decentralization or permissionless or trustless properties and wanted to basically reflect with those with their values. But the future users of, let's say, AVE Maker, they probably won't even know much about how AVE or Sky works.

they will essentially consume these protocols under a service, the same way as we're using email today. So we use certain types of emailing protocols, but there's clients that abstract a lot of that away. So everything we see is just a subject recipient and the actual message as well. So I think that's kind of like the path where AVE has been going. There's still a lot of infrastructure we're building.

we grew from zero up to having 34 billion worth of net deposits in the past year. And half of that growth came actually in 2024, which means that there's some sort of a DFI renaissance happening. If you look at both AVE and you look at both sky, there's a lot of growth that was happening actually last year. And for us, that growth is happening a lot on Ethereum Mainnet, but also, on these L2s, that basically the AVE protocol has been deployed because it's the same piece of code that can be just copied across all the EBMs and supporting those ecosystems and their use cases. We're also building non-EDAM deployments of AVE, starting with, for example, APDOS by building

in MOVE. And that's the technology that we choose as a first step out of non-EVATAM. because we want to be where the users are. And also, AVE has Go stablecoin, which came about when we wanted to create predictable borrow rates for the AVE users within the AVE protocol. And that's been growing and actually expanded to, it's in main net arbitrium and expanded into base now and avalanche. And the biggest thing we're working on now in terms of the whole kind of like evolution perspective of ABE is the B4 that brings a lot of interesting use cases, makes it easier to integrate with RWAs.

And that's a big kind of category. Yeah, you know, the point you made about how it feels like both of your protocols started off as being for crypto-native people, but you're kind of shifting to understanding like not everybody will understand how everything is, how everything works under the hood and and trying to appeal to that audience. Like I feel like the rebrand to Sky is part of that as well. So how do you guys think about doing that? You know, I don't know if, because I know obviously, Stani, you're having this AVE4 that's going to launch soon. Like, I don't know how, you know, your thoughts about how that future transition will take

place or really it's a current transition, how AVE4 meets that. and, you know, ruin how you feel like Sky is also doing that. So, yeah, either one of you can go first and addressing how your project is navigating this transition. Well, I mean, there's one observation I want to make. I think it's interesting that I kind of realized a couple of years back, which is counterintuitively, the simpler you want the product to be for like the end user that's kind of, you know, just like a normal person and they don't really want to, you know, spend too much time, research. searching all that crypto stuff.

Like this, the more you want to deliver something to them that acts as they expect, the more complicated you have to make it under the hood to kind of like account for all the things that there need to be the way they expect. Right. So if you look at like a really simple stable coin, that's something like Rye, right? So that's a design of like a stable coin that only uses Ethereumus collateral and it behaves in this like very predictive way and has very limited governance. but the problem is then you can't keep,

like the currency can't remain stable against the dollar the way people would expect. And it also cannot really provide a return. That's also sort of like what people generally expect to get on their dollars. That's possible to do with Ava and Sky in various forms, right? But what that then requires is this like huge,

basically network of contributors and risk advisors and risk parameters and sort of real-time monitoring and like this massive infrastructure. And in Sky's case, also this huge legal infrastructure for tapping into real-well assets like treasuries and centralized stable coins.

So I think it's somehow like you have to kind of absorb the complexity by the protocol in order to let the user kind of just get a really simple experience. And on the other hand, if you give the user a very simple product in their hand, then they have to kind of be pretty smart about like not falling in the pitfalls and like let's say i guess something like buying bitcoin and then thinking oh this is it really simple this can't go wrong and then it has a huge crash which

happened to me early on i mean that's what got me into stable coins in the first place basically that you just like you think crypto is nice and simple but then it crashes on you right and then that can really that can really push people away even though that the sign is so elegant and and and and like i mean so from sky's perspective it's actually that we've really embracing this, right? So we're really building up the capability to kind of eat complexity and abstract it away for the end users. You can deliver the best possible experience to the end user, which means really solid stability and then very attractive savings rate. And so the savings rate, that's kind of like the key, only one of the key features of a stable coin,

or any Defy product really. And the better savings rate you want to deliver, that means you need to be capable of getting a better risk-adjusted return, and that requires the ability to diversify into a lot of different assets. So you don't put all your eggs in one basket, and you kind of risk people actually, you know, putting them in sort of a financially insecure position. And so that's kind of like, that's a back end. And I guess the ultimate, like the ultimate kind of endpoint is to really get heavily

into applying AI to decentralized finance. And that's generally something I just think in general, that's like where it's all going. It's like this is all going to be about deploying, cutting edge artificial intelligence and sort of all of these improvements, like all the technological process that's proper as happening in large scale data capabilities and AI and decision making. To use that to sort of run the system on the back end. And then on the front end, you just offer people, USDS. it's a stable coin from Sky that's worth $1,1, and then you can choose to get the savings rate. And there's a total of more than $8 billion USDS in circulation now.

