Editor's Note:

DeFi, as one of the most transformative areas in the crypto industry, is gradually evolving from early experimental protocols into an important component of global financial infrastructure.

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

The three guests engaged in an in-depth discussion on the trend of stablecoin proliferation, the future of perpetual contracts, the mainstreaming path of on-chain yield products, the integration of DeFi and CeFi, systemic risk management, and the "grouping" evolution of DeFi protocols, sharing their judgments and attitudes towards industry hotspots.

The following is the content compiled by Rhythm BlockBeats:

The Explosion of "Stablecoinization"

Host: Hello everyone, welcome to this significant DeFi roundtable discussion. Today we have three of the most important representatives in the DeFi space: Hyperliquid, Ethena, and Aave. Let's get straight to the point.

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

**
Will this trend accelerate? Will every DeFi protocol have its own stablecoin in the future? If not, what kind of ecosystem would be large enough and self-consistent enough to warrant its own stablecoin? Will we see integration, or a comprehensive expansion of stablecoins? Jeff, what do you think?**

JEFF (Hyperliquid): Our view is relatively neutral. Hyperliquid is not a single application but a network, a system built collaboratively by the community.

Our model is a platform that supports all financial activities. From a financial perspective, stablecoins are the bridge connecting traditional finance and DeFi. Therefore, we place great importance on the infrastructure of stablecoins. We believe the boundary between infrastructure and applications is blurred, and our core contributors have their own views on this. We hope Hyperliquid will become a natural platform for building these stablecoins, ultimately achieving liquidity integration.

Host: Guy, what do you think?

GUY (Ethena): I believe the week when the USGH proposal and the MegaETH announcement were released marked a "watershed moment" for the proliferation of stablecoins. We have recently communicated with almost all mainstream chains, applications, and wallets, and everyone is now thinking about this issue more seriously than before.

I think the question is: do we really need every application, wallet, and chain to have its own savings account? The answer may be no. But the incentive mechanisms might push us toward that outcome. If you control the user distribution channels, why not issue your own stablecoin and capture the revenue? This poses a challenge to companies like Circle, as distribution platforms may choose to internalize these revenues. I believe this trend will accelerate rapidly in the coming weeks.

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

GUY (Ethena): Exactly. Regarding what kind of platform is suitable for issuing stablecoins, I think chains and applications are different. Applications like Hyperliquid can enforce users to use their stablecoin by pricing trading pairs with stablecoins. However, chains themselves cannot force applications or users to use a certain stablecoin, as the final decision lies with the applications. This difference may create some tension between chains, applications, and wallets.

Host: Applications are easier to push, while chains are more difficult.

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

Host: Got it. Stani, what do you think?

STANI (Aave): From our perspective, the launch of the GHO stablecoin is based on user demand. Interest rates in other markets are usually variable, while GHO provides predictable borrowing costs, which is a core demand from users.
After GHO was widely used by Aave users, we found that DeFi lending is actually a low-margin business. Currently, we have $70 billion in net deposits and $30 billion in lending volume, while GHO's circulation is only $100 million, yet it can generate the same revenue as $1 billion in external stablecoins. This allows the Aave protocol to transition to higher-margin businesses, increasing profits by about tenfold.

STANI (Aave):
We also view stablecoins as a way to capture revenue outside of core applications and integrate them into various financial applications and infrastructures. We focus on Esco (savings products), and part of the income generated from GHO lending will be distributed to Esco users. These products can be further integrated into fintech and a broader ecosystem. This not only enhances Aave's profit margins but also allows the income to be shared among users holding Esco, without the need for locking or cooling periods. This is a strategic business decision for us and a way to extend the economic model of the protocol beyond Aave.

