Why Kraken Is Betting Big on Onchain Vaults | John Zettler & Sun Raghupathi

I don't know if I can put concrete numbers on it, but I think in terms of caliber of companies that are offering DeFi yield products through vaults to their users, it's going to be an absurd year. 2026 is going to be the year of the vault. The year of the vault.

The year of the vault. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice, or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone, welcome back to Empire. Very excited about this one. Um, so many of you guys may have heard the predictions episode that we did with Santi and Rob. Um, my thesis, uh, one of the theses is that on-chain vaults is going to grow. I said on-chain vaults will grow from $6 billion to $15 billion Vaults will become one of DeFi's top narratives. All these asset managers are going to need to figure out their vault strategy. Got a ton of questions, basically everything ranging from like, what in the world are vaults, to like really in-depth vault questions. And I couldn't answer a lot of those. So I brought on probably two of the best people in the industry to talk about that. One is John Zettler from Kraken. We've got Sun Ragupathy from Veda. Really excited. So John, Sun, welcome.

Yeah, great to be here. Just $15 billion?

$15 billion. You think—

those are rookie numbers.

You think bigger?

We got to pump those up.

You think bigger this year?

Yeah, I think bigger.

Really?

I think bigger. Um, I mean, I think it's a— we're just really at the start right now. Um, all the tech is just kind of in place now. You've got the embedded wallets working well. You've got, you know, infrastructure that's in place like Veda. You've got a number of different fintechs who are all starving for yield in a rates decline binding environment with Fed fund rates going down and expected to go further down through the years, you know, I think the setup is perfect. So, I'm expecting it to be, you know, I don't think our launch, which will, you know, be live by the time this podcast comes out, I don't think this is going to be the last one people hear about in the next coming months.

Can we go a little deeper into that? So, I said $15 billion, you think $20 billion, you think $50 billion?

I'll take the over.

How about that? Okay. You'll take the over.

Nice. Yeah, what I'll just say on that is it's going to snowball, right? So we're seeing movement from some of the early, let's say, more advanced, more innovative companies like Kraken, but everyone's going to follow suit, right? Like DeFi yield will go everywhere. All assets will move on-chain. So I'm expecting a fatter second half of the year. I don't know if I can put concrete numbers on it, but I think in terms of caliber of companies that are offering DeFi yield products through vaults, to their users, it's going to be an absurd year. 2026 is going to be the year of the vault. The year of the vault.

The year of the vault. Okay, so maybe we should talk about what is a vault. I'm going to ask some really dumb questions in this podcast. So maybe for the— explain to me like I'm a listener, I'm a person who's never really even heard about DeFi and I don't even know too much about DeFi. What is a vault at the most basic level?

Yeah, well, I think—

yeah, Sun here.

I mean, Sun here.

But context is Sun's been building in the vault space for Yeah, before anyone even knew the word vault. So yeah, I would love to hear your explanation.

So DeFi, like, let's start with what is DeFi. Maybe that's a little too basic for viewers, but DeFi is a set of financial primitives that allow peer-to-peer coordination. And that's it, right? So you have lending protocols that match lenders with borrowers. Boom. It's all programmatic. It's all public. It's on-chain. It's magic, right? DEXs, traders, liquidity providers, it matches them. The problem with primitive DeFi is that It's not user-friendly whatsoever, and you can't package up the kinds of products you want as an institution, right? You have no risk controls, you have no compliance, you have no flexibility in customizing products for your user base. So that's primitive DeFi. Now here's where vaults come in. Vaults are a layer on top of that that allows institutions, fintechs, exchanges, anyone with users or capital that wants to offer financial products to their customers to package up the best of DeFi, layer on whatever compliance, whatever risk controls, offer whatever risk-return profile they want as a yield product. And that's what vaults are fundamentally. It's a layer that sits above DeFi that allows you to package up the best of DeFi and distribute it globally to consumers.

And they've come a lot over the years too. Like, you know, if you really rewind and go, you know, dial back the clock, I remember the first vault I ever used was Yearn Finance. Either you guys use that. Yeah, that was like DeFi summer, right?

Like, that was the best fucking time.

Summer, summer 2020, right? And like, the way I sort of think of vaults and where they fit into the DeFi ecosystem is a bit kind of like a pyramid. You've got the very base layer is liquidity, and liquidity is needed in the automated market makers, the Uniswaps, the Curves of the world. Those then power the borrow-lend protocols, which sit in the next layer up. And so, that's where you've got the names that a lot of people here know of, of Aave, of Compound, of Morpho, ones like that. And they rely on the layer beneath because they need to be able to do liquidations. When the collateral decreases too quickly, there needs to be solvers out there who can go sell those assets down and fulfill the loans to not have bad debt. Okay. So now, you've got all these different borrow/lend protocols out there. And then all these different independent markets. And you're saying, okay, well, how do I then go get the best yield? Because the user just wants a good yield. That's it. So, the vaults kind of sit at the top of the pyramid and then can be a layer to package up and aggregate all the different opportunities across the borrow/lend protocols. Okay.

Where does the— when I think of a vault, I think of— the first thing I look at is how quickly can I take my money out and what is the yield, right? So, some things have 7-day, you're kind of stuck in it for 7 days or a day. And maybe some have 3% yield, some have 7% yield. Where is the yield coming from?

Yeah, that dichotomy right there is a great point, I think, and there's a lot of alpha there. Liquidity and yield are fundamentally tied.

Yeah.

Right? And to some extent, the job of creating yield product is you have a user, you want to know what their preferences are over these things. How long are they willing to wait to get their money out and how much yield are they looking for? I think that's globally true. With DeFi, it's a little bit more complicated, right? Because you have all kinds of other forms of risk. You have counterparty risk, you have smart contract risk, you have protocol risk and economic risk. And so I think that the construction of a good vault product is in some sense optimizing over all of these different considerations. This is also why you need flexibility in vault products, right? You need to be able to, for any given user, optimize for what they care about over all of these dimensions.

Yeah. And then to your question, right, of like, you know, where does the yield come from? Like, don't worry, I've got this one dialed in because I know we're launching on Monday when this podcast comes out. I'm already expecting the Reply Guys to be in there with the goose meme. Yeah. Where does the yield come from?

Where does the yield come from? You got it.

Oh yeah, I'm ready. So Reply Guys, watch out.

Not to mention the legal team at Kraken.