If you count both the USS Rapper, but also the legacy die rapper. I like what Trun said about getting into stable coins when he got tricked, because partially like, you know, I like using ABE, and I like, you know, using stable coins, USDS and like go and all the things that in default like the reason we are here today is because like we're we're using the these different primitives on ongoing basis and and it's kind of like the same story for for me in the sense in the sense that I wanted to figure out how you can

keep your eats use it as a collateral and borrow against and that's where kind of like the idea of like idland and ovulator evolved But I do think that it's a big meme of thinking, like, how we get this technology and use cases into mainstream. But it's really because a lot of the stuff is very simple. You know, it's just about the bridging. Like how you actually get a user that doesn't have a wallet, has never interacted with the blockchain, doesn't understand or have willingness to spend time on understanding. like what the fuck is Ethereum and all this L2s and, you know,

these different networks and all this complexity. And on top of that, basically understand all these protocols, what the FI actually is, and so forth. So it really is as simple as creating a very easy way from going to Fiat, from Fiat to all the USDS or let's say as USGS to the savings rate without knowing anything. Now, how do we plug in? to our users. And I think stable coins are going to be a, going to play a bigger role. So both oven and maker ecosystems, they have a stable coin, but you have all this fintechs that are

actually looking into this opportunity, like how they can tokenize their reserves and get it on chain. And then using defy, those are kind of like connecting points as well. And then later connecting savings products, connecting the lending protocols into their infrastructure, their application specifically. So I think we're just like entering into a phase where every other kind of like a key piece of thing is solved besides privacy. And now we can like focus on solving that's kind of like a US challenge. But there's also a caveat. So there's not a lot of. There's not a lot lot of good application builders and designers in Defi or in the Ethereum community, it's very scarce talent pool at the moment. So that's something that needs to be sold if we want to

actually see Defi integrated to everything where traditional users effectively are. So in a moment, we'll talk a little bit more about some broader trends in Defi, but first a quick word from the sponsors to make this show possible. Mantle is transforming the future of on-chain finance. With a $4 billion treasury and successful products like Mantle Network and METE protocol and Ignition FBTC, Mantle is launching three new innovation pillars that will bridge blockchain with everyday banking. Enhanced index fund, offering optimized exposure to BTC, ETH, Sol, and USDA through advanced staking opportunities. Mantle banking will deliver seamless blockchain-powered services.

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Regulatory caps throttled Silvergate. Key lesson. Manage exposure before growth gets unsustainable. Again, if you want to hear a comment featured on the show, please write a review or leave a comment on episode on YouTube or X. Back to my conversation with Stani and Roon. I also wanted to just ask generally about DFI because TVL and DFI peaked in 2021. And it has increased in the last year, but it's only roughly half of where it was at the last peak. And I wondered why you thought it hadn't at least, you know, gone past the last all-time high. This is obviously also happening

at a time when there's a lot of angst in the Ethereum community about all the kinds of things. But, yeah, I was just wondering if you thought that was affecting Defi or, yeah, just, you know, why it is that it maybe hasn't taken off as much as we might expect. I mean the Defy metric, first of all, it doesn't really fit for every protocol. For all it fits because in some ways that you can measure the trust in the smart contracts and the net deposits. and so forth. But for example, trading facility, it maybe means less.

So there's more assets of chain, even when they're actually trading and executing on chain. But overall, I think that the most kind of like outcry about Ethereum is mainly, you know, because of the price action. I don't think people really understand that most of the things. on DFI are in Ethereum because it has a really good environment to build DFI. And it's something that is very overlooked. So if you go today to another ecosystem to build complex decent interest finance,

you're going to miss a lot of tooling that exist already in EVM. So it's the same as going back in 2017 or 16 in building on Ethereum and missing all this tooling that makes you build more safer protocols. And I've argued this online with people who are developers, and I feel like they still don't understand because you don't really understand this unless you go and build something that has to be mission-critical

and has the risk of complete meltdown. So once you actually go there and realize what the processes are that has to be in place and the diligence, then you realize that a lot of these networks are completely focusing on the really wrong things, than they should be if they want to attract defy. So that is very overlooked, in my opinion. And then about the TVL in general,

I think we're in a kind of like a spot where the TVL moves a lot with the market cycles. And I don't think that's very fair assessment because the valuations of a lot of these assets that are used as a bilateral, for example, they inflate when the markets are. on a trending upward cycle when we are in the bull market, and then they're decreasing on a bear market.

I think a good indicator to monitor is actually stable coins on chain and how much of those stable coins are going to B5 protocols. And I still think we're in this kind of like a weird mezzanine beard where we built a lot of native infrastructure, native asset support, liquid staking, v staking, and being used as a flat-all and then at the same time

we're entering into this new role of RWA's and seeing institutions like BlackRock and almost alike that are actually starting to bring these traditional assets on chain and those will end up into D5 protocols

as well. So to get to that point where DFI will be at one trillion, TBL, we need that traditional institutional integrations and tokenization piece, and we also need more stable points on chain. And that comes when we have things like fintech starting to integrate decentralized protocols as things become more clear to them about the offering. The security comes more clear as these protocols keep surviving and being stress tested

