Stani Kulechov & Zoltan Vardai Fireside Chat: Defi and the Transformation of Global Markets

Thank you so much for joining us. I know you all must be very hungry, but um I think I'm making no understatement when I say that I'm joined by one of the most exciting founders in crypto, who is Stani, the founder and CEO of A. And Stani, one thing that really fascinates me about your journey is that A went from this niche experimental project to the leading decentralized lending protocol worth over 40 billion today. Um I I'm really curious how did you recognize the need for decentralized lending solutions so soon and I just want to know how how has this journey been for you?

Yeah, I mean it's uh it's [clears throat] it's kind of interesting because uh it comes out of like um like some of my previous work before um uh stumbling up onto Ethereum and and and basically um everything that you could do in in um in in the financial context. I was uh building uh fintech applications um and quite excited about the kind of like uh previous waves of uh uh fintech innovation from like crowdfunding, peer-to-peer lending and and I found it really fascinating because I've I've been always uh a bit um uh bit of a finance geek. Um and then when uh a lot of this fintech innovation came, I was excited because uh you could actually build uh financial applications that are not just uh restricted uh in a one particular region but you can serve a a global audience and that was really uh interesting and and neo banks were starting to uh grow and um and also peer-to-peer lending and crowdfunding um and at the same time a lot of regulation uh came at that point. So when I um realized what what you can do actually on Ethereum when you have uh this uh permissionless uh ecosystem and uh capital can flow in any type of an application that has an opportunity and you have like a full end to-end transparency. um that really created uh um you know the this this idea that you can actually now truly build for a global audience and you don't have the same issue as in infin where you know you have to have different kinds of vendors and touching different kinds of API endpoints and the API endpoints uh break here and there and you have to maintain your application uh you have a a actually truly permissionless and and automated system that you can truly rely on and and can be um very resilient as well.

I think this weekend really speaks to the resilience of a and I'm sure a lot of you guys are really thinking about this record um crypto market crash. We've seen at least 20 billion worth of liquidations. I'm saying at least 20 because we don't have the full data from all centralized exchanges. But one amazing thing about this is that a really handled this massive um historical liquidation event well. Um can can you perhaps speak on this and is is this do you see this as a signal or testament for decentralized financial technologies because when when we look at stratfi um the criticism is always that your technology or protocol won't handle a crash but we've just seen one of the worst crashes in history and a is doing perfectly well.

Yeah I think uh every crash that we've seen in the in the kind of wider crypto space um it's always you know bigger than the previous one. So obviously like similar situation had been uh had happened before like during the FTX and a lot of uh leverage was wiped out in the system when asset prices went uh down. Um in a more like a DeFi context we we had a black Thursday as well. So now last week was a black Friday and um I think every single kind of uh um uh stress test really um helps to understand the the reliability and resiliency of uh decentralized finance and I think um it really uh surprises me how well the system uh works. Um and at at this particular time we also saw that actually DeFi was um really the the the system that worked um at it best compared to some of these uh centralized um uh platforms and and and service providers.

So I think um um obviously you know no one really wants to see market crashes but it's a it's the only way to test whether a system is resilient because you can innovate and build anything in DeFi because it's an really amazing and open ecosystem. Um and and that's that creates a lot of innovation and financial opportunity but you truly risk these uh protocols when the markets are going down like last uh Friday. So I actually think that it's a good idea that you know I I don't mind that uh users are having leverage um um on the assets that they really um I think are the future. Um I what I really want that a lot of this activity happens on chain transparently and and and publicly so anyone can actually monitor and quantify the whole risk of uh the system end to end um in in DeFi. I I feel like that's a very good point particularly after this weekend and just to your point Stan we did really see DeFi protocols um hanging tight there whereas a lot of centralized exchanges did have glitches they did have bugs we did see some of the exchanges pay hundreds of millions for these platform glitches so once again it feels like a testament for decentralization um one more interesting thing I'm really seeing this cycle is that for the first time it feels like we don't just have the protocols the builders the founders like yourself we also have the global regulations coming together we already had Mika here in Europe over in the us.