Right, right, right. You've been in my ear as well. But the short, like the short, short version of this, right, is So, going back to that layer of the borrow/lend protocols that sit under the vaults, there are borrowers on the other side. And that's really ultimately the primitive of what's driving the yield. People want to borrow assets out of these protocols typically for the use case of going levered long, which is one of the reasons why USDC is always the one that people want to borrow the most against because they could post their crypto as collateral, pull out USDC, borrow it. And then go buy more crypto with it and then lever up again. And then there's all sorts of things they can do from there. And, you know, buyer beware, your mileage may vary. But ultimately, you know, kind of going back to it, where does yield come from? It comes from on-chain borrowers, people who want to pull out typically USDC or other stablecoins for any purposes. And then when you package that up in all the different protocols, that's really like you can change the collateral type, you can change the protocol type, you can change liquidity windows. All these different parameters then layer out to an equilibrium of sort of a risk and yield curve.

Yeah. Okay. So, when I give my money to a vault and I get the— so, I'm putting, let's say, $100 into one of the Veta vaults, I get 7% on that. The 7% is because you guys are then lending out my money.

Effectively, there's lending, there's other protocols that are involved as well. But yeah, it's being deployed into DeFi protocols that are, again, peer-to-peer. So, there's users on the other side that are making productive use of that capital.

So, there's a layer between, right? So, like, the assets go into the vault, the vault allocates, and so then it's being supplied into something like Aave. Right. Or like Tidro, which is the instance that exists on Ink. And then once it's being supplied in there, the protocol itself is handling all the lending out. It's their pools. It's not like peer-to-peer in any sense, but someone's going in, on the other side and pulling from that pool to borrow it out. So that's kind of where it all is coming from.

Do you have a sense of how much of the borrow/lend protocols, like how much of AAVE supply that's being lent out to them is through vaults? Have you guys—

It's a great question.

So I would say for AAVE, most of it is direct. Yeah, probably. I mean, AAVE has something like $40 billion.

Well, maybe Morpho is a larger percentage.

Morpho is mostly vaults, right? And this is a super— I mean, this is an interesting subject.

And Morpho controls the vaults and they are the borrow/lend?

Yeah. So let's go through it. Aave because there's a very clear progression here. So Aave is like the OG or one of the OG lending protocols in DeFi, right? It's basically decentralized. It's governed by a DAO, but the fundamental economic model is a pooled system where you lend your assets into it. It goes into this big global pool, right, that has many different assets and collaterals, and anyone can come and post any one of those collaterals and borrow from that global pool, right? So let's say the supply is a bunch of stablecoins, USDC, USDT, DAI, whatever. And the collaterals are ETH, BTC, liquid staking tokens. You can deposit any of those and pull any of the supply tokens. So it's a pooled model. That's the important thing. You don't need vaults in that setup because there's no decision to make. You just put your assets into AAVE. The AAVE DAO is doing the risk parameters of what collaterals are being supported, what are the borrow caps, all of that stuff. Then Morpho came along and Morpho said, okay, what if we don't want one size fits all for lending, right? What if we want people to be able to choose what collateral they lend against, right? Because with AAVE v3, you don't get that choice. So Morpho is a set of isolated markets. It's one collateral, one loan token. So think of it as Bitcoin-USDC, ETH-USDT, and these are siloed, right? But then Morpho introduced vaults. Vaults are necessary in the system because when you have siloed markets, it's super fragmented, super inefficient, there's no shared liquidity. So you can create a Morpho vault that says, now I want to allocate to this market and that market, and you're packaging up different forms of collateral that come together into a yield product. But that's just Morpho, right? You don't have a Morpho vault that can earn on AAVE, that can go to other protocols. So Morpho vaults are a step in the right direction, but it is still too specific. It's still not flexible enough. And this is where Veda comes in. So Veda is multi-protocol, multi-chain. This was like our design principle. The goal is that you should be able to aggregate any form of DeFi, whether it's Morpho, whether it's Aave, whether it's Pendle, whether it's RWAs, right? Packaging up all these things into a single product with the most flexibility possible is the ultimate evolution of vaults. And if you actually look at what other players are doing, like lending protocols like Morpho, they are increasingly trying to diversify their vault products to be more and more flexible. So I think this arrow only goes in one direction, right? I mean, John can speak to this, right? Institutions want flexibility because they want the best yields, they want the most product flexibility, right, to be able to target these different risk-return profiles. So I think we're only going to go in one direction, and institutions, enterprises will want multi-chain, they'll want multi-protocol. They don't want to be locked into any single chain, any single protocol.

Yeah, I think that right there is it. It's like the multi-chain, multi-protocol nature of Veta is really the superpower because unlike a lot of other instances that have launched vaults, they're usually just typically isolated into like one thing or one market. And when that market, when the yields go down because you don't have those borrowers anymore, no one's wanting to use that market, you know, then it becomes a lot less attractive.

Yeah.

And there's other products out there that have, you know, already started to see some of those decreases in their TVL because the yields are now falling to like, you know, 3.5% or sub-3%.

Yeah.

So, you know, that's, that's really a superpower of VETA. And speaking from the Kraken perspective and, you know, what I think is a shared perspective, a lot of fintechs, that is ultimately, I think, what's going to win the day. Multi-protocol, multi-chain, allowing, you know, that simplicity and aggregation in the most, the highest form.

If I tried to summarize all of that, is it that Aave pioneered basically lending/borrowing and you've got these big, big open pools, Morpho introduced vaults, and then Veda took the kind of self-contained Morpho vaults and introduced a new model, which is kind of multi-chain open-ended vaults?

With the nuance that our vaults existed before Morpho existed. So we were building vaults before that. Just as a minor correction, Aave pioneered lending/borrowing at scale. Morpho introduced modular lending. So it's package up your specific lending products, your specific risk-return profile. What Veda has introduced is truly abstracted, flexible, multi-chain, multi-protocol vaults.

And I'll also just jump in. There have been a lot of other players too. Let's not forget Compound. Compound is one of the first ones doing borrow/lend.

They were the first actually.

Synthetix was like the first one way back when that was giving you yield on your tokens. You're involved.

Who else are the—

who are—

so, because you worked at Coinbase when you worked on the Morpho integration. Now you're at Kraken working with Veta. Who's like, I mean, if you did like an RFP, like who are the other vault players you could have looked at?

Yeah. So I would say there's— so maybe one thing that's also worth mentioning too is the difference between the vault providers and then like the administrators who like provide the infrastructure versus the risk managers.

Yeah.

That's also interesting.

We should actually talk about all of the key parties. Yeah. Vault operator.

Yeah.

So let's maybe— can you get into the different— the parties involved here?

Sure.

