DeFi vaults are set to revolutionize finance by 2026, attracting traditional asset managers and enhancing user experience.
Key takeaways
- 2026 is expected to be a pivotal year for DeFi vaults, with significant growth anticipated.
- The infrastructure for DeFi vaults is now in place, setting the stage for rapid expansion.
- The growth of DeFi yield products will accelerate as more companies adopt vault strategies.
- Vaults serve as a layer on top of DeFi, allowing institutions to package and customize financial products.
- Liquidity and yield are fundamentally tied in DeFi, affecting user experience and product design.
- Aave is one of the original lending protocols in DeFi, operating on a pooled system model.
- Morpho introduces isolated markets and vaults to enhance flexibility in lending.
- The trend in DeFi will move towards more flexible, multi-protocol, and multi-chain solutions.
- The superpower of beta lies in its ability to offer multi-protocol, multi-chain vaults that provide simplicity and aggregation.
- The category of risk managers in the crypto space is growing rapidly, driven by interest from traditional asset managers.
- Protocols are increasingly trying to vertically integrate by developing their own vault infrastructure.
- Traditional asset managers are expected to enter the DeFi space by 2026, but they may struggle to compete effectively.
- DeFi vaults operate by taking a performance fee from the rewards earned, which is then allocated to the vault operator.
- The integration of DeFi into user-friendly fintech applications can simplify the user experience.
- DeFi’s success relies on integrating with traditional financial systems rather than existing as an independent alternative.
Guest intro
John Zettler is Director of Product, Earn at Kraken, where he leads the company’s yield business including staking, stablecoins, and DeFi strategies. Previously at Coinbase, he served as Staking Product Lead and cofounder of cbETH, a major liquid staking token on Ethereum that drove over $1 billion in gross annual recurring revenue.
The future of DeFi vaults
-
— John Zettler
- The infrastructure for DeFi vaults is now in place, setting the stage for rapid growth.
-
— John Zettler
- The growth of DeFi yield products will accelerate as more companies adopt vault strategies.
-
— John Zettler
- Vaults serve as a layer on top of DeFi, allowing institutions to package and customize financial products.
-
— John Zettler
- The construction of a good vault product involves optimizing various user preferences and risks.
-
— John Zettler
- Liquidity and yield are fundamentally tied in DeFi.
-
— John Zettler
Lending protocols and innovations
- Aave is one of the original lending protocols in DeFi, operating on a pooled system model.
-
— John Zettler
- Morpho introduces isolated markets and vaults to enhance flexibility in lending.
-
— John Zettler
- The trend in DeFi will move towards more flexible, multi-protocol, and multi-chain solutions.
-
— John Zettler
- The superpower of beta lies in its ability to offer multi-protocol, multi-chain vaults that provide simplicity and aggregation.
-
— John Zettler
- Aave pioneered lending and borrowing at scale, while Morpho introduced modular lending.
-
— John Zettler
Risk management and asset diversity
- The category of risk managers in the crypto space is growing rapidly.
-
— John Zettler
- Diversity in asset management is crucial, and no single entity can manage all assets effectively.
-
— John Zettler
- Protocols are increasingly trying to vertically integrate by developing their own vault infrastructure.
-
— John Zettler
- Curators that focus on their expertise and utilize the best existing infrastructure will outperform those trying to vertically integrate.
-
— John Zettler
- Building a successful vault platform requires significant attention to detail and economies of scale.
-
— John Zettler
Traditional finance’s entry into DeFi
- Traditional asset managers will enter the DeFi space by 2026, but they may struggle to compete effectively.
-
— John Zettler
- DeFi vaults operate by taking a performance fee from the rewards earned, which is then allocated to the vault operator.
-
— John Zettler
- The distribution partner in DeFi typically takes the majority of the fees generated from vaults.
-
— John Zettler
- Building infrastructure for DeFi is a more viable strategy than competing directly with large fintechs.
-
— John Zettler
- The integration of DeFi into user-friendly fintech applications can simplify the user experience.
