During a fireside chat at Blockworks’ Digital Asset Summit in New York, Chainlink co-founder Sergey Nazarov sat down with Ethena Labs’ founder, Guy Young, to discuss the convergence of TradFi and DeFi via stablecoins and tokenized real-world assets (RWAs).
Chainlink provides industry-standard infrastructure that has enabled over $20 trillion in transaction value and powers a growing spectrum of RWAs representing traditional assets such as cash, debt, securities, commodities, and real estate onchain.
Ethena is a synthetic dollar protocol built on Ethereum. The protocol’s $6B+ TVL consists of its synthetic dollar, USDe, and USDtb, a stablecoin backed by BlackRock’s tokenized fund, BUIDL. A new iUSDe product wraps USDe in a compliant form that can be used by legacy entities.
The goal is to combine elements of TradFi and DeFi into a crypto primitive that functions as a superior financial product.
“A dollar with a yield is really the most basic financial asset on Earth that everyone wants access to,” Young explained.
“Stablecoins are one of the few products in crypto that have found genuine global product market fit,” he continued. “I think there is literally a 10x left on a $200 billion market size right now, and just winning that market is an enormous outcome in and of itself.”
Nazarov agreed that DeFi and TradFi will ultimately converge by combining DeFi’s superior distribution channel with TradFi’s risk management and custody guarantees.
“You have to meet certain requirements in the financial products that come out of that combination,” he said. From his perspective, AML/KYC is another form of data that can be cryptographically verified onchain.
“That’s just an additional piece of data or additional type of data that, if you get it to work correctly, you unlock more markets, more liquidity, more transactions,” he explained.
Young believes bringing institutions onchain is an inevitable, yet long-term goal. “I think the piece that we’re going to be disappointed with is the speed at which that happens,” he cautioned.
On the horizon, Ethena Labs and RWA company Securitize have joined forces to launch Converge, a new EVM blockchain optimized for retail and institutional DeFi.
“We hope that this becomes the settlement layer where TradFi can do a lot more onchain,” said Young.
He and Nazarov agreed that increasing institutional blockchain adoption will ultimately diminish the distinction between private and public chains. Nazarov imagined a future where blockchains will encompass different levels of gated capabilities:
“You’ll basically have a chain where anyone can join, but what they can do on the chain is limited by their willingness to comply with regulations.”
Watch the full conversation.