Stani Kulechov:

If I would talk to a new developer where they should start if they want to get serious about DeFi, 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 kind of tying myself into a blockchain. That's just stupid. No one should think like that, right? My goal is to build something that is secure and resilient.

Laura Shin:

Hi everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin.

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This is the February 11, 2025 episode of Unchained.

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Today's topic is the future of DeFi. Here to discuss are Stani Kulechov, Founder and CEO of Aave Labs, and Rune Christensen, co-founder of Sky. Welcome Stani and Rune.

Rune Christensen:

Glad to be here.

Laura Shin:

Both of you are OGs in the DeFi space, and both of your protocols are in the midst of some big changes, while DeFi and Ethereum themselves seem to be at an inflection point. So Rune, 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 Aave. Why don't you each fill us in on where your respective projects are in terms of recent accomplishments. Rune, do you want to start?

Rune Christensen:

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 could be used for something real.

And then from our perspective, what was really important was stability, because having a stablecoin is like the foundation of all the other cool use cases in crypto, including something like Aave, which that whole -- I mean, basically all the really cool DeFi primitives they depend on having a stablecoin that sort of is the unit of account that you make all the other interesting financial things happen sort of against, I guess you could say.

The development progressed quite slowly, but ultimately the first version of the stablecoin DAI was launched in 2017. And then it was upgraded to multicolateral DAI, which is the system that is live today still, in 2019. And then after its launch, we had the DeFi summer and there was this massive -- just massive growth, huge demand for the DAI stablecoin and massive growth of the protocol.

And then what happened is that while the system really just grew incredibly fast and had such a huge inflow of users, it was really held back by 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 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 -- I mean, who stuck with the project, including me, to try to make it -- just continue to try to figure out how do we overcome this and sort of just make it this amazing stablecoin that's, you know, it's a decentralized stablecoin, but it feels like you're using a sort of a normal financial product, right? It should feel really simple while being true to their ideals under the hood.

And increasingly that turns out to be so heavily reliant on 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 subDAOs, which we now refer to as Stars. So this sort of -- yeah, that's kind of the main category.

One of them being Spark, is like a fork of Aave, 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 includes 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 front-end on Sky.money.

And we went through with that whole sort of the launch of this, and all these upgrades September 18th 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 stablecoins in the system, more than half of it is held as the new USDS ERC20 wrapper.

Laura Shin:

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, maybe this was, I don't know, 2015 or 2016, and they made it sound so complicated. They kind of didn't fully describe it because they were just like oh, you know.

And I think 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 it, 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 just connecting more with real-world assets. It really feels like that vision that you had back in the day is coming to fruition.

So Stani, Aave also has a ton of recent updates. Do you want to tell us about the highlights?

Stani Kulechov:

I mean, a lot has happened over the time, and I think that's the way that Aave works today is quite expansive. So I think when we started building Aave five years ago, and even ETHLend two years earlier in 2017, we basically were approaching the space more from 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 CDP, or even what Aave used to be ETHLend, or the way Aave works on the boring side, the reason that I think there's a lot of complexity is because these systems are end-to-end transparent.

So when you're trying to explain Maker, or like let's say Sky or Aave 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 Aave has, it's just a simple thing as earning interest on your dollars that happen 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 Maker.

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, Aave, Maker, they probably won't even know much about how Aave 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 Aave 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 DeFi renaissance happening. If you look at both Aave, 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 other protocol has been deployed because it's the same piece of code that can be just copied across all the EVMs and supporting those ecosystems and their use cases. We're also building non-EVM deployments of Aave, starting with for example Aptos by building in Move. And that's the technology that we choose as a first step out of non-EVM because we want to be where the users are.

And also Aave has GHO stablecoin which came about when we wanted to create predictable borrow rates for the Aave users within the Aave protocol. And that's been growing and actually expanded to -- it's in mainnet Arbitrum and then expanded into Base now and Avalanche. And the biggest thing we're working on now in terms of the whole kind of evolution perspective of Aave is the V4 that brings a lot of interesting use cases, makes it easier to integrate with RWAs, and that's a big kind of category.

Laura Shin:

Yeah. 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 trying to appeal to that audience. I feel like the rebrand to Sky is part of that as well.

So how do you guys think about doing that? I don't know if -- because I know obviously Stani, you're having this Aave 4 that's going to launch soon. I don't know how your thoughts about how that future transition will take place, or really it's a current transition, how Aave 4 meets that, and Rune how you feel like Sky is also doing that. So, yeah, either one of you can go first in addressing how your project is navigating this transition.

Rune Christensen:

Well, I mean, there's one observation I want to make, I think it's interesting that I kind of -- I realized a couple of years back, which is counterintuitively, the simpler you want the product to be for the end user that's kind of just like a normal person, and they don't really want to spend too much time researching all that crypto stuff. 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 account for all the things that then need to be the way they expect.