**Host: So the economic model of stablecoins is attractive largely because of interest rates. For example, Tether is said to be valued at $500 billion because they earn Federal Reserve interest rates by holding assets, which is the appeal of stablecoins.
**

**Of course, when DeFi was first born, interest rates were almost zero. Now that interest rates have skyrocketed, we have experienced cycles of low rates, high rates, and then back to low rates. But you protocols have basically only experienced high-rate environments. Now that interest rates are declining, and the Fed's dot plot indicates that rate cuts will continue for the next few years, what does this mean for your protocols? If we enter a lower interest rate environment (though not necessarily back to zero), what changes will DeFi undergo?
**

GUY (Ethena):

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

For us, this is actually a macro positive. Our competitors will see their interest income rapidly decrease as rates fall. Meanwhile, we believe that Athena's product rates will either remain stable or increase as market enthusiasm rises. This means we can retain users and expand market share without increasing costs, while competitors relying on interest income will struggle to maintain their positions. This is one of our biggest advantages, and I believe Ethena is one of the most responsive assets to declining interest rates in the crypto market.

**Host: In other words, if your revenue source is not the Federal Reserve rates, that's a good thing.
**

GUY (Ethena): Exactly, and this applies to Stani's business as well.

**Host: Stani, what do you think?
**

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

So I believe that as rates decline, we will see a bull market for DeFi yields. This means that global users—whether in the West, Asia, Latin America, or Africa—will have access to equally attractive financial opportunities. This is a huge change. The last low-rate environment was just before DeFi Summer, when early DeFi users flocked in because real rates were almost zero, while DeFi offered higher yields. At the same time, the pandemic hit, giving people time to explore these technological opportunities.

Now we have built a very mature DeFi infrastructure. Aave has undergone years of practical testing, and Athena, Hyperliquid, and others are also developing. We are entering a phase where DeFi can be embedded into broader financial and technological systems, distributing yields.

Especially for traditional finance and fintech, when they see real rates declining, they will start looking for alternative sources of yield to retain users; otherwise, users will flow to other platforms. This will lay the foundation for the next big cycle of DeFi.

**Host: Rising yields, declining interest rates, and increased risk appetite are favorable for Aave.
**

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

GUY (Ethena): I also want to add to Stani's point. In the last cycle, we had not yet established a connection mechanism between DeFi and traditional finance. Everyone was working hard to set up credit funds, hoping to find channels for dollars to enter the system.

But now the situation is different. Whether it's DATs debt financing entering DeFi, ETF or ETP products, or Stani's products being embedded in Web2 fintech applications as backend infrastructure, these channels now exist. In the last cycle, we couldn't bridge these credit spreads; now we can achieve this on a larger scale. This is the biggest macro positive for DeFi.

**Host: That makes sense. Jeff, what do you think about the impact of interest rate changes on Hyperliquid?
**

JEFF (Hyperliquid): This is not directly relevant for Hyperliquid because we are a protocol aggregation. I think the point you mentioned is very good. I remember in 2020, the reason for the existence of the spread was that capital could not flow freely. The market itself is efficient, so I am also curious about what will happen this time. I predict that interest rates will eventually converge, but as you said, there is already an "organizational structure" for connections.

The development of Athena actually started from this "access difficulty"—capital chasing yields but not knowing how to enter the crypto track to capture these obvious arbitrage opportunities. So I believe there will be scaled development this time, but interest rates may ultimately converge.

However, I also believe that there is no strong correlation between broad market activity and interest rates (please correct me if I'm wrong). Interest rates more significantly affect businesses that are highly correlated with interest rate fluctuations, such as lending. My guess is that trading volume will increase because trading volume and asset prices are correlated in the long term.

Overall, I believe that financial activities are ongoing, and the demand for capital allocation is real. Hyperliquid's stance is neutral; we just want to build an infrastructure that can upgrade the financial system.

Host: Stani's point is that the demand for "speculative yields" will rise, and I guess this is beneficial for all trading-related businesses. You all agree, right?

New Trends and Risks in DeFi

Host: Alright, let's talk about the new trends that may emerge in DeFi.

Currently, the three of you represent the three core directions of DeFi: trading, stablecoins, and lending. I remember the concept of perpetual futures was first introduced in the 2017 uidx white paper. When I read it, I thought it would definitely become a big deal, but it wasn't until a year ago that Hyperliquid truly scaled it. So it was "obvious" long ago, but it took a long time to realize.

What do you think the next similar trend will be? Something that is "obviously going to happen but hasn't arrived yet."

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

We can refer to the experience in the crypto market: in the crypto space, the trading volume of perpetual contracts may account for 95% or more of options trading. This means that when users have a choice, they prefer to use perpetual contracts to express leveraged views on the underlying asset.

