# DeFi's Near-Death Moment | Mike Silagadze on Ether.fi, Security, and What Comes Next

## Метаданные

- **Канал:** The Defiant - DeFi, Web3 & NFT Insights
- **YouTube:** https://www.youtube.com/watch?v=PJMb21ImPcE
- **Дата:** 08.06.2026
- **Длительность:** 45:29
- **Просмотры:** 271
- **Источник:** https://ekstraktznaniy.ru/video/53146

## Описание

How close did DeFi come to a real systemic collapse?

In this episode, Camila Russo sits down with Mike Silagadze, co-founder and CEO of Ether.fi, to break down the Kelp exploit, the DeFi United rescue effort, and why Mike believes the default path could have been far worse if nobody had stepped in. He explains why the bigger lesson is not just smart contract risk, but operational security, app-layer responsibility, and the need to move past "decentralization theater."

They also get into why Ether.fi wants to be "the safest place to stake," why application-layer protocols should have emergency controls, and how Ether.fi is evolving from liquid staking into a vertically integrated DeFi bank with vaults, card rails, and real-world utility.

If you want to understand where DeFi security is failing, what serious builders are changing, and what the next phase of crypto products could look like, this is the episode to watch.

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## Транскрипт

### Segment 1 (00:00 - 05:00) []

Yeah, it was the first few days was just kind of a fog of war of really what I would describe it is that nobody was talking to anybody and without even I mean I think everybody was kind of in the same boat. Everybody was like playing this game of protecting themselves and you know communication between let's say Kelp and player zero and a it was like on like a 12hour cycle. — All right, here we are with Mike Silagata, co-founder and CEO of EtherFi. Mike, it's so great to have you back on the Define podcast. — Yeah, great to be here. Thanks for having me again. — Of course. So, yeah, lots has happened since you last came on. I think the last time you were on the Defiant was probably kind of at the height of the liquid restaking era boom. There have been many different DeFi and crypto cycles since then. We're in a completely different market at the moment and you have been at the center of the news in DeFi for a really good cause, I'd say. So for context, as all of my audience knows, back in April, we saw one of the biggest hacks in DeFi with the kelped out exploit over 290 million was drained to the exploit of the layer zero bridge pinned to the northwest lasher group. This caused a terrible contagion caused bad debt on a which you know a being a pillar of DeFi. It really did have the it could have had catastrophic consequences for DeFi as a whole. But then something happened. All of DeFi kind of came together with DeFi United pitching in trying to make the users whole as much as possible. And Mike, you put in personally 5,000 ETH even while Ether 5 really didn't have much exposure or any at all. Maybe you can touch on that in the conversation. And so you Mike was widely credited by Stani. I don't know many pointed out kind of not only the donation but also just the coordination effort that happened behind the scenes to you know make sure that this this happened. So now that you know some time has passed, I'd love kind of that the story from you firsthand like first of all when you heard when you saw that this hack happened, what was your initial reaction? And then if you can give me kind of those like behind the scenes moment like how did Defa United come together and what really prompted you or inspired you to contribute 5,000 ETH toward the that movement? Yeah, you know, it feels almost like a lifetime ago because it's just it was such a chaotic and crazy situation, but exactly as you say, North Korea managed to exploit the uh Kelp configuration, specifically their layers bridge setup, and they didn't actually steal ETH directly from Kelp. What they did was they were they basically drained liquidity pools and a you by being able to basically mint, you know, $300 million more. So it's kind of this indirect exploit of kelp. And as soon as it happened, I think what maybe was not obvious to others, but at least to me and at least a handful of other people was just immediately straightforward was yes, you had in the end about 200 something million, I think $220 million that was stolen directly. But what the obvious kind of downstream effect of that was that the entirety of Kelp's ETH supply, in other words, the entirety of the asset would then be encumbered. So, in other words, if for example, the path that was chosen by Kelp was just to declare bankruptcy and just let the courts kind of run through their process, you wouldn't have had 200 something million dollars locked up. You would have actually had about $1. 5 billion locked up. and then if you have a hund you know $1. 5 billion dollars locked up well that actually basically locks up the entire a market and then maybe it has to you know go down a similar path all the assets are frozen that gets stuck in courts and litigation for years as we've seen you know with FT for example and so then you're talking $30 billion and now I mean we're talking serious money here most exchanges I think had some exposure like centralized exchanges had some exposure to this so maybe some of them are now insolvent every other DeFi protocol pretty much had, you know, some a position. Every fund, I mean, you would have had basically a level of contagion that would have, I think, potentially have caused all of DeFi to collapse, you know, whether or not it was a, you know, that would have been permanent or just another, you know, lost decade in — Yeah, it would have the level of contagion you're saying would have like taken DeFi back to 2018, 2019.