-
— John Zettler
The evolution of DeFi and fintech integration
- DeFi is increasingly becoming a backend service that simplifies user interactions.
-
— John Zettler
- DeFi’s success relies on integrating with traditional financial systems rather than existing as an independent alternative.
-
— John Zettler
- DeFi has created tremendous value, evidenced by users earning competitive yields on their assets.
-
— John Zettler
- Coinbase’s approach emphasizes first-party products for a more integrated user experience.
-
— John Zettler
- Coinbase’s borrow product has seen significant usage with $1.9 billion in collateral and $1 billion in loans issued.
-
— John Zettler
Multi-protocol and multi-chain strategies
- The multi-protocol, multi-chain approach allows for better risk-adjusted yields by sourcing the best opportunities across the ecosystem.
-
— John Zettler
- The implementation of yield products in DeFi is fundamentally different and more transparent than traditional platforms like BlockFi and Celsius.
-
— John Zettler
- The failures in CeFi have highlighted the importance of transparency in the industry.
-
— John Zettler
- DeFi’s structure allows it to function effectively even during market downturns.
-
— John Zettler
- Kraken is developing a suite of on-chain DeFi-oriented products.
-
— John Zettler
Strategic directions for DeFi and crypto firms
- The collaboration and input from experienced individuals in the crypto space are crucial for product development at Kraken.
-
— John Zettler
- Vaults will become a significant feature across various fintech platforms.
-
— John Zettler
- Offering a range of risk options to users is essential for a positive user experience.
-
— John Zettler
- The traditional finance sector may struggle to compete with established crypto firms due to differences in distribution ownership.
-
— John Zettler
The convergence of crypto and traditional finance
- BlackRock does not own the distribution in the same way that firms like Charles Schwab do.
-
— John Zettler
- Crypto and traditional capital markets will eventually converge into a unified capital market.
-
— John Zettler
- Token incentives have shifted from paying for liquidity to paying for distribution.
-
— John Zettler
- The best product will ultimately win in the long term, despite short-term strategies.
-
— John Zettler
- Token incentives play a crucial role in attracting users to different DeFi protocols.
-
— John Zettler
Risks and challenges in DeFi
- Some DeFi products offer yields that include additional boosts from tokens, which may not align with user expectations.
-
— John Zettler
- Risk in decentralized finance can be categorized into three main buckets: bad debt risk, liquidity risk, and smart contract risk.
-
— John Zettler
- Liquidity risk refers to the ability to withdraw assets from a vault when desired, which can vary by protocol.
-
— John Zettler
- Bad debt risk in DeFi arises from borrowers who may default on their loans, impacting the overall health of the lending protocol.
-
— John Zettler
Market dynamics and user behavior
- The risk of bad debt arises when the value of collateral drops faster than loans can be filled, leading to potential losses for the protocol.
-
— John Zettler
- Diversifying over low-quality assets can be worse than concentrating assets in a secure protocol.
-
— John Zettler
- Different vaults in DeFi have varying infrastructure, trade-offs, and risks associated with their smart contracts.
-
— John Zettler
- Fear and uncertainty can lead to liquidity issues even in healthy markets.
-
— John Zettler
- Diversification is essential in DeFi to mitigate risks associated with market events.
-
— John Zettler
The future of DeFi adoption
- DeFi total value locked (TVL) is likely to explode as it goes mainstream.
-
— John Zettler
- The balance between borrowing demand and yield rates in DeFi functions like surge pricing.
-
— John Zettler
- The introduction of more users and diversified capital in DeFi will lead to less volatility.
-
— John Zettler
- 2026 will be a pivotal year for builders in the crypto space.
-
— John Zettler
- Vaults will be essential for regulated institutions to interact with DeFi.
-
— John Zettler
Kraken’s strategic direction
- DeFi is evolving to become more integrated with traditional fintech through hybridization.
-
— John Zettler
- Kraken is hybridizing its exchange to grow and offer new products.
-
— John Zettler
DeFi vaults are set to revolutionize finance by 2026, attracting traditional asset managers and enhancing user experience.