of these events like the past week. So I think we're just in a place where a lot of this stuff is getting built. And in two years from now, things will look like completely different than it is today. And, you know, I agree with a lot of what you said. The one part where you said you feel like it's mostly just people being unhappy with the ether price. you know, when I also look at the fact that it just sort of looks like Solana has more momentum right now where, you know, the Solana was the center or is the center of the main activity in crypto, the biggest trend. And in 2024, this was the first year to attracted the greatest share

of new crypto developers. I think those two facts are quite important. So when you think about those? Like, how do you also think about, you know, what we're saying about the price and everything? Like, do you worry about those two things I just mentioned? Not really. I think the more developers in overall on-chain is better. It doesn't matter where they start or end up with. I will be actually more happier. Solana, you have more developers that are building resilient, safe, and secure defy. And a lot of these protocols are tested when the markets are going to go down cycle. Then you actually see where these implementations resilient,

where the community decisions actually resilient, and Ava and Sky are protocols that have been able to actually go to those cycles. So I think that's where the actual, the big testing actually happens in production. But at the same time, I think, think the developers that are on Solana, they might be building more of things that are related to, for example, meme coins and whatnot. But slowly, as you get introduced into, and the same thing can be on Ethereum ecosystem for people who are building on base, for example, they get into the space from one interesting angle, but then as they look, research more into defy and what could

actually happen here, what we're rebuilding, the whole traditional financial system. they get excited about it and they will build. So I do think, yes, Solana has got a lot of mindshare and they have a really good kind of like a marketing department in the sense that the community and some of the key individuals are constantly saying things that today I actually was reading about a tweet where the Solana's foundation president said that there's a product that is on basically Solana that is better than A.

It's the same thing as Ava, basically, but a little bit outdated that what exists today on Aver B 3.3 essentially. So people who are talking and creating these narratives, they have a lot of disconnection of the reality. And that's fine because I don't expect everyone to actually go deep and understand how Ava works or how any of these things works. end of the day like we at least I think that's any net developer any net innovation an actual innovation not just like taking something and you know bring it to another network that's also

great if there's users and users for that but I kind of like hope that we see net new innovation and that brings us closer to to more mainstream so I do think that's it didn't overall should be void in the sense that is the innovation and level of innovation where it should be? I don't think that's the case. I think there's a lot of innovation this thing at the moment. What are they should

be comparing to Solana? I don't exactly know where that is the key here. The key is how do we build more and better things that gets us closer to these integrations? And that's where like a lot of these things that we're building here

like SQSD assets, the savings products from Sky, for example, or Aves basically before, or getting these products more in a simple way, simplified to end users are going to be really key here as well. And the tokenization as well, because I think tokenization will be everywhere, not just on Ethereum, but there's really good network effects to have that tokenization in Ethereum. because obviously actually it is the only place where you can borrow one billion dollar worth of stable coin liquidity in one transaction and you can't really do that anywhere else.

And that's a scale that institutions should be looking at in the future. Yeah, just for listeners, the exchange on Twitter that we were talking about was Alex Svanovick of Nansen tweeted, when Avey on Solana and Kyle Simani of Multicoin, which are a huge investor, into Solana responded Camino, which is sort of the equivalent of Ave on Solana. And Alex was on, oh, but, you know, Ave is 10 times larger. It would be a big TBL unlock if AVE users could simply switch chains. And then Lily Leo, the president Solana Foundation tweeted, but Camino is a better product, plus metrics today or not metrics tomorrow.

So, yeah, when I saw that, I was like, I have to ask Tony about this one. And in all kind of like, like this fits aside and like all this like drama aside. I don't live in a world where I don't look at Solana in the sense that it is a potential place for Avey to expand. But the reality is that we don't build experimentations. If we build something, we build resilient infrastructure. We have to ensure it's secure because if it gets the AVE stamp, the approval, that's going to be a lot to a lot of people, a lot of institutions and bigger users. And if we are going to expand to Solana, we have to put that work into place.

So it's not as easy as, for example, expanding to, especially for new listeners, like it's not as easy as expanding, let's say, Ave into a new L2 or EVM network. It's basically writing complete code base from scratch and analyzing the whole network any particular edge case that could cause that issue within the protocol and have that diligent standpoint. So it's not impossible. It's more possible than impossible. And, you know, one of the main complaints about DeFi on Ethereum is fragmentation, and you're

resolving that, I guess, with Ave v4, which has this unified liquidity layer. So I did also want to ask Roon, because you, you know, did decide to launch Sky in Solana. So obviously you're making a different choice than AVE, at least for now. Why did you decide to launch there? The advantage of the main product of Sky being USDS, which is just a stable coin, is that we don't actually like nothing, Sky didn't even build anything in Solana, kind of sort of natively built, I think if that makes sense. Like the expansion to Solana happened through the wormhole bridge.