We've just had the Genius Act drop and we have a few more um acts coming. Do you feel like this is I I'm asking you because you obviously have a a degree in law as well. You have a legal background. Um I'm I'm curious how do you see this shaping out? Is this the moment for DeFi to really enter uh Stratfi and traditional markets?

Yeah, I I mean my initial stance was um that I I think smart contracts in DeFi really solve a lot of the challenges that the the financial world had in the past. uh not just only decades but past the hundreds of years u even thousands of years. So by design you can uh avoid um things like the custody risk um add more transpar transparency and reduce the uh information as symmetry. So by nature the way D5 works um and providing like best best execution uh it solves all of these problems. So it my my first kind of u uh reaction to uh what DeFi can do uh a few years ago was basic basically removing um some of the regulation that isn't needed anymore because you you have a a a a better financial execution environment that is more transparent and gives a level playing field for everyone.

But um now and that's funny to say because I um I I did graduate as a lawyer and I kind of like I love the legal field and and legal problems and but at the same time I am a technologist and I understand the capability and the potential of what uh DeFi and blockchain can can actually do. But more recently I I've noticed that um actually regulation uh creates a lot of um um clarity uh especially for the more kind of traditional market participants. So with Genius actor example uh coming in there's more actually FinTech interested in stable coins uh same for example for for banks um for the big tech and even uh um e-commerce as well thinking how they can leverage uh stable coins and and the wider technology and stable coins for a extremely important because we're very stable coinentric business we have uh uh at peak 75 billion worth of net deposits and out of that 156 billion ion is uh in stable coin. So it's a very strategically important for every stable coin uh issuer. So I do think there's a lot of uh value in providing the clarity but the devil is always in the details and and what is being regulated and what I try to always uh advocate is not to regulate the technology.

So you don't regulate for example Bitcoin um as a technology um you shouldn't regulate DeFi as a technology either but you can regulate uh certain things that happens on the edges and financial service providers that are using this technology for their own purpose and I think that's like a clear uh distinction we have to keep always in mind that's that's a very clear and important distinction now um I want to switch over and talk a little bit about what's next with a because our time is obviously limited um but you guys recently ly cost 75 billion in net deposits for the first time. Uh you're preparing for a big um big update for a um could you tell us a bit more about what's next for the rest of the year for a

Yeah, I mean we've been also focusing a lot on uh real world assets. Uh so we launched uh Horizon. It's a new of a market where you can use uh tokenized assets as a collle tokenized funds tokenized money market funds and credit funds um and and borrow stable coins and and these tokenized assets are permissioned on the asset issuer level where the compliance happens. And what's interesting here is that um these um market participants that are holding these assets on chain instead of in traditional financial institutions, they can access 24/7 liquidity uh through a horizon by borrowing stable coins. And this is very important especially in situations like what we seen in last Friday when everyone was running for uh in the search of u liquidity.

And then for these uh stable coin lenders, they're able to lend out against these traditional assets on chain um and have a different type of a yield um well and a risk profile compared to lending against native uh uh crypto assets. And then we are focusing a lot on the AVA v4 which is the next generation of uh lending protocol uh which has a very interesting kind of um hub and spoke architecture model where we concentrate the liquidity into one uh particular hub. Um and then we allocate hubs based on risk profiles. And this allows a lot of the DeFi innovation to scale because um if you innovate something interesting and new in DeFi um you can create a um a spoke and connect to wider deep the deeper of a liquidity as the the use case actually starts to uh get more traction and and scale. So those are the uh two main things and and also the go aan native stable coin is something we put a lot of uh attention as well because it brings higher margins to the um to the avid dowo um and that's something that we're also focusing on on growing that that's excellent Stanny I'm I'm particularly happy to know that um some of the oldest protocols continue building up their road maps particularly because um we're in the presence of the man who basically um invented decentralized flash drones and decentralized landing Um Stani, I'm afraid this is all we've had today.

Thank you so much for for your time and for you ladies and gentlemen. Please look forward for a incoming road map and uh uh a lot of uh new new exciting things to drop um before the end of the year. Thank you so much. Thanks a lot, son.