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

Host: Why hasn't this trend occurred yet?

GUY (Ethena): Mainly because the legality of such operations in the U.S. has always been unclear. But I believe that within the next 12 months, the U.S. may allow the launch of stock perpetual contracts. For example, Coinbase recently launched a futures product that resembles a "perpetual style," which can be seen as a hint of regulatory attitude. So we are just waiting for regulatory clarity for this product to be realized.

Host: Jeff, what do you think?

JEFF (Hyperliquid): I believe perpetual contracts are one of the greatest innovations in the crypto space. Although technically it may have been proposed long ago, what truly drove it was BitMEX and its successors, who continuously optimized the technology to make it a superior derivative tool.

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

For example, the tokenization of RWA (real-world assets) has not really become widespread, mainly because offline processes are too complex. Perpetual contracts can bypass many of these obstacles and reduce friction between on-chain and off-chain.

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

GUY (Ethena): Yes, and there's an interesting point that Jeff mentioned: what changes in user behavior will occur when the market shifts from "Monday to Friday" to "24/7"?

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

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

JEFF (Hyperliquid): I believe this applies not only to a specific asset class. Perpetual contracts are actually one of the most effective ways to express "Delta One" views (i.e., directly reflecting the price movements of the underlying asset). It is a core financial primitive, almost a mathematical structure. The market should be efficient and should allow for efficient price discovery.

Host: So Jeff means this is a form of "mathematical elegance."

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

Host: Stani, what do you think?

STANI (Aave): I agree that "everything can be a perpetual contract" is a very interesting direction, and it will continue to grow like derivatives in traditional finance.

I believe tokenized assets will also have their own development space as long as some restrictions can be relaxed. These two product forms will coexist, but the share of derivatives will be larger, as has already happened in traditional finance.

These products are particularly suitable for "advanced users." But I think the real big opportunity is to bring these technologies to mainstream users. For example, providing on-chain yield strategies in a simple form for ordinary people to participate.

Athena's approach is a great example: combining on-chain native strategies or crypto primitives and packaging them into an "economic opportunity" for a broader user base. This transformation of "on-chain yield → mainstream users" will be a very important trend.

In lending, we are also exploring how to enhance "predictability." Fixed-rate loans are an important direction we are researching.

We are also thinking about how to break through the "over-collateralization" model—where users must provide crypto assets as collateral. We hope to expand the credit model beyond pure crypto collateral. Tokenized assets are one direction, but we want to go further.

The benefit of fixed-rate loans is that they can provide predictability for both lenders and borrowers. For lenders, this is an opportunity in the fixed-income market; for borrowers, it allows for better hedging of interest rate risks.

The slow development of fixed-rate loans in DeFi in the past was due to the high efficiency of floating-rate pools. For example, Aave's lending pool efficiency is as high as 88%-92%, leaving almost no room for optimization.

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

The "Grouping" of DeFi: Does It Contradict the Original Intent of Decentralization?

Host: Let's change the topic. You three represent trading, stablecoins, and lending, but you are also involved in each other's fields.

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

But now it seems you are really promoting this model. What do you think of this trend? What is the ultimate goal?

JEFF (Hyperliquid): Personally, I find the term "DeFi group" somewhat contradictory. The original intent of DeFi is like Lego blocks—each team focuses on a specific module, perfecting it, and then allowing others to connect and combine through APIs.

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

People may have different views on the vision, but for Hyperliquid, we place great importance on building core financial primitives on a "trustworthy and neutral" platform.

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

Initially, many people doubted whether this model was feasible, but I believe we have preliminarily proven that it can be realized. We will continue to repeat this process.

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

GUY (Ethena): I think part of the problem is that there are actually not many business models in the crypto space that can support billions of dollars in scale. The three directions you mentioned (trading, stablecoins, lending) are basically all there is.

So when you try to expand your business and look for new sources of income, you naturally enter other teams' territories, leading to "crossing lines."

Our own strategy is to focus on perfecting one thing before considering other directions. Sometimes there is indeed the temptation to "do a little bit of everything," but there have been many historical failures of "DeFi super applications"—they didn't do any function well enough, and ultimately no one really cared about them.