### Segment 2 (05:00 - 10:00) [5:00]

— Yeah. the level of trust then would you know would have been lost obviously. So, so this to me and again I think to A and Stani it was just like okay A B C D it was just it was very obvious kind of what you know how bad this could get and I I'll go even further and say that this was actually the default path if nobody stepped up if just people kind of hid behind lawyers and you know just tried to cover their own you know interests that actually would have been the default path and so Ether didn't have any direct exposure our vaults like our obviously our ETH was fine not encumbered in any way. Our strategy vaults actually had no exposure to this, you know, in particular the losses. Our cash product was fine. So, we didn't have any direct exposure to this, but what we do have exposure to is DeFi. And if DeFi blows up and crypto, you know, gets another lost decade. I mean, that that's very problematic for us. And so I think Stani and A deserve the basically all the credit for standing up DeFi United and you know spearheading this thing but I would say the credit that Ether and you know we deserve is just being one of the early very early supporters. I don't know if we were the first ones to commit. I think we were actually, but we also played a role in helping, I don't know, open up communication and getting other people to the table. And we did that because it was just, like I said, it was an existential thing. The easiest thing to do, not just for us, but for everybody, is just to stand back and let the let things play out. But the consequence of that, I think, would have been much worse. And we can talk more about this in a bit, but it caused us of course like everybody else to re-evaluate. All right, how do we think about safety and security? How do we make sure that Etheri is the safest place to stake and to do anything DeFi related and there's a lot of things that we've thought of that there. We we'll definitely want to get into kind of the lessons from that and how you're applying those lessons, but I just want kind of the color of it still like how did it kind of unfold and come together? Was it like a telegram message from Stani being like, "Hey, we're doing this or how did that coordination happen? " Yeah, it was the first few days was just kind of a fog of war of really what I would describe it is that nobody was talking to anybody and without even I mean I think everybody was kind of in the same boat. Everybody was like playing this game of protecting themselves and you know communication between let's say kelp and player zero and a was like on like a 12hour cycle. In other words, it was just like very little communication actually happening and everybody just focusing on their own internal interests. And so the first thing I think that had to happen is just get people actually talking to each other. Not through lawyers because that's, you know, you get very slow turnaround and it's very defensive kind of communication, but just get people get the decision makers on the phone or on a call and talking to each other. And so we explored a number of different ideas. I think I've said this in elsewhere actually like at one point we spent quite a bit of time looking at just Ether by acquiring Kelp and this is just we obviously didn't want to do this. It would have been extremely risky exposes to lots of liability but it was kind of like look either that or DeFi blows up. I mean we're willing to kind of do what it takes. So that we went pretty far down the line on that path. I mean, it was just a very intense week of just nobody sleeping, you know, getting an hour or two here and there and just crunching through all these different possibilities until what emerged was this DeFi United rescue package for Kelp and uh and then, you know, more depth in terms of execution of that plan. And you know, but by the end of it, I mean, we saw tons of different folks come to the table and actually offer either grants or loans or, you know, anything they could do to support this, you know, this recovery effort. — What did you think of the response the Defa United idea had? — Yeah, I thought it was great. I mean, as I said, initially it was it went from disappointment because very few people were stepping up and there was about a week of that, I would say. But then once it sort of started to gather steam and there was this sort of public website and the donations started coming in and it really then it was actually very heartening. So I guess that's kind of that's probably how it always works is kind of nothing happens until all of a sudden there's a watershed moment. And again all credit to Stanny and the A team for organizing leading this whole thing. — Nice. Okay. And then to kind of close that this part of the conversation, where what where is it now? Like I kind of got lost on on the status of DeFi United like I know there was on like the recovery effort as a whole. There was a court order for the original DA funds and then we published on the defiant actually that the the funds from the exploit itself have