So if you look at a really simple stablecoin that's something like Rai. So that's a design of a stablecoin that only uses Ethereum as collateral and it behaves in this very predictive way and has very limited governance. But the problem is then you can't keep -- 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 Aave and Sky in various forms. But what that then requires is this 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-world assets like Treasuries and centralized stablecoins.

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 not falling in the pitfalls. And let's, I guess, something like buying Bitcoin and then thinking, oh this is 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 stablecoins 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 push people away. Even though the design is so elegant and simple.

And I mean, so from Sky's perspective it's actually that we're really embracing this, right? So we're really building up the capability to kind of eat complexity and abstract it away for the end user so we 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 stablecoin or any DeFi 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 the backend.

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, is like, this is all going to be about deploying cutting-edge artificial intelligence. And sort of all of these improvements, like all the technological progress that's happening in large scale data capabilities and AI and decision making to use that to sort of run the system on the backend, and then on the frontend, you just offer people USDS, it's a stablecoin from Sky that's worth $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 USDS wrapper, but also the kind of the legacy DAI wrapper.

Stani Kulechov:

I like what Rune said about getting into stablecoins when he got tricked, because partially I like using Aave, and I like using stablecoins, USDS and GHO, and all the things that in DeFi. The reason we are here today is because we're using these different primitives on an ongoing basis. And it's kind of the same story for me in the sense that I wanted to figure out how you can keep your ETH, use it as a collateral and borrow against. And that's where the idea of ETHLend and Aave later 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. 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 what the fuck is Ethereum, and all these L2s, and these different networks and all this complexity.

And on top of that, basically, understand all these protocols, what DeFi actually is and so forth. So it really is as simple as creating a very easy way from going to fiat -- from fiat to Aave, USDS, or let's say USDS to the savings rate without knowing anything. Now how do we plug in this to our users?

And I think stablecoins are going to play a bigger role. So both Aave and Maker ecosystems, they have a stablecoin, but you have all these fintechs that are actually looking into this opportunity, like how they can tokenize their reserves and get it on-chain and then use in DeFi. 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 entering into a phase where every other kind of a key piece of thing is solved besides privacy. And now we can focus on solving that, kind of like a US challenge. But there's also a caveat. So there's not a 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 solved if we want to actually see DeFi integrated to everything where traditional users effectively are.

Laura Shin:

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 who make this show possible. 

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Back to my conversation with Stani and Rune. I also wanted to just ask generally about DeFi because TVL and DeFi 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 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 kinds of things. But yeah, I was just wondering if you thought that was affecting DeFi or -- yeah, just why it is that it maybe hasn't taken off as much as we might expect.

Stani Kulechov:

I think the DeFi metric, first of all, it doesn't really fit for every protocol. For Aave, 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 off-chain, even when they're actually trading and executing on-chain.

But overall, I think that the most kind of outcry about Ethereum is mainly because of the price action. I don't think people really understand that most of the things on DeFi are on Ethereum because it has a really good environment to build DeFi. And it's something that is very overlooked. So if you go today to another ecosystem to build complex decentralized finance, you're going to miss a lot of tooling that exists already in EVM.

So it's the same as going back in 2017 or '16 and 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 DeFi. 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 really fair assessment because the valuations of a lot of these assets that are used as a collateral, for example, they inflate when the markets are on a trending upward cycle, when we are in a bull market. And then they're decreasing on a bear market.

I think a good indicator to monitor is actually stablecoins on-chain, and how much of those stablecoins are going to DeFi protocols. And I still think we're in this kind of weird mezzanine period where we built a lot of native infrastructure, native asset support, liquid staking, restaking and being used as a [?] flat all. And then at the same time we're entering into this new role of RWAs, and seeing institutions like BlackRock and amongst alike that are actually starting to bring these traditional assets on-chain, and those will end up into DeFi protocols as well. 

So to get to that point where DeFi will be at 1 trillion TVL, we need that traditional institutional integrations and tokenization piece, and we also need more stablecoins 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 completely different than it is today.

Laura Shin:

And 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, when I also look at the fact that it just sort of looks like Solana has more momentum right now where the Solana was the center or -- is the center of the main activity in crypto. The main -- the biggest trend. And in 2024, this was the first year they attracted the greatest share of new crypto developers. I think those two facts are quite important. So when you think about those, how do you also think about what we were saying about the price and everything? Like do you worry about those two things I just mentioned?

Stani Kulechov:

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 to have more developers that are building resilient, safe and secure DeFi. 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 decision is actually resilient.

And Aave and Sky are protocols that have been able to actually go through those cycles. So I think that's where the actual -- the big testing actually happens in production. But at the same time, I think, the developers that are on Solana, they might be building more of things that are related to, for example, memecoins 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 research more into DeFi and what could actually happen here, what we're rebuilding, the whole traditional financial system, they get excited about and they will build. So I do think yes, Solana has got a lot of mind share, and they have a really good kind of like 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 Foundation president said that there's a product that is on, basically, Solana that is better than Aave.