So like the way that I would describe it as simply as I could is that, you know, Veda is the administrator, the— who administer the vaults and provide the actual infrastructure, everything down to like doing the daily NAV calculations and so forth. Like that comes from Veda. And then there can be off of Veta's infrastructure, many different risk managers, what they called, who then operate the vault, who come up with strategies and then decide on the allocations of those vaults. And so in that world, you know, we're with this launch that's coming out, you know, the day on Monday when this podcast releases, we're working with Chaos Labs and with Centaura, two of like, you know, premier risk managers in the space. Chaos Labs, people might know from working with Aave. They've managed the Aave DAO, risk managed the Aave DAO for quite a while now. And Centaura is more institutional focused, but, you know, growing very quickly and a great partner to work with. But there are many others too. And I think other ones that people might have heard of along those lines are like Gauntlet and Stakehouse as like two other examples of risk managers out there.

And I'll just, just add to that, this category, you can call them risk managers, curators, whatever. This category is growing rapidly, almost as quickly as vaults as a whole. Because you have the largest asset managers in the world already today are becoming interested in diversifying their offerings through these on-chain products. So that's going to explode, right? Like, we have this nascent— these are very crypto-native companies, right? Stakehouse, Gauntlet, Chaos. But the biggest TradFi and even, you know, TradFi adjacent crypto asset managers, they have the skill set to do this and they're already starting to move on-chain.

Probably a really dumb question. Why don't you— why do you need the risk managers? Why do you need Gauntlet and Stakehouse and Sempola, what are they called?

Centaura.

Centaura and Chaos. Why don't you just do that yourself?

Yeah, it's a good question. I believe in a world that has diversity of curation. There's never going to be one party that just manages all of the world's assets. I mean, you could say BlackRock does a lot of it, but even they don't, right? There is a diversity and plurality. And if I think about what our advantage is, it's really the crypto-native, DeFi-native stuff, right? Building the plumbing, making the infrastructure work, the widest possible access to chains and protocols. Are we really going to go toe-to-toe with the BlackRocks of the world in risk management and building trust with, uh, capital allocators? Maybe, but that's not the business that, uh, we're doubling down on. So it's just, it's just a different business model, right? It's who playing to our strengths.

And from our perspective too, the other interesting thing to add is like we can integrate against Veta once with one standard integration, one model of the way that the vault works, and then you can get n number of different styles and ways of how those vaults are shaped and formed and how they deliver returns.

Yeah.

One more question on this front is, you know, we said we now have chains building apps and we have apps building chains, right? You kind of go up and down the stack and people, you know, as the industries grow, you verticalize. Do you think that we'll see any of the curators start to maybe try to own the layer below?

Yeah, it's already happening.

It's already happening.

They're trying, right? So Gauntlet has their own vault infrastructure product.

Interesting.

Which is similar to Vetas.

In the market?

It's in the market. I don't know if anyone is really using it, but it's out there. I think the challenge is that—

Aave v4 too is going to have a vault.

Aave v4, yeah. I think that's closer to Morpho than it is to a vault product. You're right, protocols need vaults. Hyperliquid, they have their own vaults. Everyone wants vaults. I think the challenge is that building a successful vault platform is very different than these other things. It's very different than building a successful lending product, different than doing good curation. There's real economies of scale with doubling down on vault infrastructure because it's so complicated. It requires a lot of attention to detail. None of these people who are trying to vertically integrate, I think, will have a better vault product than we do as an infrastructure. Now, what they're trying to do is capture more margin, and power to them, but in my view, they'll be outcompeted by the curators that focus on their expertise and use the best infrastructure that exists.

So how do you pick these curators or risk managers?

Yeah, great question. What we're generally looking for, just speaking from the lens through which we saw this at Kraken, is we wanted someone who had experience doing curation at scale. You know, Chaos Labs being a great example of that. They've been working on doing risk management for the, for the AAVE protocol for quite a while now. Another thing that's important, right, is their security model, their familiarity with working with the vault provider. So someone who's actually had experience like Centaura has had plenty of experience working with Veda, that was important because you know that there's like already that relationship there, that, um, that know-how. And then I think furthermore, there's, you know, sometimes also a level of craftiness and innovation of being able to consider different newer protocols, looking for temporary incentive programs that they can deploy into, and also sometimes like looping and some of those other more slightly higher risk activities, but that can bring about more yield.

What I'll say is there's a large number of curators now and risk managers in the space. There's a huge— there's a very long tail of people that are just doing stuff like, you know, they don't really know what they're doing. You tend to see power laws in this category with everything in finance, right? You have curators who have managed billions of dollars at scale and they know what they're doing, right? And they have institutional relationships and They have really deep data models. And then you have ones who are just like, yeah, we're just going to throw money around. So they tend to separate on that.

Do you think so right now? So Chaos, Gauntlet, and Stakehouse are probably 3 of the leading people. Do you think that we will see traditional asset managers move into the space in 2026? Will a traditional asset manager try to compete with Gauntlet on this business?

Absolutely. That's like a prediction I'm very, very confident in.

Yeah.

Will they do well?

They will. They will? They will because they have the customers, right? Like the DeFi curators in some sense are competing for this pool of DeFi users, right? Or they're trying to go to large credible institutions like Kraken and sell their services to the people who have distribution. But the largest asset managers do have distribution, right? They have customer relationships, they have assets. That they can funnel into their products. So I think it's very difficult, right? If BlackRock comes on-chain and says we want to bring $100 billion on-chain, they can do it.

Do you want— when BlackRock launches a vault, you want them to do it with you guys?

They will do it on Veta.

Yeah. Okay. Okay. Um, can we talk about the revenue and the business models? Like, where is the value being captured here? Is it— is it— let's say someone— let's say there's $10 gets made. How much does Veta make? How much do the risk curators make? Like, where's the flow of capital?

Yeah, sure. I'm happy to go into it. So, the vaults themselves are built in such a way that they take a performance fee. So, a percentage of the rewards that are earned on the vault basically gets set aside to the operator of the vault, basically like whichever—

The operator equals the curator equals the risk manager?

This one, not quite, because like it goes to the holder of the admin key basically, and that admin key can provide a 0x address that all the fees get paid to. So in this case, you know, in the vaults that we've launched together with this release, we've got 3 vaults. They are a 25% performance fee. Those rewards then flow into a fee splitter smart contract, very simple, and then that's split between Kraken as like the distribution partner bringing all the customers and volume. The lion's share goes to, to that distribution, Veda as the infrastructure provider, and then also the risk manager of that vault.

Got it.

Yeah.

Okay.

And I can tell you a little bit about like my philosophy with Veda as a business. Our goal is to serve thousands, tens of thousands, hundreds of thousands of vaults, right? And who's going to take the lion's share of the fees that are actually generated in these products? It's going to be the distribution, right? The people who own the distribution. But our goal is to be, is to serve everyone. And so you kind of have this dynamic where the distribution partner always takes a lion's share because they own the user. The curator comes in and they're kind of competing based on their ability to outperform. And our goal, we operate more like a SaaS company where we're providing infrastructure.