### Segment 3 (10:00 - 15:00) [10:00]

already been just you know like funneled away — funed — through chain. Yeah. — So, so through 13 and others, but on kind of the TIFFA United itself, I don't know like what's the status of that? — Yeah. So, the funds have been raised. I mean, this is old news now. They were able to raise more than adequate amounts of funding to cover to fully cover the gap, which is great. And — I see 262 million raise, 137,000 ETH. So, — yeah. So that's more than that's almost double actually what was needed to cover the you know the whole. So obviously that's great. I think it shows you know this is very much a market effort right and obviously the alternative to that we've seen in the traditional finance world is government stepping in using taxpayer dollars to kind of paper over these various holes whereas this is entirely just private you know — it's like a private community bailout rather than a government bailout. — Yeah. Uh, I mean, I wouldn't call it a bailout is when you use other people's money. In this case, there was no bailout. It was just that the industry got together and fixed this problem. So, so where it stands is I think things are in in good shape. There was, again, to recap for maybe people that weren't aware, Arbiter, I think correctly was able to pull back the funds from the attackers to basically recover those funds and put them back, you know, where they belong. There was some thoroughly frivolous legal challenge to that, but then that was I I wouldn't even try to go into the details of exactly what happened, but basically the those assets were moved over to A and then I think they're waiting awaiting distribution, but I think — Okay, so the court order was dismissed. I guess like I missed that. — The way they did it is they didn't dismiss it. they transferred the liability I guess to a so in other words a is now responsible for those funds I don't know if the court uh if the restraining order is has been discharged I probably would have heard about it if it was but that can be a long process so it may be a while before that actually happens but the fact that the funds are now in a's hands is you know is good that now it's just a matter of time beforeh before that happens because of course this what this law firm was trying to do is to look for a settlement, right? Because their case is absurd. It rests on the idea that this was North Korean property, which of course it wasn't. So, usually what they do is they filed these frivolous they bought they acquired an interest in historical claims from, you know, 20 30 years ago and they use it to put out this nuisance suit in order to get a settlement. So, who knows what hopefully they don't get any settlement out of it, but you know, maybe they'll get some, you know, some amount of finance, some amount of the assets, and then the rest of it will be given back to the uh, you know, the victims. — Perfect. Okay. And then a last question on Defa United. I had this discussion on a defiant live stream. It was really interesting the different perspectives on this on whether you know we all agree that the effort was amazing and it was really inspiring to see everything come together but at the same time it doesn't feel like a lasting you know sustainable solution for an exploit of this magnitude. It's like you can't expect this you know like community to come together and contribute funds to plug a hole that happens because of a hack. So what's your take there? like, yeah, this it's great that this happened, but going forward, what are better solutions for security incidents like this one? — Yeah. So, there's lots of ways to address this in a more long-term way. Well, we've seen with this hack and other hacks like recently we had the Drift hack, you know, fairly recently, you know, I mean, today we had the Nosis Pay, I think it was today, Nosis Pay hack, and then we had obviously there was the mega hack of VBIT for over a billion and a half dollars. So we've had all of these, you know, exploits in pretty much all of the cases, certainly all the really large ones. The failure is not like some super sophisticated smart contract exploit. The failure is I would say of more basic operational security obsac gaps that exist in protocols like in the case of this kelp hack, their configuration was reset from a two of two setup for the layer zero bridge. it was reset to a one of one. And you know, at the time that reset happened, maybe one could have argued that wasn't the end of the world, but there's a reason that no other major protocol that uses layer zero did that, right? There was lots of test configurations that were out there with the one of one. But I think almost all of the transfer volume that was in this sort of one risky configuration was kelp. And so that's an example where look there's we need a better way of creating transparency and whole higher standards holding protocols to higher standards when it comes to this kind of operational security. uh in the case of drift it was just I mean again lots of complexity this whole