Key takeaways
- 2026 is expected to be a pivotal year for DeFi vaults, with significant growth anticipated.
- The infrastructure for DeFi vaults is now in place, setting the stage for rapid expansion.
- The growth of DeFi yield products will accelerate as more companies adopt vault strategies.
- Vaults serve as a layer on top of DeFi, allowing institutions to package and customize financial products.
- Liquidity and yield are fundamentally tied in DeFi, affecting user experience and product design.
- Aave is one of the original lending protocols in DeFi, operating on a pooled system model.
- Morpho introduces isolated markets and vaults to enhance flexibility in lending.
- The trend in DeFi will move towards more flexible, multi-protocol, and multi-chain solutions.
- The superpower of beta lies in its ability to offer multi-protocol, multi-chain vaults that provide simplicity and aggregation.
- The category of risk managers in the crypto space is growing rapidly, driven by interest from traditional asset managers.
- Protocols are increasingly trying to vertically integrate by developing their own vault infrastructure.
- Traditional asset managers are expected to enter the DeFi space by 2026, but they may struggle to compete effectively.
- DeFi vaults operate by taking a performance fee from the rewards earned, which is then allocated to the vault operator.
- The integration of DeFi into user-friendly fintech applications can simplify the user experience.
- DeFi’s success relies on integrating with traditional financial systems rather than existing as an independent alternative.
Guest intro
John Zettler is Director of Product, Earn at Kraken, where he leads the company’s yield business including staking, stablecoins, and DeFi strategies. Previously at Coinbase, he served as Staking Product Lead and cofounder of cbETH, a major liquid staking token on Ethereum that drove over $1 billion in gross annual recurring revenue.
The future of DeFi vaults
-
— John Zettler
- The infrastructure for DeFi vaults is now in place, setting the stage for rapid growth.
-
— John Zettler
- The growth of DeFi yield products will accelerate as more companies adopt vault strategies.
-
— John Zettler
- Vaults serve as a layer on top of DeFi, allowing institutions to package and customize financial products.
-
— John Zettler
- The construction of a good vault product involves optimizing various user preferences and risks.
-
— John Zettler
- Liquidity and yield are fundamentally tied in DeFi.
-
— John Zettler
Lending protocols and innovations
- Aave is one of the original lending protocols in DeFi, operating on a pooled system model.
-
— John Zettler
- Morpho introduces isolated markets and vaults to enhance flexibility in lending.
-
— John Zettler
- The trend in DeFi will move towards more flexible, multi-protocol, and multi-chain solutions.
-
— John Zettler
- The superpower of beta lies in its ability to offer multi-protocol, multi-chain vaults that provide simplicity and aggregation.
-
— John Zettler
- Aave pioneered lending and borrowing at scale, while Morpho introduced modular lending.
-
— John Zettler
Risk management and asset diversity
- The category of risk managers in the crypto space is growing rapidly.
-
— John Zettler
- Diversity in asset management is crucial, and no single entity can manage all assets effectively.
-
— John Zettler
- Protocols are increasingly trying to vertically integrate by developing their own vault infrastructure.
-
— John Zettler
- Curators that focus on their expertise and utilize the best existing infrastructure will outperform those trying to vertically integrate.
-
— John Zettler
- Building a successful vault platform requires significant attention to detail and economies of scale.
-
— John Zettler
Traditional finance’s entry into DeFi
- Traditional asset managers will enter the DeFi space by 2026, but they may struggle to compete effectively.
-
— John Zettler
- DeFi vaults operate by taking a performance fee from the rewards earned, which is then allocated to the vault operator.
-
— John Zettler
- The distribution partner in DeFi typically takes the majority of the fees generated from vaults.
-
— John Zettler
- Building infrastructure for DeFi is a more viable strategy than competing directly with large fintechs.
-
— John Zettler
- The integration of DeFi into user-friendly fintech applications can simplify the user experience.
-
— John Zettler
The evolution of DeFi and fintech integration
- DeFi is increasingly becoming a backend service that simplifies user interactions.