It's the same thing as Aave basically, but a little bit outdated that what exists today on Aave 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 Aave works or how any of these things works. End of the day, like, we -- at least, I think that any net developer, any net innovation, an actual innovation, not just like taking something and bringing it to another network. That's also great, if there's users and users for that. But I kind of hope that we see net new innovation and that brings us closer to more mainstream. 

So I do think that Ethereum overall should be worried 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 missing at the moment. Whether 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 a lot of these things that we're building here, like USDS, it's a savings products from Sky for example or Aave's, basically V4, 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 Aave is probably the -- actually, it is the only place where you can borrow $1 billion worth of stablecoin 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.

Laura Shin:

Yeah. Just for listeners, the exchange on Twitter that we were talking about was Alex Svanevik of Nansen tweeted, "when Aave on Solana?" And Kyle Samani of Multicoin, which are huge investors into Solana, responded, "Kamino", which is sort of the equivalent of Aave on Solana. And Alex was on, "oh, but you know, Aave is 10 times larger. It would be a big TVL unlock if Aave users could simply switch chains." And then Lily Liu, the president Solana foundation, tweeted, "But Kamino is a better product. Plus metrics today are not metrics tomorrow." So, yeah, when I saw that, I was like, I have to ask Stani about this one.

Stani Kulechov:

Well, and in all kind of like --like disputes aside and all this 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 Aave 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 Aave 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, it's not as easy as expanding, let's say, Aave into a new L2 or EVM network. It's basically writing complete codebase from scratch, and analyzing the whole network, any particular edge case that could cause an issue within the protocol, and have that diligent standpoint. So it's not impossible, it's more possible than impossible.

Laura Shin:

And one of the main complaints about DeFi on Ethereum is fragmentation. And you're resolving that, I guess, with Aave v4, which has this unified liquidity layer. So I did also want to ask Rune, because you did decide to launch Sky on Solana, so obviously you're making a different choice than Aave, at least for now. Why did you decide to launch there?

Rune Christensen:

The advantage of the main product of Sky being USDS, which is just a stablecoin, is that we don't actually -- like nothing -- Sky didn't even build anything in Solana. Kind of sort of natively built something, 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 allowed like -- 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 USDS. 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 Aave.

And the reason why that -- and that's actually been -- so that's been done through Aave's liquidity mining system. And so that same system is also available on Kamino and Drift and a couple of others of the DeFi 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 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 Stani is talking about, right? That of course when you have USDS somewhere, when you're offering the Sky savings rate on Kamino or something, like it's very important that it's not some hacked together thing that's gonna 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 -- you can -- it's possible to do the expansion without basically having to just put in a huge amount of work up front, without even knowing if the users are gonna come there.

And then now what -- I mean, and then what's great about this approach is then, now that basically like Sky's found at least some level of product market fit, right? And there's about $100 million of USDS on Solana. So 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 cool Sky features on Solana and basically enabling -- I guess actually, I mean the thing -- I think when people are talking about this question about like getting Aave on Solana, what they would really like is they would like the scale of Aave, right? The economies of scale of this big DeFi energy that comes from the really big DeFi protocols on Ethereum Mainnet, which is really -- I mean Sky and Aave and maybe a few others make up that core of the vast majority of all DeFi liquidity scale.

And one of the really big innovations in Sky, that's sort of 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 -- so basically, for instance, Aave, even when you deposit USDC on Aave or borrow USDC on Aave, sorry. So if you like put your Ethereum on Aave, and you borrow USDC, you're potentially actually collateralizing USDS stablecoin.

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 Aave through this thing called allocation system. And also lending into Compound and Morpho and these other protocols on Ethereum mainnet. And then the next step is also being able to do that, for instance, on 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 Aave and you'll have all the major protocols. They will be in all of these blockchains and they 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 arbitraging 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, I think it's a major unlock that Sky's basically able to use the kind of the model of a stablecoin 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 the Aave scale. So even if you're on Solana, you won't be able to borrow directly from Aave on Solana, you might be able to borrow on Kamino.

And then what's happening is actually that, like there's people depositing USDS into Aave on Ethereum mainnet, and the capital they're depositing in there is then actually bridged across to Solana, and then it's deposited into Kamino, and then somebody else borrows it out of Kamino 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 DeFi together.

Laura Shin:

I actually do 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, Stani, as you mentioned you are -- or Aave is going to deploy on Aptos. So I can understand there are certain advantages there because the Move language has certain things built into it that are just sort of purpose built for DeFi in a way that 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 foundational stuff built into the system to kind of help create those checks that aren't there through the language itself.