### Segment 4 (15:00 - 20:00) [15:00]

operational thing but in the end look it was a multisig they exploited a multisig by taking over two wallets in the case of buy bitid same thing right they compromised the front end the nosis front end but like should you really be relying on the a front-end UI JavaScript UI to transfer a billion and a half dollars like probably there should be better you know operational methods there so I think that one of the lessons is really just we need to hold people to a higher standard and I think a just recently released a new risk framework for how they'll evaluate listing of assets. You know, recently Ether was listed on the largest Morpho market with the with steakhouse and I mean the sort of diligence that was done in order to ensure that we had good you know obset practices was pretty in-depth and I think that's the right way to do it. The other thing maybe I'll say is, and this is sort of our takeaway as EtherFi, our goal is to ensure that we are the safest place to stake, hold your assets. And one of the ways that we're doing that is to stop with a lot of the decentralization theater that many DeFi protocols engage in. What I mean by that is the bar for decentralization for a blockchain is different than the bar for decentralization and credible neutrality for an application layer protocol. For a blockchain like Ethereum, the bar is extremely high. And I think it's entirely reasonable to say North Korean hackers get hold of a bunch of ETH, it's not reasonable to expect the blockchain to fork and you know and solve that. In the case of an application, I think it is reasonable and in fact that is the correct thing to do. And so things that are a little bit taboo, I guess in the context of D5 protocols like blacklists, like ability to pause the protocol rapidly in case, you know, some invariants are violated. There's ways of doing those things that give the protocol and users protection while still respecting self- custody and decentralization. To make it very concrete, there should be a pause button that an EOA address can hit that pauses the protocol for 24 hours, giving time to a larger security council to ratify that pause if in fact something you know really bad happened. Same thing with blacklisting addresses. If you detect that an address is malicious and did something that it shouldn't have been able to do, you should be able to blacklist them very quickly and then after you know within 24 hours ratify that action with, you know, with a security council vote. So those types of things Etherfi is just is introducing is doing so that we can do more to protect our users assets and so that we don't just throw our hands up like many other DeFi protocols and say it's decentralized. Sorry, you know, your money's gone. Well, we don't think that's good enough. We think again that is actually the obligation of an application layer protocol and that actually is what gives the freedom I guess to the blockchain to be fully decentralized, fully incredibly neutral is when the application layer is doing its job of protecting user assets. It's such a it's a difficult conversation and decision to make because it's it's not black and white kind of decentralized and centralized on whether and in which cases it's good and which cases it's bad because you could say okay the fact that Kelp Dow used the more centralized configuration of layer zero the 101 DVN was what caused or what opened it to this exploit. Right. So, but on the other hand, you could say no, you do need more centralized control in a protocol because you need to be able to blacklist some addresses and be able to pause it when something goes wrong. But at the same time, like wouldn't I mean, couldn't you say if you have those faculties, an attacker could also use those in their favor? — Well, so yeah. So, I think there's two different sides to it. There's sort of positive controls and negative controls. having a maximally decentralized bridging cross-chain system and ability to transfer and you know use the token in DeFi great super decentralized you should let the users do what they need to do but you can have let's say elements of your defense mechanisms that are more centralized because that doesn't let you it like being able to pause the contract at least in most circumstances doesn't let an attacker steal the funds being able to put you know a bunch of addresses blacklist doesn't let an attacker steal funds. And if there's a sufficiently decentralized process to sort of ratify these types of actions, you can get the best of both worlds where users can get permissionless self-custody composability and in DeFi while at the same time having enough emergency tooling in place to be able to stop, you know, the really bad things from happening. like it's not, you know, saying crying decentralization is not