You're just a technology platform.

Exactly. That's right.

Do you care about owning the distribution at all?

I care about it in the sense that Owning distribution is great. It's a great business, but that's not our focus right now.

It's not your focus. So you'd rather go to the exchanges and the fintechs and Klarna and Robinhood and Kraken and integrate?

In general, the trend we're seeing in DeFi, DeFi is increasingly a backend. You have two choices. Either you're going to do the consumer thing, like the EtherFi of the world, Plasma, where you're building a neobank effectively. You're trying to compete with the largest exchanges and fintechs. That's a really hard battle. It's really expensive. There's a lot of luck involved. Some people are fighting the good fight. If you're not doing that and you're building infrastructure, you need to be going to enterprise, meaning the fintechs that are moving on-chain.

Yeah, that's an interesting— go ahead.

Yeah, I was going to say, I think Sun's point is really interesting too, because there could be this perception that this product, the classic DeFi mullet, you know, of, of, you know, fintech in the front, DeFi in the back, is competitive to DeFi, but it's really not. Like, it's really complementary to DeFi.

Totally.

Because you're basically just a different front end that's bringing it to all the same protocols and all the same activity and TVL on-chain. And my view here is like, you know, as someone who has been using Vaults since, you know, the DeFi summer, I guess, and even before, The problem has always been like keeping track of where all your money is. Like, where the heck is it?

What?

Oh yeah, I use this protocol like 3 months ago. I forgot I still have like money over there and this one over there. Like, that's a pain in the butt. MetaMask or whatever self-custody wallet you have always has issues with your ledger and like, that's always a pain in the butt. And then you're like, okay, well, how do I aggregate all these things? Well, then there was that like Zapper. I remember I used Zapper back in the day that like connected all these things. Zapper and Zerion.

Yeah.

Like those were helpful and that was a step in the right direction, but I think they've degraded and I don't use them anymore. I remember one of them, I think, went out of business or something. So, it's been challenging and not easy to use all these DeFi protocols, especially if you have to go to 4 or 5 or 6 different websites to go find the best yield that you're looking for. So, the beauty, I think, of where this is going, and speaking of distribution partners, is once you have that packaging, that aggregation layer of vaults, and then you have it plugged in into a traditional, easy-to-use fintech with a slick native app, you're bringing it right to the user's fingertips without them having to think about much.

Yeah.

And so the way we've done this is, you know, we've worked with an embedded wallet provider, Privy, which probably a lot of people in this podcast have heard about, the one acquired by Stripe. They've been a pleasure to work with. And what it allows for is it allows for a non-custodial wallet that's embedded under the hood directly one-to-one with the user account. So, you've got your Kraken account, you've got your Kraken account, you each have an embedded wallet that is just yours, but we, Kraken, can't touch it. We can't move the funds, we can't influence it, we can't do anything about it. It all requires you to be in the loop. You'll get a one-time OTP code, a small 6-digit passcode that comes to your email from Privy. You type that in, you That's your way of assembling all the pieces, and then you can actually interact and do the transaction. So I think that's where this is going, which is that DeFi is increasingly becoming a backend. We're packaging it up through vaults in a way that's simple and easy to use. There's not a lot of active stuff that the user has to do. And then you're delivering it in the same fintech channels, in the same apps, at the user's fingertips without the need for ledgers, self-custody, 17 different websites, and everything else.

Yeah, very interesting. I think Sun's point around, um, you guys are really just a tech platform is kind of shifting. That's a— that's probably my takeaway of the episode so far, is most of DeFi will really just become a backend. And yeah, maybe a few will survive as frontends, but those— if that's the case, you end up really trying to compete on distribution with Robinhood and Coinbase and Kraken. And you've got to— that's a hard game to win.

Keep going. Nubank, Revolut, then you get into the traditional banks. Like DeFi— so I'll go a step further and say this is not just beneficial to DeFi and complementary. This is actually the only way that DeFi succeeds. I think I've been building in the space for a while. We all have. There was a pipe dream that we would invent this entire independent financial system. And just migrate everyone over. Like everyone's going to leave the banks, leave their, their exchanges and fintechs and move on-chain. But that was always a pipe dream, right? And where we're at now is a land of compromise where there's tremendous value that DeFi has created. I mean, just like we haven't explicitly said this, but you have Kraken users, millions of users on this exchange who with a single button are earning yield on ETH across multiple protocols, They can see their assets at all times, right? It's all on-chain. They can get those assets out whenever they want, right? They're getting the best, most competitive yields that exist. That is an amazing product experience. And so I think this is actually necessary and it was inevitable. I think it took people a while to realize, but this is phenomenal for DeFi.

Yeah. John, can you talk a little bit about the learnings from Coinbase? So we haven't talked about this, but you spent like 5 years at Coinbase. You're running a lot of product stuff. I think you helped build out their staking, CBE, um, vaults with Morpho. Can you talk about the learnings from your experience with building vaults at Coinbase and Morpho? Like, what went right there, and then what also went— maybe you could have improved upon?

Yeah, sure. I would say, um, so first off, like, you know, uh, I don't want to steal the thunder from some of the great people at Coinbase who continue to make these products awesome. Like, you know, being early and helping start a product zero to one is just a small piece of the battle, and there's, you know, tons of people in the trenches over there who continue to grind and make that thing better and better. And even, you know, my role was pretty small. There was Andrew Holt, uh, Mara Vila, like my, you know, co-founders, product co-founders from the engineering and design side who are super important. Um, but like, to, to speak maybe directly to your question of lessons, um, one of the things that Coinbase does really well is that they favor first-party products to provide a more integrated experience, more like the Apple model than like the Android model, so to speak. Um, and so with the Coinbase approach, it was, you know, a vault provided by Stakehouse built on Morpho, which is a Coinbase Ventures portfolio company, on top of Base their L2, delivered to customers using USDC, which is pretty much their first-party token. With Circle, they're both co-owners of it. So the very up-and-down integrated nature of it made it quite easy to use, free gas for the users, and a pretty slick experience using their own server signers for the embedded wallet of it all. That one of the things I learned building that product was the relentless focus on being the easiest to use. Like Coinbase had this saying always internally that Coinbase wanted to be the most trusted and easiest to use. And that was like, as Brian would always say, those are like our two differentiators. Those are the things. So you try and bring that, you bring that into all of your products. And I think those lessons really have influenced me in becoming a product leader of, those are necessary for everything. You always want to hammer and hammer on the user experience, always try to make it easier to use and improve upon it. The whole Coinbase DeFi suite has been doing quite well. I mean, if you look at their borrow product, there's some Dune dashboards we could put in the show notes or something. I can send it to you. They're up to, I think, $1.9 billion of collateral in the borrow product with about $1 billion of loans issued against that. That's the DeFi borrow side. Of the lend side, I think they peaked at around $475 million of TVL. It's come down a little bit as the yields have trailed off, but it's been, you know, by and large I would call, you know, a successful suite of products at Coinbase. And I think they're just getting started, you know, hats off to them. But, you know, putting— I have, you know, swapped my, my, my team blue for team purple. And the thing I love about Kraken is that we have an opportunity to use providers like Veda where it's not all just first-party, you know, products and services, but we can really source the actual best in the industry. Um, and, uh, and, you know, the vaults that we have here that we're, that we're launching with— I mean, we were just going through the demo, uh, before we got on air, and the yields are substantially better. and one of the reasons why they're going to stay better is because of this model of going multi-protocol, multi-chain using someone like Veta allows us to source the best yields from across the ecosystem. So, like, fundamentally and long-term, this is a more advantaged approach. It is a smarter, better strategic approach because you're going to long-term have better risk-adjusted yields when you have more diversity and opportunity.