But as we just discussed, there's a lot of user activity on Solana. And you probably also saw this past weekend there was a controversy about comments that Chao Wang of AllianceDAO made where he said that a year ago, he would not have had an opinion on whether one of his startups should -- or one of AllianceDAO's startups should start on an Ethereum Layer 2 or on Solana. But then now that he's seen this happen multiple times where startups launched on both, he said, "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 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 maybe they're building with this confidence that they'll be around in the future. But some of the changes that they want to make and have planned, it looks like it might take a while to get there to the point where -- because crypto moves so fast, I am wondering, is that going to be fast enough for just how quickly things can shift in crypto? And so I don't know if that worries you. What if Solana just takes off and Aptos -- yeah, okay, it has certain technical advantages, but it doesn't ever get the users.

Stani Kulechov:

Yeah. You raised a good point that none of these networks really has been particularly designed for specifically like a DeFi use case, maybe like Aave, stablecoins, kind of yes, because they existed already in certain forms before Ethereum, and some kind of DEXes, 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 DeFi on Ethereum. It has a really good ecosystem, really good auditors and developer community. The tooling is amazing. So the threshold to build -- if you're a new developer, and you want to build DeFi, 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 DeFi 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.

There's just generations of better tooling from let's say Truffle to Hardhat, then 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 actual DeFi, but you have to approach from a completely different perspective. So those are good places for advanced DeFi developers to build DeFi because 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 memecoins. And I think, it's interesting because you have people coming on-chain doing a transaction, buying a memecoin, maybe out of the pump.fun users, 99 point whatever, are losing money. Maybe there's a theory that's how you onboard them on-chain, I don't know. But maybe if you're building something where you have this type of 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 DeFi, 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 kind of like tying myself into a blockchain. That's just stupid. 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 their L2 strategy, it is quite clear that you can actually go into Solana. It's one entry point. Ethereum is kind of a multi entry point. So you have the mainnet, that's too expensive. It's basically for really serious business. And then you have L2s, they're very young in the sense that you have multiple L2s from like Base, Arbitrum, that do a lot of DeFi. You have L2s that are focusing on other types of things. Lens chain is one of the L2s that is focusing on SocialFi and decentralized social.

So you have this kind of different paths. And even Sony is building their L2 on Ethereum for their use case, and Ondo is building a L2. So like what this says is that the paradigm is different now. So it's not about 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 mainnet, 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 blob market posting blob transactions. But at the same time Coinbase and Base 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 discussions and topics of having native L2s on Ethereum and having more beefed up Ethereum, and I'm more favorable of that.

So 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, so to 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 mainnet 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 panicking about it and seeing like, well, you have these L2s, but like okay, how these interest 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 it because of the volume 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 some new innovation, because the reason for that is because they can do it. They have less risk at stake at the moment versus Ethereum is more of 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 have to review ongoing basis. You want that kind of hardness, and resiliency there. 

So Vitalik also said a couple of years ago that he wants to see a lot of the innovation on L2s, and then if they work well, they can be implemented into the mainnet. I'm in the favor of path where, let's make one clear native, kind of like entry point that is an L2, that the other L2s can actually benefit if they connect to this kind of a network or a messaging solution, and still have that mainnet there as a way to have the full security. So that's my take on that.

Rune Christensen:

And also I want to say, I mean, as somebody who is like a major Solana bull, I don't own any SOL tokens. So maybe not -- more like I'm bullish on the tech. Like I love the culture they have like the approach to like going faster and what is it called it, you know, the --

Laura Shin:

Moving fast and breaking things.

Rune Christensen:

Yeah. No, it's like the slogan. It's like increase bandwidth, reduce latency. This single-minded, like faster, faster, faster. Right? And I think that's really great and I love that approach. It's sort of the polar opposite to the Ethereum, like don't touch it unless you really know why it was there in the first place, right?

And the thing is that, if you look at USDS -- so USDS did this like major subsidized-like incentivized launch on Solana with 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, pretty major expense to kind of get a foothold on Solana. 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 -- it's actually like a blip. Like it doesn't really register compared to like the overall scale of USDS which is like 8.3 billion in total. And then in the same time that the Solana -- the USDS supply in Solana grew to 100 million, the launch on Base, which was done with very little marketing and it was sort of just launched and enabled, and that's about it. That's kind of like growing organic and that's now at half the size of the supply on Solana, and it's continuously growing while the Solana scale more like it kind of got a bunch of initial traction because of all the incentives and then it 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 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 Solana.

But meanwhile if you look at something like Base, it just grows by itself. USDS just get adopted. And then you look on mainnet, and on mainnet the USDS supply there just grew by 2 billion in the last couple of weeks. So I guess, this is this point of just like the scale of Ethereum DeFi 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?

Laura Shin:

And yeah, it's like a network effect.

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