-
— John Zettler
- DeFi’s success relies on integrating with traditional financial systems rather than existing as an independent alternative.
-
— John Zettler
- DeFi has created tremendous value, evidenced by users earning competitive yields on their assets.
-
— John Zettler
- Coinbase’s approach emphasizes first-party products for a more integrated user experience.
-
— John Zettler
- Coinbase’s borrow product has seen significant usage with $1.9 billion in collateral and $1 billion in loans issued.
-
— John Zettler
Multi-protocol and multi-chain strategies
- The multi-protocol, multi-chain approach allows for better risk-adjusted yields by sourcing the best opportunities across the ecosystem.
-
— John Zettler
- The implementation of yield products in DeFi is fundamentally different and more transparent than traditional platforms like BlockFi and Celsius.
-
— John Zettler
- The failures in CeFi have highlighted the importance of transparency in the industry.
-
— John Zettler
- DeFi’s structure allows it to function effectively even during market downturns.
-
— John Zettler
- Kraken is developing a suite of on-chain DeFi-oriented products.
-
— John Zettler
Strategic directions for DeFi and crypto firms
- The collaboration and input from experienced individuals in the crypto space are crucial for product development at Kraken.
-
— John Zettler
- Vaults will become a significant feature across various fintech platforms.
-
— John Zettler
- Offering a range of risk options to users is essential for a positive user experience.
-
— John Zettler
- The traditional finance sector may struggle to compete with established crypto firms due to differences in distribution ownership.
-
— John Zettler
The convergence of crypto and traditional finance
- BlackRock does not own the distribution in the same way that firms like Charles Schwab do.
-
— John Zettler
- Crypto and traditional capital markets will eventually converge into a unified capital market.
-
— John Zettler
- Token incentives have shifted from paying for liquidity to paying for distribution.
-
— John Zettler
- The best product will ultimately win in the long term, despite short-term strategies.
-
— John Zettler
- Token incentives play a crucial role in attracting users to different DeFi protocols.
-
— John Zettler
Risks and challenges in DeFi
- Some DeFi products offer yields that include additional boosts from tokens, which may not align with user expectations.
-
— John Zettler
- Risk in decentralized finance can be categorized into three main buckets: bad debt risk, liquidity risk, and smart contract risk.
-
— John Zettler
- Liquidity risk refers to the ability to withdraw assets from a vault when desired, which can vary by protocol.
-
— John Zettler
- Bad debt risk in DeFi arises from borrowers who may default on their loans, impacting the overall health of the lending protocol.
-
— John Zettler
Market dynamics and user behavior
- The risk of bad debt arises when the value of collateral drops faster than loans can be filled, leading to potential losses for the protocol.
-
— John Zettler
- Diversifying over low-quality assets can be worse than concentrating assets in a secure protocol.
-
— John Zettler
- Different vaults in DeFi have varying infrastructure, trade-offs, and risks associated with their smart contracts.
-
— John Zettler
- Fear and uncertainty can lead to liquidity issues even in healthy markets.
-
— John Zettler
- Diversification is essential in DeFi to mitigate risks associated with market events.
-
— John Zettler
The future of DeFi adoption
- DeFi total value locked (TVL) is likely to explode as it goes mainstream.
-
— John Zettler
- The balance between borrowing demand and yield rates in DeFi functions like surge pricing.
-
— John Zettler
- The introduction of more users and diversified capital in DeFi will lead to less volatility.
-
— John Zettler
- 2026 will be a pivotal year for builders in the crypto space.
-
— John Zettler
- Vaults will be essential for regulated institutions to interact with DeFi.
-
— John Zettler
Kraken’s strategic direction
- DeFi is evolving to become more integrated with traditional fintech through hybridization.
-
— John Zettler
- Kraken is hybridizing its exchange to grow and offer new products.
-
— John Zettler
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Source: https://cryptobriefing.com/john-zettler-2026-will-be-pivotal-for-defi-vaults-the-rise-of-multi-protocol-solutions-and-how-liquidity-ties-to-yield-empire/