Yeah.

For someone who's listening who says, I've heard this story before, it's called BlockFi, it's called Celsius, I open up the platform, I get 7% yield, all good, no risks. How do you talk about that?

Maybe I can take this one.

Yeah.

So there was things that they did correct, BlockFi, Celsius, in that the product experience was great, right? And clearly people want yield. Like that is a no-brainer. It's a universal demand. The implementation was totally wrong and it's night and day. And this is why DeFi is such a superpower. Because the difference is when you gave your money to BlockFi, you had no idea where it was going. You had no real claim over those assets. They could do whatever the hell they wanted with it. And they did. They did crazy shit with those assets. With this model, I'm not going to say there's no risks, because everything involves risk, any financial product. And obviously crypto and DeFi involves its own kind of unique set of risks. but you know where your assets are at all times. It's all on-chain. Even if Kraken goes down, there's a global outage, right? You lose your phone, you can literally go to the blockchain and see your assets. And not only can you see your assets, you can see your claim to the set of assets that are in that vault. And only you can redeem your assets, uh, you're— you only— you can redeem your assets from that vault. So it's just totally night and day, right? You take this universal demand which people want, high-yield savings accounts. That's just like a killer product. But you build it in a way where it's transparent, right? It's truly non-custodial. And most importantly, right, like, it's all public. Everyone can see it, right? So that's what I think is fundamentally different. I think those set the industry back a long time, but also it's probably necessary because people now really value the important things like transparency.

Those weren't DeFi.

Yeah.

Yeah, you know, they were CFI. They were like over-levered, risk-taking private books that were making shit loans to shit counterparties, and they got screwed. Yeah, you know, and then, and then the customer suffered. And but, you know, remember when like all of that happened last, you know, the last turn of the tides when we went from bull to bear, and I guess was it 2022, and through that just bloody year, um All of DeFi went unscathed.

Yeah.

You know, because it just functioned and operated as it was supposed to. These were overcollateralized loans. The collateral was there. The risks were managed. And when those liquidations happened, they happened in an orderly way. And, uh, the users, you know, everything was functioned as it was supposed to.

Yeah. So you're showing me a little sneak peek of the product, which looks great. People should try it out. Um, by the way, side note on Kraken's product, I've been It's been getting, uh, markedly better over the last probably 18 months, I'd call it.

So yeah, there's like— I would call it the Arjun effect. Like, Arjun's our CEO who's been on the pod. It's nuts.

It's Arjun. The things Arjun has done for Kraken, I think, have been unbelievable.

He's, he's a great leader in the sense, you know, every leader is very different. And, um, the joke I'd say to some people is that I can't imagine two different people than Brian Armstrong and Arjun Sethi.

Tell me why.

But both are incredible. Like, well, they're so different and in so many ways I don't even know where to begin.

Yeah.

But like one of the ways, and one of the things, maybe I did reframe it in just like one of Arjun's superpowers is that like it can, we can always move faster. We can always be better. We can always be leaner and we can always be hungrier. And so it's this constant drive to move faster and to do more with less. That reminds me of this, like, it's that feeling you get when you're in a smaller stage startup that's really working, that's in product market fit mode. And it's awesome. Like, it's just, it's such a refreshing change of culture because it is no process for process's sake. There's no big quarterly planning cycles. There's like, you've got one OKR, which is like your revenue number at the end of the year you have to hit. And like grunt and tell me what you need to, what resources you need, what financials you need, whatever you need to make it happen. And, you know, mountains can move around you to get what you need and to move fast.

Yeah. How does something like this vault product get approved at Kraken? This is bottoms up. You guys go to Arjun, you're like, I think we should do this idea. We should work with Beta. Is Arjun like, we need an earn product?

Yeah. So, I mean, we have— so even when I was hired, you know, Arjun was, you know, pretty closely involved in my recruiting process. And this is one of the things that they were already starting to talk about and was like, it was already starting to be built. But there was a lot of lack of clarity in how it was going to get structured, how it should be designed, how it should be engineered. And so there had been this view and there had been a lot, you know, Arjun had brought in a couple of these strong more on-chain crypto-native individuals. That is also, I would say, a superpower of Kraken. You've got all these really OG cyberpunks, really early, early evangelist kind of people in the crypto space. So there was this knowledge and this understanding that we wanted to do this, but there wasn't really an understanding of how to do it. And I'm really happy with where this product landed, but it's just the first of many. There's a whole suite of on-chain DeFi-oriented products coming our way. And I guess that's probably where I should leave the teaser and the cliffhanger for the next one.

I remember actually the day that John joined Kraken because we'd been chatting, we'd been working with the Inc. team, and obviously everyone wants an earn product and we were talking about things. But I remember John joined and shit just started moving. Right? It was like, so more credit to Arjun finding the right people to come in and build the products that the company views as important.

Did you know for this product that you wanted to use Veda, or did you talk to Morpho too, or, and other people?

We, um, there were some thoughts and some different opinions inside the company, as there's always a ton of different opinions. And I think we just had to all work together to come to common sense of what was going to make a lot of sense. And Veda was a very obvious choice because of you know, some of the great— what we keep saying is this, you know, cross-chain, cross-protocol opportunity to deliver sustainable higher yields than you can get elsewhere.

