Ethereum’s Evolution: The Future of DeFi and Institutional Adoption

Welcome back to Market movers.

The opening bell live from the New York Stock Exchange.

Ethereum seeing a pullback to kick off the trading week.

The other crypto major dipping below 4300 following a monster rally that pulled it within striking distance of its all-time high set back in late 2021.

Now a big driver of Ethereum's summer rally has been growing institutional adoption fueled in part by the passage of the Genius Act.

Now last Monday, Espot ETF saw their first ever 1 billion.

A day in inflows, often called digital oil by advocates.

Espo case centers on traditional finance, embracing blockchain, using stablecoins, and tokenize real world assets to unlock programmable finance.

Well, joining me to weigh in is Ryan Gelvannker, founder of Plaza Finance and Abu.

Well, thank you so much for joining me here.

Thanks for having me.

Well, there's been a lot of focus on the other crypto majors, so I want to ask you what Ethereum, the go to platform for innovating on trap by derivatives.

Ethereum is really exciting and it has been for about a decade now.

It is the most decentralized blockchain.

It has the most builders.

Solidity is a great language, and that's kind of led to the rails of global decentralized finance being built on Ethereum and the Ethereum virtual machine.

We're now at the point in the race for a general purpose blockchain for E.

L2 scaling solutions is the cheapest place to move money and has the best infrastructure available to make it efficient and safe, so we're starting to see sort of run away with the market and and the price action reflects that.

Yeah, and Ryan, you just mentioned L2s.

So when we're talking about layer 2s, give us your take on why it's so important for layer 2s such as base when it comes to institutional adoption.

Yeah.

We saw a problem kind of 2 years ago with Ethereum where gas prices spiked as user demand for blockchain transactions exploded.

Layer 2s are a way to scale Ethereum to move some of the kind of transaction logic off of the core Ethereum blockchain and onto other chains that kind of post proofs to Ethereum.

They're a way for Ethereum to scale to the size of let's say the Visa network or more without causing kind of a rise in the price per transaction.

So it's a way to keep Ethereum cheap and efficient.

We chose to build Plaza Finance on base because we trust Coinbase and think they're building one of the best L2s out there, but L2s are a key part of Ethereum's scaling journey.

Yeah, and I do want to get your take on fixed yields while we're talking about this.

So of course when we're talking about the broader markets, the macro environment, we're paying attention to inflation, but when it comes to fixed yields, tell us about this relationship.

Yeah, so everything is driven by the Fed and interest rates in the US.

The same is true for fixed yields in the blockchain space.

When the Fed cuts, we tend to see yields compress in blockchains as well.

Right now there's a lot of uncertainty as to whether there's going to be a cut, and rates kind of have been moving with more volatility over the last few weeks than maybe the market wants.

But right now there seems to be quite a bit of value in duration, so long yields are more attractive than short.

So great places to find long yields are on blockchains.

So at Plaza Finance we launched an asset called Bondy.

It's a bond backed by Ethereum.

It's a perpetual bond right now it's a 10% yield for a 45% LTV on Ethereum.

We think that's incredible relative value relative to what you see in the corporate bond market, what you see in structured products.

So I would steer people towards duration and safety.

And now that you've covered yields, I do want to ask you about leverage.

So how is Ethereum actually enabling leverage without, say, the traditional risk of liquidation?

Yeah, so we built a mechanism for leverage on Ethereum.

The asset is called Ly.

It's live on base.

It's effectively where we've issued a bond called Bondy, and that bond finances people to take liquidation-free leverage on Ethereum.

So it's a great way to take some modest amount of leverage for long term EFfuls without the risk of getting stopped out if if let's say, draws.

Down 50% in the day, which we've seen in weird market moments in crypto.

Everyone knows that crypto is extremely volatile, so making sure you don't get stopped out when you're taking a levered bet is quite key to your long-term success.

So we see more and more people kind of getting excited about Ethereum and all the institutional adoption and want to take a long term bet.

They don't necessarily know in 1 year or 2 years whether it will be up or down.

But they believe in 10 years it'll be up, so Levi is a great product for that.

Yeah.

And while you're talking about that, I was thinking the fact that Ethereum just celebrated its 10th anniversary or birthday.

So as we move forward, do you think programmable derivatives of Ethereum will actually help bridge that gap between defined red line?

Absolutely.

If you look at the spectrum of risk return available.

Traditional financial markets, it's far wider than what's available for blockchain-based assets like Ethereum, and that's why we built Plaza Finance to widen the spectrum of risk return profiles available.

So programmable derivatives are a word or a phrase that we came up with to capture the fact that we take assets like ET and can split their risk return profile into different profiles better suited for investors.

When you make assets better suited for investors.

They're a better buyer.

They're willing to pay a better price.

People are able to finance their assets cheaper.

So we view programmable derivatives as this layer above liquid staking and liquid retaking where assets like Ethereum get financialized and risk profiles are made that are well suited for anyone.

So we're quite excited to help create some widened adoption of ET and other financial products built on ET.

Yeah, and finally, before I let you go, you've been entrenched in this ecosystem for a while now.

So given some of the regulatory clarity that we're seeing on the horizon, what do you think it means for not just the blockchain, but also the crypto community in general?

I think it's great.

I think technology is really going to accelerate in the blockchain space driven by American builders.

For a while, American builders were kind of viewed by the regulatory regime as maybe on the The wrong side of the law and may be viewed as criminals.

Now we're viewed as pushing forward strategic technology that's important to the US winning a tech race, and that's where it should be.

So we're seeing more and more builders, especially in New York, start working on blockchain projects, and that's only going to accelerate kind of the move towards a more decentralized financial system.

OK, Ryan, well thank you so much for coming on the show and thank you so much for joining me here at the New York Stock Exchange.

Thanks for having me.

Thank you.