So Sky simply tapped into this existing, like very well-developed infrastructure of Wormhole, which is set up to basically bridge tokens on Ethereum over to Solana. And then the second major kind of feature that's available in Solana is the same thing that allows Sky to offer the Sky savings rate on USTS. So the kind of the standard 8.75% that you can get on your USDS, no matter where you hold it. You can get that on AVE. And the reason why that, and that's actually been, so that's been done through Ava's liquidity mining system. And so that same system is also available on Camino and Drift

and a couple of others of the D5 protocols on Solana. It's a bit of a shortcut because what Sky's doing is it's tapping into what's already there and like building on top of that in a way that makes it really easy. And then as a result, it's possible to deliver this thing that, as Stan is talking about, right? That of course, when you have USDS somewhere, when you're offering the sky savings rate on Camino or something, like,

it's very important that it's not some hacked-together thing that's going to blow up suddenly. So the fact that it's possible to make this kind of integration really, really easily just makes a huge difference in terms of being able to. It's possible to do the expansion without basically having to just like put in a huge amount of work up front without even knowing if the users are going to come there.

And then now what, I mean, and then what's great about this approach is then now that basically, like, Sky has found at least some level of product market fit, right? And there's about $100 million of USDS and Solanas. There's about 100 million of demand for USDS. And that's enough to justify then like further investment and further effort put into building out some coal sky features on Solana and basically enabling. I guess actually, I mean, the thing, I think when people are talking about this question about getting AVE getting AVE on Solana, right?

What they're really, what they would really like is they would like the scale of Aver, right? The economies of scale of this like the, you know, big defy energy that comes from like the really big defy protocols on Ethereum magnet, which is really, I mean, Sky and Sky and Sky and and maybe a few others make up that call of the vast majority of all defy liquidity scale. And one of the really big innovations in Sky that's sort of like a later innovation that expanded on top of the original sort of early design of the decentralized stablecoin model is what we call the allocation system. And so this is a mechanism that allows Sky to kind of,

not just have to like, so basically, for instance, AVE, even when you deposit USDC on AVE, or borrow USC on AVE, sorry, so if you, if you put your Ethereum on Aver and you borrow UTC, you're potentially actually collateralizing the U.S.S. stable coin. Like, even if you don't know you're borrowing from Sky, you might be doing that. And that's because Sky is capable of lending into Aver through this thing called the allocation system and also landing into compound and morpho and all these other protocols in Ethereum Maintenet. And then the next step is also being able to do that, for instance, in Solana.

And then now you start to get both sides of the equation, right? So you both have the ability to tap into the savings rate, but also potentially borrow USDS and borrow kind of like the USDS collateral. And while this is not going to be, I mean, In the long run, obviously, I think it's just a matter of time, but eventually you will have AVE and you will have all the major protocols. They will be in all of these blockchains. And it will become invisible in the end, right?

Like you just sort of use all the blockchains and you use all the protocols. And it doesn't, it's only like machines and AI and robots under the hood that is sitting and arbitrahing and shuffling money from blockchain to blockchain. And as an end user, you're not going to care about that in the long run. But in the short run, it's like a, I think it's like a major unlock that Sky's basically able to use the, like use the kind of the model of a stable coin as a big piece of liquidity infrastructure that can basically sort of allocate the liquidity where it's needed to be. And then help with at least relieving some of that demand for like, I mean, I guess that, you know, the Avis scale. So even if you're in Salana, you know, you won't be able to borrow directly from, from Alva and Salana. You might be able to borrow on Camino.

And then what's happening is actually that, like there's people depositing USDS into AVE on Ethereum Mainnet. And the capital they're depositing in there is then actually, you know, bridged across to Solana. And then it's deposited into Camino and then somebody else borrows it out of Camino again. And that way you can achieve that kind of connection. which I think is pretty cool. And yeah, allows for this like very expansive and sort of fast-moving, hooking up of all the different components of defy together. I actually do you want to circle back, though, to this question about just like

when it is that a project will choose to deploy on this or that chain? Because, you know, Stani, as you mentioned, you are or AVE is going to deploy an optos. And so I can understand there are certain advantages there because the move language, you know, has certain things built into it that are just sort of purpose built for defy in a way that, you know, Solana, frankly, is not. Ethereum also was not. But as you mentioned, because so much growth has happened on it, there's a lot of, a lot of foundational stuff built into the system to kind of help create those checks that aren't

there, you know, through the language itself. But, you know, as we just discussed, there's a lot of user activity on Solana. And you probably also saw this past week. And there was a controversy about comments that Chow Wang of Alliance Dow made where he said that a year ago, he would not have had an opinion on whether one of his startup should, or one of Alliance Dow's startup should start on an Ethereum layer two or on Solana. but then now that he's seen this happen multiple times where startups launched on both, he said, quote, on Ethereum Layer 2, there's no traction, no users. And magically on Solana, it just works. I've just seen so many examples that at this point, it's irresponsible for me to recommend

founders not to build on Solana. So, you know, it just feels like, yeah, like I was saying earlier, that there is momentum there. And sometimes when I'm looking at the angst in the Ethereum community, it feels like, Ethereum has this long roadmap and, you know, maybe they're building with this confidence that they'll be around in the future. But yeah, some of the changes that they want to make and, you know, have planned, it looks like it might take a while to get there to the point where, you know, because crypto moves so fast, like, I am wondering, like, is that going to be fast enough

or just how quickly things can shift in crypto? And so I don't know if that worries you. You know, what if like Solana just takes off and Aptos? Yeah, okay, it has certain technology. advantages, but it doesn't ever get the users. Yeah, you raise a good point that like not really, none of these networks really has been particularly designed for like a specific, like a defy use case, like maybe like all the stable coins kind of yes, because they existed already like, you know, like in certain forms before Ethereum and some kind of like dexas and. fundraising contracts and whatnot has been in mind.