### Segment 5 (20:00 - 25:00) [20:00]

the same as sort of saying, well, look, we're just going to not bother locking the front door because, you know, that's too centralized. Like, you should have defense mechanisms that are appropriate to the uh you know, the the tools that you need to protect user assets. — Yeah, for sure. It just it's it seems like it's kind of like playing wagamal, you know, like it's like, okay, one you find out of like one thing you need to be worried about, then an attack happens and it's like, oh, like we also need to be watching for this thing. So, I don't know. It's a difficult time. I think it's, you know, it's until kind of DeFi hardens and figures out absolutely like all the best standards to follow, OBSC practices. I I think there I mean we're bound to see more hacks until that happens unfortunately. — Yeah. I mean I think the space is getting a lot better. I mean there's a lot more tooling now to including things like formal verification of contracts, you know, onchain and off-chain monitoring. I mean there's a lot of tooling that's available that let's say the protocols that have recently been hacked were not using that could do a lot to protect you know user assets. I think there are many ways to exploit the traditional financial system too, right? If somebody gets you, for example, many people don't even realize this, if someone gets into your bank account and does a wire transfer to, you know, Panama or something, if for the most part that money is gone, like the bank doesn't have some magic switch to pull back the funds once there's a swift transfer that's taken place, especially if it's crossborder, like the money is gone. Like there's no way to recover it. But that doesn't happen very often. I mean it happens every once in a while but usually small scale you don't see you know10 billion dollars siphoned out of a bank you know through a swift transfer so there's precedent I guess it took you know a century for the traditional finance system to get to a level of security with enough mechanisms of protections in place that you know the really bad stuff just doesn't happen. So I think it'll you know it'll take maybe hopefully less time for DeFi to get there as well but I think it can get there. Again, I think the key thing is, at least for me and hopefully for others, is this realization that look, the standard for decentralization for a blockchain versus an application layer product is just different and you need to take a different approach to it. You need to be way more proactive and put in much more protections and ability to hit pause on things than you do with a blockchain. like you would never want to stop a blockchain because something you know something bad happened but you do want to I think it's actually entirely reasonable and expected to do that on an application layer product. — Yeah, it's it makes sense. I mean an app a product a protocol needs to be a lot more user centric than a blockchain. like you have to be putting your users first. And so if a decision to pause is what's going to make the user experience better, then you know you should consider that before any kind of ide ideological idea of like you know oh you know we shouldn't stop it because of decentralization. No, you should stop it because you your first priority is keeping your user funds safe. — Yeah. Look, it's again lots of analogies here that could be used, but if somebody gets hacked or there's a data breach, you don't like stop TCP IP, right? You don't stop the internet, but you can absolutely stop a particular application, a server or, you know, a database or whatever. Like that's entirely reasonable. It's not reasonable to say we're going to stop the internet when something bad happens. It's very reasonable to say we're going to stop this, you know, this server or this service if uh if something bad happens. then that is in fact the responsibility of the people operating that service. So it's not yeah it's not perfect because yes we still need to respect decentralization self- custody but there's ways of doing that still provide tools for protecting users. So RSC is was the the token that was kelp token that was used to you know drain the ETH contracts and Ether has you know it's is the same kind of a protocol as scalp a restaking a liquid restaking platform you have similar to RS E you have ETH a liquid restaking token that's at the core of your product have you I mean you've talked about kind of the lessons you took from the hack and what you're doing to make either fight safer about kind of the token your token itself are you making any changes and maybe that I'd like to kind of transition you use that to just talk about Ether more broadly I get into like what you actually do we've been talking about the hack — yeah we started yeah I mean our vision from the beginning was to build this vertically integrated DeFi platform that you know we call a DeFi bank that is a viable alternative to traditional banking. So if you were to go to the Ethery website today, you download the app, you know, you it would look and feel like a fintech product. So you

### Segment 6 (25:00 - 30:00) [25:00]

can deposit your crypto assets, you can invest them, deploy them in DeFi, you can get a credit card, you could spend, borrow, do all the normal things that you'd expect from your traditional bank, but lower fees and higher rewards. And it's great. And that's where the bulk of users now discover and use Ether. The first product that we launched that is you know stake rest is what serves as sort of the yield layer the rewards layer for the etherfy product and yeah the changes that we're making as I as I kind of mentioned is just putting a lot more protections into that staking asset to ensure that in case of emergency that there is something that can be done to prevent you know damage from spreading. those changes have already been made and I think some of them actually have already been deployed and then we're going to be building on those over the next little while. So, so that's the staking product, but we're applying a lot of the same lessons for the broader suite of products, including our DeFi strategy vaults, the we call liquid and our cash uh product, which is the spending card product — because we saw another hack. I think you mentioned this one, hnosis pay on and that's, you know, a competing or like a different crypto card. — Yeah. And but what they had here is kind of what you're saying about having these like guard rails, but the attackers actually used the delay module. You know, I didn't look in depth. I don't I don't know that I've seen a postmortem of exactly what happened. So, I'm kind of I could be wrong in a bunch of things that I'm saying here. I think the way that was exploited was I guess it allowed an attacker to inject kind of arbitrary transactions into people's vaults or wallets. And this delay module had a 3minut window to for I guess Nosis to be able to pause the uh the contract but they didn't detect it and didn't pause the contract. So I I don't know how you know just how sophisticated the attack was. I got to I mean Nosis is a very competent team so I got to believe that this was probably a fairly sophisticated attack but there's certainly an element of operational execution here because if it had been detected within that 3minut window you know it could have been stopped but again I really don't know the full details here. Yeah, but it just like goes to the point that it's not so straightforward. Like even if you can add those guard rails and you know, but we're dealing with very sophisticated nation state actors here. So I mean it just needs it means that defa needs to get just like extremely strong like military level strength to fight back. So yeah, I just like pivoting to the EtherF cache and it and it did feel to me like well an actual pivot but you're saying it's it was like always part of the plan but I'd love to understand better how these two things fit together because like I yeah when to me either is a liquid resting protocol and recently I've seen it I I've seen kind of all your activity being actually around a credit card and So I'm like how do those two things fit? Like are you just like changing the business or Yeah, like if you can explain how all these pieces fit together. — Yeah, that's a totally reasonable question. I mean so again to reiterate the vision to build this integrated platform was there from you know 20 23 when we were first launching this. It's been a work in progress. the the reason to us I guess internally it was actually a pretty natural progression is that the starting point was to build the staking asset which served as the yield layer. You could think of it as sort of like T bills, not a perfect analogy, but you can think of it as sort of like the T- bills of Ethereum, right? Like risk-f free rate on Ethereum. Having that yield product, then the natural question is, all right, you've got your, you know, yield layer risk-free rate. The next thing you want to be able to do is to take that and deploy those assets that you know that st asset into DeFi. And so that was the genesis of our vault product is it's an answer to the question of all right I've got this staked ETH what do I do with it? Well what you can do with it is put it in these vaults that then deploy it into various DeFi protocols and earn more rewards go further out on the risk curve — and sorry ETH is the token that represents state ETH on Ethereum mainet. — Exactly. — Okay. And then you deploy. — So you take your E because people were doing this manually. They were doing all this work putting it into various protocols and earning you know a return. In this case we automated that process through smart contracts and created these vaults these strategy vaults. Then it's like all right great you've got this you have all these assets in DeFi. You're earning this these rewards number goes up. Okay. So what who cares what can you do with it? How does it actually impact your