The yields you showed me were like, I think there's one that was like 2%, one that was 3%, one that was 6%, 6.5%, something like that. Did you ever think about a 20%, 30%? Like, you can, you can loop, you can, you can get to kind of the percent you want. There's just increase risks.

So yeah, as long as we don't start getting, you know, Terra Luna tattoos on our shoulders and start talking about 20%, you know, like that, I'm going to get flashbacks.

Should we go there?

You know, like the chihuahua meme.

But there's a thought that if you want to give the user the best experience or the— you want to give them all the options, which is this open beta model of like, you know, just serve anyone, anyone, everything. You should serve them 15%. You should serve them 50%.

I'll bring that question back to you. It's very similar to like, how much leverage do you let someone trade with, right?

Like, I like that you can take the slider to 100. I don't go to 100, but it's nice. I feel good as a user that they don't stop me out at, you know, 10x or something.

What I'll say is, like, we have very much an intention to add more bolts over time.

Yeah.

So this is the version 1, right? Like, this is our, you know, planting our flag on fresh virgin territory and saying, you know, we're here, we've got a lot more coming, you know, come work with us. And so, you know, anyone who's out there listening to this pod, like, who, you know, is a risk manager who has a differentiated strategy they want to you know, pioneer or bring, like, come talk to us. You know, we're not hard to find. You can DM me on Twitter or Sun, and like, let's start talking and figure out, you know, what additional opportunities we could offer.

Because, you know, what is the interesting pitch if someone comes and slides into your DMs? What is the interesting pitch? Is it their track record? Is it the API they can deliver? What is the—

yeah, like, show me what you're doing and why it's differentiated. Show me that you've been doing it before. And that it's not like, you know, a track record over 2 weeks, and explain why this is going to last over time.

Yeah, yeah. I have a question for you actually. All right, so you, um, you put out a tweet, right, about your prediction that vaults would be huge, right? And we kind of discussed this. What made you— what makes you so bullish? I don't think we've heard you like kind of articulate that.

I was at a holiday party with, um, There's two theses. One is the one that we've talked about a lot, which is the DeFi wallet. And I see what's happening with everything from like Coinbase to now Kraken to like, if you go on the World app, there's like vaults powering it. It feels like every single one of these fintechs will launch that. I'm fully on board with this thesis. But the thing that like really kicked me into that was I was at a holiday party, and one of the largest asset managers in the world was there. And they said, to someone else who is at one of the largest, uh, they service the asset managers. Two, they're probably like 50, 55 years old, as traditional trad fi as it can get, wears a suit and tie to a holiday party. And one says to the other, have you heard of these vaults? The guy says, vaults? I was expecting him to say, what are vaults? He goes, vaults? We're all over vaults. They know Steakhouse, they know Gauntlet, they know Morpho, you know, like they I'm sure they know Veda. Like, they were deep. And they're— both of them in different ways said they're coming into the vaults business.

The suits are coming.

The suits are coming. So, I'm a little less optimistic than you are that they will be able to compete with Gauntlet or Stakehouse or Chaos because they own distribution, but in a very different way than like Robinhood owns distribution. Like Robinhood owns— the user goes to Robinhood and can click a button. The user goes to Kraken and can click a button. BlackRock is like— BlackRock actually doesn't really own the distribution. I think BlackRock— like Charles Schwab owns the distribution and you could buy the BlackRock products through Schwab. I mean, you can also go to BlackRock if you want to, but it feels like a very different user experience.

It is different. You're right. They have to go and talk to people.

Yeah.

They go and talk to people and convince them.

It's like a product that's sold by financial advisors as opposed to something that is Like, I think Charles Schwab owns distribution, TD Ameritrade owns distribution. So, and I think on all of those platforms, that's where you'll see these things.

Yeah. And like, would a Tarun ever go work for a BlackRock? Like, I don't think so. Like, you know, like someone who's like as deep as it comes. Tarun, founder of, you know, of Gauntlet. But, you know, you kind of require someone who's like deep on like, oh yeah, well, Athena is right now paying, you know, this good yield. But as soon as ETH starts to tank, you know, that's going to disappear and we got to be ready with our strategy over looping on Euler. Don't worry, Euler's good again. It's like, you know, it got hacked before but it's safe now. And, you know, oh, we're going to go over here and then go to do some, you know, looping on Aave with, you know, some LSTs, LRTs. I don't know, I may be also skeptical that like that level of crypto-forward individual has a, you know, would want to go work in one of those big institutions.

With that being said, I have another meeting I had. It was a dinner actually with one of the huge hedge fund portfolio managers. And I was like, are you into crypto? He's like, you wouldn't believe the looping that I'm doing. I was like, oh, what are you doing? He's like, I've got levered to the nines on Superstate with US— what's their thing? USDC. He's like, I'm looping USDC like 7 times right now. And so where I think these folks are smart, And it's not crypto's— crypto and traditional on-chain capital markets, crypto or traditional capital markets will eventually converge.

Right.

And they'll— we'll just call them capital markets one day.

Yeah. I mean, like the set of yield and primitives that exist today is going to change over in the next 5 years, right? RWAs are going to move on-chain. There's just a much larger asset universe that exists outside that. I agree with you. I think things are going to merge. That being said, I definitely think the people who are here today who have that expertise, they're going to be big as well, right? I think there's enough room for all the people who are forward-thinking to win.

Yeah. Um, can we talk about maybe the behind the scenes of what's happening here? So in, uh, up-and-coming— every time in crypto there's like these new up-and-coming space, there's only a few players, there's all these crazy backdoor games and dealings, and I'll— you know what, I'll give you like my first 3 years of revenue if you do that. There's all these— can you tell me about some of the games that are being played?

Yeah, it's a good question. I can tell you that it's a similar dynamic in that there are a few live players, right? We've talked about a number of them. There's a finite universe of players on the other side, right? People who are as credible as Kraken and who are worth pursuing aggressively to try to win business from. And then there's just the levers that each— everyone has, right? A lot of projects, token projects, have large amounts of their token supply earmarked for these kind of deals, right? And like the trend that we're seeing, people— you talk about Yearn back in the day, right? People used to pay for liquidity. That was what token incentives were for. Now token incentives are for paying for distribution, right? It's a very different model. I think it's a better model. Now look, my view is truly— I know this is kind of a cliché, but like the best product will win over the long term and everything else is short term. You're trying to establish credibility. Maybe you're trying to raise money. But at the end of the day, you need a product that will allow your partners to outcompete their competitors. So that, you know, Vayda doesn't have a token, right? We don't have a massive war chest that we can use to throw money around. Like you see these things with—

you guys raised though, you raised $18 million.

Yeah, yeah, we raised our Series A, you know, early, mid, mid last year. Yeah. But, you know, we're not—

who led that?