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

We are not a platform like Hyperliquid, but there are indeed some applications building on our core product. We do not intend to create our own exchange but to open our products so that other teams can build their own businesses based on them.

For example, USGH operates on Hyperliquid, but it is not a native product of Hyperliquid; it is built by other teams. This relationship is mutual, and we also have teams building products on Hyperliquid.

So back to your question, the issue is that there are not many places in the crypto space that can truly make money. As a result, the largest participants will naturally "do a little bit of everything," such as centralized exchanges also doing stablecoins, creating their own chains, etc. This model has repeatedly appeared throughout the industry.

Host: Yes, Jeff's point is that the approach of traditional financial groups is "to serve themselves"; they are not open, not connected, and not combinable. In DeFi, we have these openness and composability, but there will still be cross-ecosystem competition. What do you think about this issue, Stani?

STANI (Aave): I actually think that Aave's growth has largely benefited from what these teams are building, which is also a very important part of Aave's story.

Composability is key. The collateralization mechanism is one of the cores of the entire DeFi product system. Collateral and yield opportunities may occur in other protocols, and these protocols need liquidity support. Aave is the place that can provide services for various innovations.

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

This is precisely what makes this field exciting. We will continue to focus on lending, delving into how to manage collateral more efficiently and how to safely access more opportunities. This alone is a massive undertaking.

Host: I want to dive a bit deeper into this topic. Do you remember the early days of DeFi? Back then, everyone thought DeFi was like MakerDAO v0, completely on-chain and endogenous, with no connection to the outside world or fiat currency.

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

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

It is now clear that DeFi and CeFi (or the broader centralized world) are not disconnected but rather a continuum. You are constantly traversing this continuum. What do you think of this trend? Are we moving towards a future where DeFi and the centralized world are deeply integrated? Has the vision of "pure DeFi" come to an end?

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

It is a better technology for handling the most critical aspects of human collaboration—money and financial assets. So, in my view, this is not a fusion or competition between two worlds, but rather the entire financial system updating its tech stack. And better technology will always prevail.

GUY (Ethena): I think the "pure DeFi" you just described now exists only in a very few applications. The issue lies in the differences in user demographics: there is a group of users who care deeply about "complete decentralization," and they are the early adopters in the crypto space.

However, most of the people who entered this field later are more pragmatic. They believe that certain characteristics of decentralization are important but do not need to be fully realized. They are more concerned about whether the product can scale and whether it provides a good user experience.

The truly successful applications in this cycle have almost all made compromises on the "decentralization vs. usability" dimension. They are not completely decentralized, but they have solved other more important issues, such as scalability and usability.

So the trend you mentioned will definitely accelerate. If you have global ambitions, you cannot only serve those 2,000 users who care about "extreme decentralization." The new generation of entrepreneurs wants to build products for a global audience.

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

People initially cared about decentralization because it brings system resilience and avoids single points of failure. That is the core we truly care about.

Governance is also part of resilience. You can design resilient governance mechanisms.

In the past few years, we have seen that decentralized lending has not really taken off. When we started on-chain lending in 2017, many centralized lending platforms (like Celsius, BlockFi, Genesis Lending) were also developing. They raised hundreds of millions of dollars and built completely centralized crypto collateral lending models.

But these platforms are essentially "black boxes," with opaque risk management. Once the market cycle turns down, these centralized lending platforms almost all collapse.

Now, almost all lending activities have shifted on-chain. On-chain lending not only has higher pricing efficiency but also lower operational costs. For example, centralized lending rates might be 9%-12%, while DeFi lending costs only 5%.

So my conclusion is that for traditional finance, fintech, or centralized participants, directly accessing Aave and providing services to users is much easier than building a lending business from scratch and managing risks.
The reason DeFi lending performs well is that it possesses characteristics like transparency and smart contract execution, which contribute to a higher-quality financial system. This is the result we see.

In the future, we will continue to develop in this direction. For example, many centralized stablecoins are now based on RWA (real-world assets), and we have already crossed that threshold. Although we no longer possess all the characteristics of "purely on-chain" from 2020, we retain some key attributes that can lead to better financial products.