So I wouldn't discount the fact that you could build, let's say, really good defy on Ethereum. It has a really good ecosystem, really good auditors and developer community. The tooling is amazing. So like the threshold to build, like if you're a new developer and you want to build DFI, the choice is actually Ethereum, just for the tooling perspective, because you can basically

impersonate accounts, you can fork the blockchain, you can mine empty blocks, you can do a lot of the simulation tooling, advanced simulation tooling, that is important for DFI when you're building let's say collateralized products or interest rates or

anything where you have this pricing component. And fuzzy testing implemented directly into foundry. Like there's just like generations of better tooling from let's say Truffle to hard hat than newer generations to foundry. Like that evolution is really powerful tooling. And then at the same time, these other ecosystems like Aptos or Solana, I would not discount the fact that you can build extra defy,

but you have to approach from a completely different perspective. So those are good places for advanced DFI developers to build DFI because it has, you're going to, the starting point and the threshold is higher because you don't have the same any mature tooling and environment. And that's fine. And it depends also on your products. So for example, a lot of the success of Solana, for example, comes from Mimcoins. And I think it's interesting because, you know,

have people coming on chain doing a transaction, buying a meme coin, maybe out of the pump, pump fund users 99 on whatever are losing money, maybe there's a theory that's, you know, that's how you onboard them on chain. I don't know. But maybe if you're building something where you have to set up a component, maybe it's interesting to build there, actually. And there's more real estate as well. So I don't discount on building these other networks. But if I would talk to a new developer where they should start, if they want to get serious about BFI, then it's on Ethereum. And I would love to build on all of this. So if there's users and there's ecosystems, I will be happy to contribute. So I'm not really like kind of like

tying myself into a blockchain. That's just stupid. Like no one should think like that, right? My goal is to build something that is secure and resilient. Now, when it comes to Ethereum's the L2 strategy, it is quite clear that you can actually go into, you know, Solanite, one and two point. Ethereum is kind of like a multi-entry point. So you have the main net that's too expensive. It's basically for really serious business. And then you have alt-2s. They're very young in the sense that you have multiple alt-tools from like base arbitrin that do a lot of defy.

You have alt-use that are focusing on other type of things. Lens chain is one of the L2s that is focusing on social fire and these socials. So, like, you have this kind of, like, different paths, and even Sony is building their L2 on Ethereum for their use case and Ando is building an L2. So, like, what this says is that the paradigm is different now. So, like, it's not about, you know, coming to Ethereum. You come to Ethereum out of some of these L2s. and then you're part of the whole ecosystem.

What I like to question is that is this fair for the mainland? Because the thing, what is happening now, if you look at, for example, BASE, base is charging sequencer fees. So the transactions feel very low on L2s, right? With the blog market, posting globe transactions. But at the same time, Coinbase and Bays are making a killing on a centralized sequencer. So whether this is actually fair for Ethereum where they're using the data availability and how Ethereum should actually approach this issue.

That's why there's this kind of like discussions and topics of like having, you know, native Alchus on Ethereum and having more beefed up Ethereum. And I'm more favorable of that. So like I want to actually see that you can have an entry point into Ethereum and you see the beautiful Ethereum logo. and kind of like that's your entry point. Let's call it Ethereum Lite, okay? So make it easy.

And that's your entry point. Not Coinbase, not like, and let's make it actually decentralized. And that's your entry point. And then you can do transactions on Neenet if you are moving bigger funds. But I think that's the kind of missing piece where Ethereum is stepping too much back

as a kind of a network. And the social layer of crypto is kind of like panicking about it and seeing like, well, you have these altus, but like, okay, how these interests are they, they have the roadmaps and whatnot. So I do think if you compare all of these different networks, Ethereum, it takes time to move, but it isn't as slow as you think about because of the ballium that is actually securing. If you look at, for example, Aptos, a lot of things are upgraded very quickly, even month to month. basis, if there's something, some new innovation, because the reason for that is because they can do

it. They have less risk at stake at the moment, whereas Ethereum is more of like a bigger internet computer and more stakeholders. People want it to be boring as well because you want to ensure it's secure and there's no changes that, you know, you have to review ongoing basis. You want that kind of like a hardness and resiliency there. So Vitalik also said a couple of years ago that he wants to, you know, once you see a lot of the innovation on L2s, and then if they work well, they can be implemented into the main net. I'm in the favor of path where let's make one clear native kind of like an entry point that is an L2, that the other altus can actually benefit if they connect to this kind of like

a network or like a messaging solution and still have that main net there as a way to to you have the full security. So that's my take on that. And also want to say, I mean, as somebody who is like a major Solana bull, I don't own any

salt tokens. So maybe not. More like, I'm bullish on the tech. Like I love the like, I love the culture they have, like the approach to like going faster and what is it called it? You know, moving fast and breaking things.