CoinFund.

Nice.

Okay. But just maybe to follow on that point, like, I think where some of the games get played are often in those token incentives.

Yeah.

And where they come from.

And so is this like— sorry to interrupt you there, but like, is this— everyone's competing, everyone wants Robinhood, right? Everyone wants to be the vault on Robinhood. So then you go to Robinhood and you're like, we'll give you like $6 million of our token if you choose us.

It's all— it's at all the layers, right? It's like, so it's like, it's like the borrow/lend protocols will go to the risk managers and the curators and be like, Well, come deploy with us and we'll incentivize it with our own token. And then, you know, the nice thing if you're a Kraken user is you don't have to deal with any of that. You're just getting USDC on USDC. So it's, you know, all being handed—

So Aave could go to Stakehouse and be like, guys, like, put your vaults on Aave instead of on—

I don't know. In theory, yeah. And they could like issue them, you know, Aave tokens. And, you know, Aave, it has to, I think, be approved by the DAO. And so there's some of that. But The other protocols might not be as— might be more independently driven, some of those decisions. And then, so that's an area where the games get played. But there's also that token incentivization can also happen at the distribution layer. So I was just popping open the Coinbase Lend product, similar to a competitor to what we're offering with Kraken's DeFi Earn. In the Coinbase version, right now, the yields are at about 3.5%, but if you pop it open, you can see that 75 basis points of that is coming directly from Morpho as an extra boost that you're getting in Morpho token. It's like, well, that's not really the thing I came here for. I'm coming here for USDC, and I'm coming here for USDC yield, but that's indicative of where a lot of these things are.

Oh, it gets paid in Morpho token.

Yeah.

Oh, interesting.

Yeah, I think you can convert that into USDC, right? Sure.

Yeah, yeah.

But that's speaking of token incentivization, that's a big thing. The nice thing is for all the customers here who just can't wait to come use the Kraken DeFi Earn product, it's just straight USDC on USDC. It's pretty simple.

So, what's the craziest backdoor thing that you saw where you're like, I can't be involved in that game?

I don't know that I can say the craziest things, but I've seen people offer insane amounts of equity for a single deal with zero guaranteed revenue ever. And it's very common. And honestly, it might be worth it, right? Because like you get one of these major partnerships and each one of those builds credibility for the next one.

Right.

Right? Because this is, it's ultimately about trust, right? These large institutions, they want someone who is, it's de-risking. They want someone who's done it before. So I get it, right? But yeah, it is crazy. And you're right to observe that there's definitely some aggressive deals going around.

Yeah. We haven't talked about risks. We've talked about risk a little bit. What— how do you think about the risk? Is it smart if there's no— because it's all overcollateralized, there's no like undercollateralized lending risk. So then is it just— is it really just smart contract risk that we're talking about here?

I like to break the risk into 3 buckets. So the 3 buckets I have are you've got The risk of bad debt expense. I think that's number one. We'll talk about bad debt risk, liquidity risk, and then smart contract risk. And those, like cybersecurity risk, was kind of the same thing. So, like, we'll work backwards, right? So when you first talk about the cyber risk, it's like, you know, could the protocols, could the Aave, could the Morphos, could they be jeopardized and there could be some critical bug? You know, at this point, with how battle-tested, with how Lindy those are, I don't think that's that big of a deal. But it is something like, you know, that risk is very much there and true. And for all the great work that Saan and the Beta team have done, like, I'm sure you would agree that there's always some level of risk too, even with, you know, the vault contracts that you guys offer. So, that's like one layer of risk. Then I would call liquidity risk is kind of the framing of, can I get my money back when I want it? And so this— every vault handles this differently. Some will, like in different protocols, will— you can only withdraw from the vault if there is liquidity there ready for you at that time. Other ones can say like, oh, there's like a 1-day wait time, and then at that point there, you know, it'll be queued up and then be delivered back to you. So that's kind of like the liquidity risk. Can you get your assets back from the vault when you want them? And then the third and probably most DeFi native one of these is the bad debt risk. And if we go back to earlier in the pod, we were talking about the where does the yield come from, it's ultimately from those borrowers on the other side that are paying a yield to borrow the assets from the protocol. They are posting collateral, and that's why it's overcollateralized lending. They're maybe putting down $100 to borrow out $50. If the $100 that they put down, which is in the form of Bitcoin or something, drops precipitously and faster than the solvers can go out and fill the loan, which is kind of how those, you know, things work in the background, then you could be in a situation where there ends up with what's called bad debt, where the collateral has sunk so fast that it is now lower than the total amount of loans that are outstanding, and the protocol then has to take a haircut. Every borrow-lend protocol deals with this differently. Aave has the umbrella insurance or the umbrella policy, I think is what it's called, something like that. But it's basically you can get paid a yield for being that kind of stand-in, that backstop. Back in the day, if you remember, one of the earliest borrow-lend protocols was actually MakerDAO. And so, you remember when it was You know, users were putting up their ETH and taking out DAI, but the MKR token was the one that then was the backstop, right? So there's— everyone's kind of figured out a different way to handle the bad debt, and but ultimately that is probably the real risk and why it's different from just, you know, sitting on T-bills.

Yeah, it's a great question. So there's, there's two dimensions to it. You're right that more diversifying in some sense is not always good. If you diversify over garbage, you're in a worse position than if you put all your assets in one secure protocol. So that's the protocol layer. From a smart vault smart contract perspective, this is its own deep subject. Not all vaults are the same infrastructure. They have different trade-offs, they have different permissions, different ways they do calculations. There's a vault exploit this past week from some Curve pool that had some pricing issues. So that is something that we think about deeply. And there is to some extent a trade-off between how expressive these vaults are and the surface area for where things can go wrong. So you're right, the simplest vault is it doesn't do anything, right? It maybe sits on top of Aave and that's it. And there's minimal smart contract risk, but there's no product flexibility. We've thought about it a lot. What I can say is it exists, but this is why it's super important to be battle-tested. It's why we sprinted to get to multi-billion-dollar scale. And stay that way and prove that our infrastructure is secure because you can't put a price on that.

Right.

You're at almost $2 billion today, right?

Yeah. And our peak TVL was, it's going to sound insane, but $6 billion. Yeah.

How did you get the TVL?

The $6 billion was during the height of Plasma, which was nuts.

So you were one of the main Plasma—

We are effectively Plasma as well.

You are Plasma. Okay. How do you think about correlation risk across strategies? So, if there was a March 2020 liquidation cascade or 10/10 or something like that, more March 2020 because it's a little more tied into DeFi, are the vaults actually diversified or do they all blow up together? Or is that not your problem? That's on the risk manager to figure that out.