### Segment 7 (30:00 - 35:00) [30:00]

real life? And that's where the the credit card and the full kind of crypto neo bank vision comes together where now we give you fiat on and off ramps. So you can take the money, you know, either bring, you know, fiat into crypto or vice versa. And you have a credit card that lets you actually go out there and spend this money in real life. So you put these three layers together, the yield layer, the D5 strategy, investment layer, and then the spending and borrowing. So you basically have a vertically integrated D5 bank or bank alternative. So that's that was the natural progression. Today the vast majority we have I think about 400,000 you know registered users and the vast majority of these users came to Ether understanding it as a you know this crypto neo bank. Certainly some of the OGs and people that have been in the space still remember Ether's origin as liquid staking and that's always uh it's probably always going to be the case. — Interesting. Yeah, that's kind of how I obviously first knew about Etheri, but yeah, I think this model of having a credit card be the gateway into DeFi and staking makes a lot of sense. It's just something that, you know, everyday people can access and use in just daily life. — Yeah, exactly. It's basically like the last myotradfi rails hooked into DeFi so that you can actually have a product that you know is accessible and usable in your normal day-to-day life. So while DeFi is obviously having a lot of issues, TVL is shrinking, there's these hacks, there's all kinds of prices are, you know, are bad. I mean, our EtherFi NeoANK is all-time high. Revenue is all-time high. Usage is all-time high. Spend transfers. I mean, we're doing billions a year annualized in transaction volume. So, so yeah, it's that's the benefit of having a product that's actually useful in real life is you're not, you know, sitting there worried about, you know, what what's happening in the crypto gamverse. You're we could just focus on building good products for users. So how are people using Ether? Is it so you have your card if you put money into it does that automatically get deployed in a vault and that starts you know earning interest for you and then you can spend from that like — yeah pretty much so you know very concretely you know you have your iPhone or Android you download the EtherFi app you can transfer money from your bank into it or you could transfer crypto into it as well. So you have an account, you have your self-custodial asset from there. You can buy some ETH, you can transfer ETH into it, you could stake it, you can deploy it into DeFi, and you can get a credit card that then lets you spend those assets directly or borrow against them. And then there's all kinds of other fun stuff built in like 3% cash back on all your spending, obviously, yield on assets that are deployed into DeFi, travel rewards. I mean it as I said it looks and feels very much like a fintech bank alternative that the many most of our users use you know every single day as their primary financial tool. — Talk to me more about your user base like where are they like what kind of I'm just interested like who are these people who are like just like using crypto cards and yeah do you have like more information about what your user looks like? — Yeah, it's a global user base. So we have users all over Latin America. So for example, Brazil, Mexico, we have users in Southeast Asia. So in, you know, Taiwan, Hong Kong, Thailand, lots of users in Europe. We actually don't have a ton of users in the US for I mean a lot of different reasons, but most of our user base is very globally distributed. So — would you say it's like more attractive in emerging markets? Is it like a stable? — Yeah, it see it clearly seems to be. Yeah, people want exposure to the US dollar. They want like a really easy offramp from their local currency and Etheri gives them that. And the types of banking rails that you have in a lot of emerging markets are just bad. They're just not good products. Whereas in the US, you just you have a lot of pretty decent alternatives. And the domestic market is pretty nicely covered, right? If you want to send money to somebody in the US, a lot of different options that work pretty well. Whereas if you want to send money cross border, you know, good luck with that. And that's where stable coin banking rails are just so great. — And is it easy to pay with the Ether card? Say if I'm in Argentina like — Yeah, for sure. Yeah, of course. I mean, it's a normal Visa card. You can use it anywhere at any of the hundreds of millions of merchants worldwide. In many countries, like in Brazil being a good example, we have local payment rails. In Brazil, the most popular payment rail, more popular I think than credit cards is Pix. Uh, and so that's just a, you know, it's a countrywide, it's QR code based payment system. So if you want to get paid, you show a QR code, it just transfers the money in. You want to pay somebody, you scan a QR code and pay them. And Ether works great. People use that, you know, every day. So yeah, so