Yeah, no, it's like the slogan. It's like increased bandwidth, reduced latency, right? This like single-minded, like, faster, faster, faster, right? And I think that's really great. And I love that approach. It's like the sort of the polar opposite to like the Ethereum, like, you know, don't touch it unless you really know why it was there in the first place, right? But the thing is that if you look at USDS, so U.S. did this like major subsidized

like incentivized launch on Solana, right? With like a lot of effort put into, and a lot of a huge investment put into launching on Solana. Maybe not a huge investment, but still like a pretty major expense to kind of get a foothold on Solana, right? And that got the USDS supply there to like 100 million, which is like, I mean, that's pretty good for Solana because Defi is still quite small there.

But it's sort of like it's actually like a blip. like it doesn't it doesn't really register compared to like the overall scale of usDS which is like 8.3 billion in total right and then in the same time that the salana uh like the u sys supply and zalana grew to 100 100 million uh base the launch and base which was done with like very little marketing and and it was sort of just like launched and like enabled and that's about it that's kind of like growing organic and like that's now at half the same thing. size of the supply on Salana. And it's continuously growing. While the Salana scale more, like, it sort of, it kind of got a bunch of initial traction because of all the incentives. And then it's sort of, like, it's stable. But it's kind of waiting for the next push, I guess, is how I feel about it,

personally, that there, like, Sky has to do something more. And definitely more things are coming, as I said earlier. It's enough to validate that there's definitely demand and there's a market on But meanwhile, if you look at something like base, it just grows by itself. Like, USGS just get adopted. Like, and then you look at main net and on main net, the USGS supply there just like grew by two billion in the last couple of weeks. So I guess this is all like this is an this point of just like the scale of Ethereum

DFI is just so crazy huge. And it just kind of grows by itself in a way that just yeah, it's like a force of nature. Right. Yeah, it's like a network effect. Yeah. I mean, it's an extremely strong network effect, right? That's not, nothing comes close to it anywhere else. And I am so convinced personally that this type of value is, that's 90% of what matters.

Like the technology and all that other stuff, like, even like the culture and the memes. And like, I don't think any of that matters compared to like the sheer like economic inertia. And this is also why I'm so like fervently like a multi-chain believer that like I think all of the blockchains are all going to grow and scale and will all be relevant. And that's because I think there's enough time and there's like enough space and enough market for everybody that every single one of the blockchains that exist now where serious effort and serious kind of like momentum is being built as we speak and will continue to be built over the next five, 10 years.

That will get them to a stage that looks like the kind of false of nature that Ethereum has now. And it just becomes, you know, like then as blockchain gets bigger, they will just benefit more because it's just more money and more value and there's just more for all of this capital to tab into. And then we, you know, get to next level of like AI capabilities that can then, you know, help this kind of stuff make better decisions and allocate it better and just optimize it even further. And it will just, you know, it'll just further keep growing and growing and growing. So also this idea of like angst and like competition and tribalism, I think it's so like foolish and kind of hilarious really

because I'm so convinced that like if tomorrow Solana became ten times as big as Ethereum that would just make the size of Ethereum would just like shoot up like it would just be like a rocket booster on Ethereum itself. Yeah one thing I would say is that

and I kind of like some parts agree with but some point I disagree in the sense that a lot of things that are like happening I think at the moment on Shane will not have that stickiness of actually creating use cases that people come on ongoing basis. I think DFI has been able to achieve that

some of the DFI examples, but it's very unclear, for example, if MNcoin, Nemecoins, for example, will achieve that. We've seen the same thing with SocialFi, which is a really interesting and amazing category, but we haven't yet hit that kind of a momentum where, like, besides the kind of like, early alphoria we actually see stickiness on the user base.

And social applications are notoriously hard. So I think all this discussion and kind of like drama and like, you know, the competition stuff is because, you know, there's not enough users us to not focus on this issue. When there is not enough users, what happens is that we start to argue like, you know, boosting is better. and like we're not focusing growing the pie, we're focusing on like,

kind of like, you know, these comparisons that should be that relevant. It's kind of the same, like, maybe similar debate will be like if people would be debating between AWS and Google Cloud,

you know, like people don't do that because, you know, you're not really like bested in with your backs in, in these technologies that you really want to like, kind of like, go and shout like, you know, people should use, AWS, like people write good articles why, how do you make the decision, but you don't really

see this like day to day kind of like a fighting over liquidity and holders. And in my opinion, that's simply because not enough users. There's not enough users, even in DeFi, it's very small. It's amazing compared to a few years ago where we are. Most of the finance is still paper. Most of the finance is paper and digital bits, not blog. and I think that's where we are today. So, like, as my previous kind of, like, point is that we don't see that innovation. So, like, what's exciting to see the same thing copied, being copied and pasted to these other networks, besides giving the basic utility?