I mean, it's our problem in the sense that we're in DeFi and it's our business, right? And it happens, right? In fact, a couple of months ago, There was a company called Stream Finance. I'm not sure if you guys heard of this. That was kind of a media contagion. It was one asset, stablecoin. Again, we could talk about that, how people call themselves stablecoins and it's all bullshit. But it went insolvent and there was a set of Morpho Markets that users just couldn't withdraw from. They incurred bad debt. What ended up happening was that fear spread to all the Morpho Markets and for a period of like I don't know, 15 minutes or something, not that long— even healthy markets and healthy vaults had liquidity and withdrawal issues. So sometimes it's not just like the economic spread. Sometimes even fear and FUD can cause these kinds of disturbances. It's definitely something I think about. It's one reason why diversification makes sense. Aave was fine during that event. Maybe there's future events where Aave is not fine and Morphos is fine. But yeah, it's really on the risk manager, but you got to be mindful.

What do you think, maybe picking on the Morpho competitive dynamic there, like Morpho has this, I think Morpho has permissionless vaults, right? So like anyone can go to Morpho and spin up a vault. You guys have more managed curated strategy. What's the, how do you think about that? Like why is that?

They're very different models, right? So Morpho's model, as far as I can tell, I don't think they're monetizing their vault layer. It's just like, it's an instrument for getting capital into the lending protocol. But the lending protocol, I don't know that I'm—

Whereas you guys are just a vault provider.

Exactly.

Vault tech layer.

Right. And this is what allows us to invest in building the best infrastructure, right? Versus vaults are always secondary for protocols, right? They're only as good as they need to be. They're not as good as they should be.

Do Morpho vaults allocate to lending pools outside of Morpho? No. Okay. And then would you guys ever allocate your vaults to Morpho even though you compete with them on the vaults layer?

We have Veta vaults that allocate to Morpho vaults. Multiple Morpho Vaults, right? Let's say you want to allocate to two different Morpho curators, right? How do you do that? Well, that's a beta vault. Huh.

It's the beauty of beta.

I like your model. That's cool. That's really cool. Do you get worried about Aave launching native vault products?

I think Aave, like, everyone's going to do vaults. But is Aave going to launch a vault that lets you allocate to Morpho or Euler or Pendle or Uniswap? No, they're not, because that's not their business.

What do you guys think happens to DeFi TVL as the DeFi mullet goes like probably mainstream slash parabolic this year?

I think it explodes. Yeah, I mean, it explodes. And the question, right, is will there be enough borrow demand on the other side that the yields continue to stay high and competitive? Because this is like, you know, it's like surge pricing, right? It's like it's constantly balancing these two things. It would be very wild to me if all these fintechs launch, we bring in tons of USDC or other stablecoins in, and then the yields start compressing, compressing, compressing because there's no people wanting to borrow on the other side. I think when that happens, it just spurs the market, pulls from the market more borrow products that are built on DeFi. And I bet that becomes more and more maybe also another hint at what is to come from Kraken in our growing suite of DeFi and on-chain products. But that's, I think, the thing I would be looking for and curious about is like, let's say this really does happen, we bring in a ton of incremental TVL, how can the industry then— like, what— maybe it's like a, you know, Jevons paradox kind of thing. It's like, what then comes of all the new types of lending? And like, if lending is super cheap in DeFi, I should be saying borrowing. If borrowing starts becoming very cheap in DeFi, what are all the new use cases that will come from that?

Yeah, this is fascinating. So I'll add to that, which is the user base historically in DeFi has been like 1,000 people. Realistically, you look at the capital, it's like, you know, Justin Sun and a couple other people. And you get very interesting dynamics.

The amount of teams are just like, how are you going to get your TVL? They're like, oh, I know someone who's close to Justin Sun.

It's always his eminency.

Yeah, I think he had like a billion dollars in one of our vaults at one point. So those dynamics, the markets are very interesting where you have a couple of people. That changes when you have millions of users, when the capital base becomes diversified and more sustainable. I think it's very interesting. You have maybe less of this stuff that we see in DeFi now, this volatility, and you're actually able to build more interesting financial products with that user base.

Yeah.

As we think about wrapping up, what do you guys think is one thing that listeners should really pay attention to in the vault space?

I think this trend, you know, I'll just reiterate it, this trend of flexibility and product always wins is something we'll see play out. What Kraken and John are doing is truly amazing. Again, one click and you get all of this DeFi, right? It's not just one protocol, one chain, one asset. You get all of this exposure packaged up into this single, simple, very easy-to-use product. I think, you know, that door only opens and it stays open.

I think the other thing I'm looking for or watching out for is like what we call inside of Kraken is hybridization. Like DeFi and fintech are going to merge closer and closer and closer. And this is kind of what we've been talking about through this episode where DeFi is becoming more backend, more API, more of a tool that's powering all these yields than it is actually its own user interface. And that is, I think, how we 10x the size of DeFi and just on-chain users. How do we get to a billion daily active on-chain users at some point in the future? It's going to be through the apps that are simple, easy to use, and fit the same interaction patterns that people are used to.

Yeah, there's— I just remembered one thing that this is its own kind of topic, but vaults are— we're talking about vaults as a product tool, but vaults are actually also a compliance tool. And my view is that in the long run, vaults will be the only way that institutions, regulated institutions, you know, TradFi institutions can actually interact with DeFi because you can't just throw capital into this permissionless, you know, open whatever layer. You need to be able to impose your risk controls. So I think there's implications on regulation, how DeFi actually gets regulated. I think vaults are going to play a central role.

Fascinating. Anything else we didn't cover?

Just that there's a ton more to come. You know, I think this— my hunch of where we are right now is I think 2026 is going to be like a year for the builders. Yeah, I think the speculators might need to sit this one out for a couple of years until we get back into those times. But this is the time for builders and for builders, for users out there, for people who want a high yield, who want to use Kraken, like, please come use the product, give us feedback. We're open to it. We've got a lot more products coming to you soon. And for those who are out in DeFi and who want to plug in to one of the most, you know, trusted, secure, well-known global cryptocurrency exchanges, our doors are open. So, you know, please come find us. We'd love to talk to you about any sort of protocol or offering that you guys have, whether it's new vaults, it's new DeFi primitives. This is the big effort where we're hybridizing the exchange. It's one of the big ways Kraken is growing. Things like xStocks, bringing stocks on-chain, all these different products we're doing. Um, we've got a ton of really, really exciting stuff on the roadmap. So, you know, anyone, please just come knock on our door. We'd love to talk to you.

Love it. John, Sun, thank you guys.

Thanks, Jano.