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

STANI (Aave): No one will use a financial product just for "decentralization's sake," like a system that requires 10 or 20 people to argue on a governance forum. What people really care about is whether the system is stable and whether it can effectively mitigate risks. If you can achieve controllable risks and system transparency, users can make better financial decisions.

Risks in DeFi

Host: Let's talk about risks; this is a good transition.

There are now many complex strategies in DeFi, such as circular mining, Pendle's yield splitting, LST/LRT arbitrage trading, etc. Of course, there are also old issues like smart contract risks and forced liquidations.

What risks are you most concerned about? After all, this is the crypto industry, and there will always be the next explosion or crazy event. Where do you think the next "unknown risk" might come from? Jeff, what are you most worried about in the Hyperliquid ecosystem?

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

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

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

Just like human health problems, what truly leads to death is often not accidents but long-term accumulated issues. This "slow and painful decline" is the biggest risk.

Of course, there are also the explosive risks you mentioned. We try to ensure mathematical solvency in protocol design rather than relying on the prices or collateral of off-chain assets.

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

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

As projects develop, it is easy to fall into complacency, thinking "we have succeeded," and then start to maintain the status quo. This kind of arrogance is very human but is also one of the biggest risks.

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

Host: So, the real risk may be complacency and letting our guard down. GUY, what do you think about the risk issues for Ethena?

GUY (Ethena): I believe that overall, the current systems are much safer in many ways than in the previous cycle. For example, as Vitalik mentioned two weeks ago on Matters, the proportion of smart contract attacks relative to TVL has been on a straight decline since the last cycle.

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

For example, the centralized institutions mentioned by STANI, like Genesis and Three Arrows, had very unclear leverage structures. In this cycle, similar leveraged positions are not obvious. In a sense, the collapse of Terra was also a form of leverage—its USD was a liability in the system without real backing.

So from a technical and leverage perspective, it is indeed safer now. But there is a counterexample: we have also seen exponential growth in system scale. STANI is the best example—they have increased their on-chain balance sheet size by ten times since 2021.

Now these on-chain protocols are approaching the size of the 33rd largest bank in the U.S. These numbers are enormous, and if something goes wrong, the impact will be very serious.

But this is also the reason for our existence—we are not here to build something trivial. We should be excited about building "systemically important" infrastructure, but we must do so responsibly.

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

But I believe that our current approach is already one of the safest versions within the "dollar structure." At the same time, it has opened the "Overton window," allowing anyone to call "a loan to Kenyang Bicycle Company" a "stablecoin."

It seems we are now packaging anything as "dollars" and then saying it is a stablecoin. I hope everyone takes a moment to think: have we pushed the boundaries of "what can be called a dollar" too far?

Host: STANI, what do you think is the biggest risk facing Aave?

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

In the past few years, certain categories of risk have significantly decreased. For example, smart contract risk—many protocols have been validated over the years and are highly mature. Risks related to asset types are also gradually maturing, and there are now many excellent risk service providers helping lending protocols manage these parameters, performing very well.

So from this perspective, I am not that worried at the moment. But I do believe that the real risk testing for lending protocols occurs during market downturns.

When the market is stable or rising, it is easy for everyone to excitedly launch various assets. But true risk management capabilities are only validated when the market declines and liquidations are triggered.

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

What I am more concerned about now is "counterparty risk." For example, when an asset is integrated into Aave, we assess the protocol or asset risk behind it—how it is managed? Is there some form of permission or centralized control?

This also relates to the centralized elements you mentioned earlier. Some assets may have control logic or centralized functions at the smart contract level.

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

Credit to the team at Credora, who have made significant efforts in transparency, allowing us to see more clearly how the mechanisms behind the assets operate.

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

Quick Q&A

Host: Alright, we are running out of time, so let's move into the quick Q&A segment. Each of you quickly answer a few questions. Who do you think is your biggest competitor?

STANI (Aave): Banks

GUY (Ethena): Circle

JEFF (Hyperliquid): We are not competing with anyone

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

JEFF (Hyperliquid): Focusing on infrastructure too early

GUY (Ethena): Being too inward-looking, only focusing on a niche user group within DeFi

STANI (Aave): Ignoring composability

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