But, like, the things that actually move needle is the new innovation. And I would like to see, like, reports of, let's say, whoever VCs or whoever, like, are writing this, things to get better deal flow. They should focus on, like, what is that incremental innovation and where it is happening, you know, and kind of like measuring that. That's, like, exciting, actually, and bringing us closer to adoption. And innovation doesn't mean that you have to come out with a complex thing. The most simple, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the,

the, the, the, simple because simplicity scales. And that's why I think like kind of like if you get to a point where people are building new stuff and kind of like pushing the innovation and accelerating that, whatever chain it is, then we focus less on actually like, you know, which chain is the best because we won't we won't give a shit about it because we just want to see and use things that are new and all. Yeah. So as somebody who, you know, obviously whenever I report something, I'm doing it like, absolutely whenever I report something, I'm doing it like, after events have happened, right? So I'm just always trying to follow the action. But like, I also don't want to miss the story. So I'm always trying to think like, where could this go? And, you know, sometimes when I hear Ethereum people talk about Solana and kind of dismiss it for just being the center of meme coin activity and like that's not important and blah, blah, blah,

it does remind me a little bit of, you know, when Bitcoin Maxis or whoever used to dismiss Ethereum during the ICO craze and blah, blah, blah. And I'm not saying you were doing that, on it because you've had a much more nuanced, you know, take on how you were looking at it. But, you know, a part of me is like, oh, well, it could still, you know, grow into something that's more serious and long-lasting. Yet at the same time, I do also understand. The meme coins were or are just a little bit more like mercenary. And it's for like short-term thinking.

and I think that's why maybe even though the Ethereum ecosystem is going through, frankly, in my opinion, just a lot of trouble. You know, we haven't even talked about all the criticism of the foundation and Vitalik and, you know, all those things. So I, and, you know, and, you know, we haven't even gone into depth into issues about, like, the fragmentation and scaling and, you know, we've touched a little bit on the L2s being parasitic. But, like, I basically feel like,

there is something more to the fact that it is true. People who participate in Defy are probably more long-term participants than people who have been participating with meme coins. And it's not to say they're completely different groups, obviously, I'm sure there are people who do both. But anyway, so I do look at it all and do wonder like, okay, where could this go? Because I could see it really going in either direction where Ethereum prevails or Solana takes its mantle or maybe they just coexist. So just to cap off our conversation because Rune alluded to this in the beginning and it was so interesting where he talked about how he felt like, you know, what he's thinking about or where he looks to where this is going is how AI could be used in DFI. And I wondered if you two could

just talk about where you think that trend is headed or what that future might look like. First of all, everyone in tech or in any kind of sort of future-looking headspace right now, I think is getting this pervasive feeling that AI literally impacts everything. Like there's barely anything you can look at in your daily life or professional life or sort of anything that is not going to be affected by AI. So I don't think it's like very radical to be like, yeah, you know, crypto. will change because of AI and Dow's will change and so on. Because it's obvious because even like, you know, paintings will change or something, right? I mean, something as ridiculous as you'd never expect. I mean, I'm reminded of this like joke about how there's a limit to decentralization, right?

You'll never get like decentralized running shoes, right? Like blockchain is never going to impact your shoes, right? But AI will probably impact your shoes, right? In fact, like every part of your shoe. By the way, I did once chat with a woman who bought it. shoot, I think she bought 17 pairs as though step-in shoes. She said it cost her like $17,000 and she was making a lot of money and then was not. Anyway.

Okay, I guess maybe we did get decentralized running shoes, but maybe they weren't that great after all, right? Well, I'm sure the AI running shoes, whatever they held that ends up meaning will actually be great, right? And they'll be better than the alternative, at least on some metrics. Anyway, so, so AI is just such a massive thing. It impacts everything. everybody in like investors and so on and business leaders, they're thinking about like, what's the story on AI, right?

Like, how do we tap into that? And the case I'm trying to make to people is that Defi specifically is the single most powerful leverage point for like, how do you apply AI to the real world, to anything, basically? Like, how do you transform basically sort of intelligence power or intelligence capability into economic value and benefits for people.

And there's just nothing where it sort of scales more directly and applies more directly than through defy. And that's really because, like, fundamentally, AI is this kind of like abstract, like digital sort of, you know, like, yeah, abstract thing that is not really, it's hard to grasp exactly what does it do and sort of where do you use it directly. And defy's literally just like, it's the thing of like,

okay, we have this thing called blockchain, which is this sort of magical internet money, and then defy is like the process, okay, let's turn that into useful stuff. So it's sort of naturally the rails of like, you take AI and you then like apply to things like, yeah, I mean, business financing and pricing stuff and, you know, allocating resources

and all of these things that then can result in like one day somebody, I don't know, building an AI shoe or something, right? But like that comes sort of downstream of initially Defi becoming more more powerful because it is capable of really tapping into the value of AI and then it results in much better allocation of capital towards much more innovative businesses that then in turn, you know, are the ones that are the best at tapping into AI and so on. Okay, and so in Sky, like a key piece of the transformation into Skis,