### Segment 8 (35:00 - 40:00) [35:00]

that's and we have similar kinds of integrations across other countries. — Nice. Okay. So I'm seeing here you said 400,000 registered users. — Registered users. Yeah. I'm seeing here that the trend has been sliding since August last year. I don't know seeing kind of your TVL fees uh revenue. It seems like you reached an all-time high in August and you know while still definitely substantial 3. 5 billion TVL. I think you made yeah about like you're about like 5 to 10 million in revenue monthly but you know it's still below last year. So yeah, what do you think or statistics according to DeFi Lama? I don't know. I don't know if this is wrong. — Revenues is above last year for sure and that you know will definitely exceed our last year's revenue this year by a probably by about 40% if I had to guess as a forecast. TV is I mean it's a it's not a great metric because so much of it is tied to the price of ETH. So ETH has come you know way down and so obviously that reduces and this kelp hack has caused a lot of unwinds in a lot of de-risking in DeFi and so we we've definitely had hundreds of thousands of ETH you know exit the protocol but the ETH staking is not our primary source of revenue now by you know by a big margin most of it is on the the newer the vault products the cash product so that obviously we want to continue growing our staking business But it's less of an existential risk for us. But it definitely hits the topline TVL number. — Yeah. And by the way, yeah, I'm I switched from USD based data to ETHbased so that it's, you know, you don't get that kind of distortion. And yeah, revenue is definitely a lot more stable than the USD number painted. So yeah, revenues and fees have been pretty around the same ranges relative to last year. So, no decline there, but yeah, definitely a decline in in TVL, I guess, since the start of the year and especially after the kelp hack. That definitely had a contagion effect for you. — Yeah, that's exactly right. Yeah, we've had, as I said, like I think five or 600,000 ETH that exited because of that. And so, yeah, I mean, it's not great. where, you know, we'll continue trying to grow the staking business, but the by far the more valuable kind of long-term focus is creating this integrated DeFi bank platform and that's where most of the revenue is now coming from. — Do you think it was that were those outflows just people getting scared about staking the hack or — certainly there was a lot of that just people just leaving DeFi? There were multiple funds that were large depositors that just were exiting DeFi. But in addition to that, there was just a lot of leverage staking on a you know, billions of dollars of leverage staking and a lot of that most of it is actually now unwound. So yeah, that was the it was a combination of those two. — Feels like if part of your model is a giving back staking yield to your card users, right? So you still kind of you obviously want that number to go up. There's not a I mean if a card user is staking ETH then obviously they get the yield but there wasn't there's not like if somebody is just using Etherite to stake that doesn't directly do anything for the card holders there they're integrated by independent products okay if that makes sense — okay it's not like that — like it's not that a staker is somehow yeah that's not passed to card holders the cash back and rewards are just paid through normal like interchange revenue that the card drives as all the other activity like token swaps and borrow interest all the other activities that people do on ether. — Oh, okay. I thought like the rewards that people got were more tied to the staking yield on ether, but no. Okay. — That's just the yield that indirectly powers the strategy vaults and then obviously the strategy vaults is what people deploy into when they use the crypto neo bank. — Got it. There has been like such an explosion of crypto cards recently. I feel like I don't know every day there's like a new one or a different integration announcement. How do you compete with such I don't know it feels like it's getting more and more crowded. — Yeah, I mean look it's a it's an exciting space. We we've certainly inspired a lot of companies to look at this category which is great and as with anything else there's going to be consolidation and like a small number of players that really own this uh this market. the winners in this space are going to be ones that break out of the crypto bubble. So random DeFi protocols or chains launching a card, you know, unless they successfully execute on actually a user acquisition strategy that goes way beyond just crypto users, uh that it's just a card program in and of itself is not a viable business. You need a broader platform. So I think this the amount of innovation and

