Crypto finance is only now beginning to provide an environment that matches traditional finance: ways to earn steadier, more predictable returns – similar to bonds or savings products, according to Stani Kulechov, founder of Aave Labs and Guy Young, CEO of Ethena.
“Most fixed income looks like allocating risk into different formats…basically just allocating and allocating risk,” Young said during a panel at the Digital Asset Summit (DAS) in New York. “This piece of DeFi was probably least seen two years ago.”
Until recently, crypto users mainly traded in tokens or borrowed against them, often chasing high, unpredictable returns. New tools make it possible to capture returns, even in a market known for its wide fluctuations.
“What you’re doing with Pendle is offering a swap from fixed to variable rates,” Young said, referring to a system that allows users to choose between more stable or more variable returns – similar to choosing between fixed or adjustable interest rates.
That’s not easy in crypto. “It’s very difficult to know three months from now what the market will actually look like,” he said.
Kulechov said Aave has helped support this shift by providing deep sources of capital that other projects can tap into. “Aave acts as a kind of liquidity sink,” he said, and helped “kick off a lot of the new products in DeFi.”
For now, much of the money made still relies on trade rather than traditional lending. “A lot of DeFi returns are still largely based on leverage,” Kulechov said.
Over time, this could change as more real-world assets move up the chain, a process known as tokenization.
“A large part of the revenues and a large part of the economy will come from traditional financing,” he said.
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