guy was to sort of prepare the entire network and ecosystem end to end for what is it like to be able to properly tap into the the potential of this kind of future what do you need like what's the infrastructure you need to be able to really tap into that and I think the most important answer is structured data right it's like you need to go from sort of like the language and the the way you communicate should go from being more like vibes and, yeah, hanging out and this, yeah, like the kind of, you know, the internet speak and forum posts and that kind of stuff. It should go from that. And then into these like very, like something that almost looks like code, right? And so to accommodate that, we build this thing we call the Atlas. And the Atlas is basically, we later found out. I mean, we didn't really. know what we were building at a time, but it turns out it's something like a legal system for Sky in a sense, or like half legal system, half AI prompt, perhaps as a way to think of it. And it just turns out to be like a very powerful way to scale up an organization.

Because what it means is like all of the knowledge, all of the rules, all of the processes that are basically developed enough to be sort of like more or less like set in stone or at least like persistent processes that are now like how everything in the ecosystem runs, they're then available in this, at this sort of single source of truth called the Atlas that is voted in through the governance. And basically it, like, it replaced the earlier system we had of at the time called MIPs, like maker improvement proposals. It's like the old school approach of like you make one proposal and then you make another

proposal and then you sort of like stack them all on top of each other and then you, you know, you apply them all equally. while the Atlas is more like a tree structure, which is what gives this kind of structured data. And yeah, it just turns out it's incredibly useful for then, you know, let's say the new deep research feature that just came out from Open AI, right? So because of how the Atlas is structured,

it's very convenient to take sort of sections of it that relate to something like, like how the Sky ecosystem currently manage legal resilience of Rival assets or something. You can sort of easily isolate all knowledge related to that in the system, put that as a prompt into chat

TBT deep research and then just have it come up with ways to improve it with sources and all of these stuff, right? In a format that then can easily be sort of put back in as a proposal. So you're really opening up for the ability for normal people to just be armed with chat DBT deep research

or other AI tools like that and then actually contribute direct directly into like the sort of the brain of the system in a way that in the past, you know, you'd have to be a real expert to contribute at that level. I think the defy is a really, an on-chain is a really kind of like a perfect substrate for AI agents because of the, you can guarantee the execution. You have less the prices from that perspective, the transparency and like the permissionless nature. I think it's just

a great combination. I even could imagine that a lot of the activity that is happening in DFI a few years from now is AI agents-based. Capital allocations, and especially with Alvi-V4, the users

are able to position themselves on the Visc curve, so you can participate in a very low-risk pools, or you can add risk gradually by positioning and supplying to different pools. So what is the interesting here is that I think that optimization of that behavior will be AI agent-driven. Adjusting risk parameters will be AI-driven.

And as Rune said, I 100% agree there's a lot happening within a Dow or a decent-interest protocol infrastructure where you kind of need that automatization and you want to reduce the overhead that comes from governance. So governance can be a really good tool and you can create a really good consensus decision, but it can be a bottleneck. And it can be, especially in those cases where these changes are very minimalistic. So I think it's going to be a big area and regardless what network you're building on for Defi builder, you know, focusing on this kind of like a intersection between AI agents and Defi is really, really fascinating. And I think that's also like overlooked area where I wish there would be more interesting innovation besides the basic

AI agents I've seen so far. So it looks very bullish to be. Yeah, I honestly remember, I think in like 2018 or something, I did an interview with Dominic Williams of DFINITY. And he kept saying that the way the DFINITY DAW worked was that, yeah, there was some AI aspect. But when I was like drilling down into the details, it was very manual. Like the users had to vote and like maybe they could delegate. But like that's not an AI. Like if a user is making a choice and he kept insisting there was an AI. But anyway, point is when I,

I look at the AI agents. I'm like, oh, maybe like, you know, I personally, I think he was trying to spin me because, like, there just was no AI aspect to what he was saying. He was using the word. But, like, when I was drilling down to the details, he wasn't describing anything like that. But I'm like, oh, like in the future, actually we could, instead of me delegating, I could have my own AI agent where I tell it, like, these are the risks. I'm comfortable taking these are the ones I'm not, like taking into that account, taking all

that into account, you know, please vote accordingly or something or whatever you think is the best way for the doubt to go. And anyway, so we'll see what happens. But you guys, this has been a super fun and fascinating conversation. Where can people learn more about each of you and your work? Ava.com for Ava and over up for Avara. Avara. Avara.

Yeah. And for Sky ecosystem, you can go to SkyDMoney to use the products or Spark. 5. And you can follow me on at Rune Kek on Twitter. Okay, perfect. Well, it's been a pleasure having you both on Unchained. Thank you so much.

Thanks for having us, Laura. Thanks so much for joining us today. To learn more about Stani and Roon, check up the show notes for this episode. Unchained is produced by me, Laura Shin, with all from Matt Peltcher at Fonda Ranovich, Meckenkavis, Pam Jumdar,

and Mark Okoria. Thanks for listening.