Yeah I agree with you especially on rollbacks, hopefully we all stay paranoid and red team enough that we eliminate fragility in both DeFi and tradfi which is even more important since both are converging more and more so either way it’s still our problem lol.

Yeah I agree, we can’t afford to get complacent and I’m not saying DeFi has solved security, just think there’s an advantage to having built financial infra on the assumption that anyone in the world will try to break it.

Sure but rollbacks are a recovery mechanism after you get rekt 😂, so from the standpoint of how well systems are prepared for ai driven attacks in the first place I think deFI is ahead.

Yeah but i don’t think that physical backing makes them any less vulnerable to exploits, I mean trade execution and money movement is still software based so to me it doesn’t seem like ai needs to compromise anything physical to exploit vulnerabilities in those systems.

Yep, I think the difference is being under constant attack is normal for us not so much for them

Definitely security should always be the number one priority, I guess my tweet is alluding more to the fact that we’ve been in a far more adversarial environment than tradfi imo and naturally are probably more prepared then our legacy counterparts.

DeFi will win so much we’re going to get tired of winning.

This might be a bad take but i think DeFi is better prepared for AI based hacks than tradfi, we operate in the most adversarial environment imaginable with billions sitting in public smart contracts and literal state actors trying to exploit them, AI is going to make every environment just as adversarial and so I wonder how well opaque legacy systems that aren’t as battle tested as DeFI is will fare.

Yeah @saurabh_evm is top tier absolute pleasure working with him

I’ve actually written about this so at the risk of sounding self promotional I’d say the attached tweet probably a good start, but I’d also read the sentora ARFC as that outlines the economics too.

Haha absolutely, but I think there’s a pretty big difference between recognising the opportunity and appreciating just how big it’s going to be, I genuinely think we’re going to see some enormous credit businesses being built on v4, so exciting times. Congrats on hare btw

The global credit layer

I’ve been going on about how Aave V4 completely changes the economics of the curator business for a while now, so if you’re running a curator business and aren’t seriously considering building your own credit franchise on V4, I genuinely don’t know what to tell you. The business opportunity here is absolutely wild, curators have spent years building relationships with capital allocators and developing their distribution, V4 gives them the opportunity to turn all of that into an actual credit franchise where they can earn fees for managing capital AND capture a share of the economics of the lending markets they operate. Which means curators can now originate borrowing demand, structure the markets that serve that demand and benefit from additional economics as that credit activity scales, which is a much more defensible and lucrative business than endlessly competing for deposits and squeezing out a few extra bps in vault/performance fees. I’ve said this before but I genuinely think some of the largest credit businesses in DeFi will end up being built on V4. Sentora recognised this early and I think a lot of curators are going to look back and wonder why they didn’t. The opportunity is staring them in the face.

Man your literally a footnote 😂

Very cool will check it out

Man I wrote something a couple of days ago about how I think the next financial war is going to be fought over the capital routing layer and this is another pretty big signal of where things are heading. I think we’re going to see the frontier AI labs get a hell of a lot more involved in crypto and DeFi than people expect, I mean @sama positioning here is super interesting. You’ve got @OpenAI building the agents while @worldnetwork , which he cofounded, building the identity infrastructure those agents could use to interact with financial institutions, world already integrated @coinbase x402 and is moving into stablecoin payments, so there’s clearly a lot more going on here than just protecting banks from deepfakes. I expect to see way more involvement from AI labs in DeFi and finance as a whole just because the reality is that whoever controls the identity and trust standards financial institutions accept will end up having enormous influence over which agents get access to capital in the first place. So yeah tldr is that we’ve been massively underestimating just how intertwined AI/DeFi and tradfi is going to become, I don’t see a world where these guys are going to be content just providing the intelligence while everyone else controls where the money goes. Which means our job is to make sure that as this war for control of the capital routing layer heats up, DeFi becomes the financial infrastructure everyone is competing to route capital into. I actually think the frontier AI labs could become some of the biggest drivers of DeFi adoption we’ve ever seen and we’ve got a pretty insane opportunity here if we play our cards right. Let them fight with tradfi over who controls the flow of capital and no matter who wins we should be making sure it all flows onchain lol.