### Segment 9 (40:00 - 45:00) [40:00]

activity in the space is great and healthy. over time, you know, you're going to have consolidation. So, when we think about competition, like I don't we don't think about it as like here's like five other crypto cards. Like that's just that's not our competition. Our competition is Revolute, Chime, New Bank, like these are the the companies that we're really trying to displace and maybe to even to some extent like the traditional the larger traditional players. That's the broader market, not like this little micro, you know, crypto bubble. So what's your edge there against these big fintexs? — Well, lower fees, better rewards for users. I mean, it's really pretty simple. Uh people in there is already many things that users can do on our product that they could never do in a trady product, but that's going to become even more true once you know we have tokenized stocks in there, once we have integration with pers and prediction markets and all this other great stuff. I think the composability and power of DeFi will just allow users to have a better product experience than they could with a traditional let's say bank. — So is it that like with Ether being more cryptonative you're able to integrate with all these new tokenized assets DeFi vaults more — like faster more seamlessly than others. Yeah, there's many aspects of the product that I think are going to, you know, start it's going to be more clear why it's so much better. But one of the maybe more concrete things is what I what we call the omni portfolio. So in a traditional, you know, finance experience, you have your checking account is sort of in one place and it's one account and you've got your, you know, your insurance policy is maybe somewhere else maybe with another company. your mortgage probably with a third company, your investments are in Robin Hood, your cryptos with Coinbase, and all of these are just these completely separate systems. And you go to your bank, maybe you have, you know, a million dollars in crypto. You go to your bank and you ask for a $10,000 loan, and they say like, "No, we can't, you know, you don't have you only have thousand bucks in your checking account, so we can't give you anything. " So, this is the problem that existed, let's say, before the internet with a lot of sort of broader array of services. these things just didn't talk to each other. They weren't composable. Whereas with what we are calling the Omni portfolio, it's going to be one account that holds all of these things. Your cash is going to be in that account. Your investments, your tokenized stocks are insurance policy is going to be there. Your NFT that represents your ownership of your house will be there. Everything, every financial asset that you hold, which is basically every is going to be in this one integrated portfolio. And that is going to be composable with this broad array of services like lending like whatever products you can uh you can think of. And so what that's going to mean is that the average person now will have a much more financial power to them. They will have access to the same kind of tooling like low interest borrowing being one of the main ones that is currently only accessible to either high net worth individuals or institutions. And so again, even more concretely, you're going to get higher rates, higher reward rates on your assets. You're going to have a higher interest rate on your dollars. You're going to be able to get higher cash back on your card and your spending. You're going to be able to borrow for less interest. That's just a better product. Like, product than anything you can get in traditional finance. So, all the crypto gambling nonsense, put that aside, you're just going to have a better financial product. That's why it's going to be broadly adopted. to to wrap up, you know, and I think this is kind of the vision a lot of crypto is is coming to accept recently that in the end the way that crypto becomes mainstream is disappearing and it becomes a bit boring, you know. It's like, you know, yeah, it just like makes payments transfers easier, just stock ownership easier, but it's Yeah, it's not about kind of the meme coins and NFTs and gambling. And I see a lot of people kind of — Yeah, gambling is a is a, you know, part of the economy, but like what percentage of it is it of the economy, right? You know, low single digits maybe. So, the most of the real economy is, you know, is not founded on that. So yeah, like in the same way that you know when you order an Uber, you're not sitting there thinking to yourself like I'm using the internet to order a car. You just have an app, you use it to to, you know, solve a problem that you're having. In the exact same way, to the extent crypto is useful and I do think it's useful. You're going to just use it to solve a problem. You're going to use it to send money easier. to borrow more cheaply. You're going to use it to earn a higher interest rate and have a broader array of investment options that are available to you. And it it'll just make your life better. You're not going to think of it as crypto. You're just I'm getting more yield on my dollars. And that's great. That's, you know, that's a very positive thing. — For sure. And — that's a much larger opportunity. I guess that's maybe the that the market for that is a lot bigger than the market for gambling on meme coins or tokens.

### Segment 10 (45:00 - 45:00) [45:00]

— For sure. And no, it's it's great to see that kind of you have at EtherF cracked away into that bigger market with your card. It seems like a really good place for people to get these benefits without having to even worry about, you know, using crypto at all. — Right. — Nice, Mike. Awesome. This was amazing. Thank you so much for joining me. — Yeah, this is great. Yeah, thank you for having me. Great conversation as always.