Hahaha yes they’re going to get seriously disrupted though I do think they’ll follow in JPmorgans footsteps and attempt to ban agents from accessing customer accounts.

Man I really think the next financial war is going to be fought over the capital routing layer and if you look at what some of the big boys in finance and tech have been doing recently it’s obvious we’re already watching the early stages of it play out. S&P have been making some super smart moves into DeFi, positioning themselves to become one of the firms institutions and AI agents rely on when deciding where to put serious money onchain, they’ve also made credit ratings accessible to agents via MCP, meanwhile you’ve got JPmorgan restricting agents like muse from accessing customer accounts and openAI getting into agent payments and looking into acquiring Trail of Bits. So today your bank holds your money, you decide where to put it and financial products compete to attract you, but when agents start making those decisions the company holding your money, the company operating your agent and the firm deciding which risks are acceptable can all be completely different businesses, all fighting over the insane amount of money to be made controlling the flow between them. The good news is this is insanely bullish for DeFi because we’ve already built financial markets that machines can interact with directly without needing to negotiate access with every protocol, but it also means the customer protocols are competing for is going to change from humans to machines that can compare thousands of lending markets and move money around in seconds, which is a whole different ballgame. I mean think about what that does to the economics of distribution, if you’re operating agents that direct billions in capital you’re in a really powerful position. You’ve got lending protocols competing for access to your flow, you can negotiate better terms, take a cut of the capital being routed and build an absolutely enormous business without ever having to provide liquidity or take on any credit risk yourself. But that’s mainly looking at things from the retail side, institutional capital is a different beast because even if an agent finds the best lending opportunity in DeFi, it still has to adhere to the risk mandates of whoever owns that money. And that’s why I think S&P’s moves are so smart because if their DeFi assessments become part of the criteria institutions use to decide where their agents can allocate, they’re basically positioning themselves to influence which onchain businesses get access to some of the biggest pools of capital in the world. That also creates some pretty crazy incentives for DeFi builders too, because if changing your collateral requirements or risk parameters l makes you eligible for billions in additional funding, of course you’re going to build around those criteria, so we could end up with risk assessment firms influencing how entire DeFi markets are designed and the funny thing is they don’t even have to participate in them. Now take that a bit further and imagine thousands of agents relying on the same risk assessments and being able to move capital almost instantly, one downgrade could have billions trying to exit the same markets at once, sending borrowing costs through the roof and creating the exact liquidity problems the assessment was warning about lol. We could literally end up with the companies assessing risk becoming a source of systemic risk themselves. And I think that’s the part DeFi builders really need to pay attention to because although enormous amounts of financial activity is moving onchain more and more of the bargaining power and economics will move to the companies controlling the agents and the information they rely on. We’re building financial markets that anyone can access, and now some of the biggest firms in finance and tech are lining up to fight over who gets to tell the machines where everyone else’s money goes lol. It’s going to be a fun few years ahead!

It’s great to see DeFi teams ignore all the doomerism and just relentlessly ship and innovate, the guys at @3janexyz just shipped onchain credit scores with @cred_protocol and boy oh boy what they’ve been building is impressive. One of the things I’ve always found weird and funny about DeFi is how we’ve basically built an entire lending economy around capital that’s already sitting inside smart contracts, we’re so obsessed with TVL that we forget an enormous amount of tradfi operates through commitments to provide capital in the future, without that money having to sit there waiting to be used. 3Jane brought that committed capital model onchain with LCC and now they’re introducing credit scores into the equation, except the people being scored here are the ones promising to provide capital rather than the ones borrowing it. So two participants could each commit $10m of funding, but those commitments aren’t necessarily worth the same if one has a history of honouring their obligations and the other doesn’t and being able to assess and price that difference gives financial reputation actual economic value within 3janes model. I’d love to see other lending protocols adopt this because instead of competing purely on deposits you could start sourcing committed funding, with capital providers earning fees on those commitments and that means protocols can support considerable more credit capacity than their actual TVL+ open up even more design space around committed credit facilities/liquidity backstops etc. There’s still an insane amount of financial infra that we need to bring onchain, so it’s great seeing the guys at 3Jane innovating here and building this stuff around a real credit business while others are busy crying that there’s nothing left to build in DeFi lol.

tldr: please panic calmly and in an orderly fashion