How you doing, man? Welcome to your what, third Token, fourth Token?
Yeah, I can't even count. I've been here so many times.
It's always good to come here, yeah?
Yeah, man. I thought we were calling it on-chain finance and legacy finance, not TradFi anymore. What's up with that?
[laughter] Little clean up there.
Well, man, it was great to speak with you in New York City at the Circle event and also at the Avalanche event. Obviously, you guys have launched some new products there, RWA hub, these types of things. Clearly, kind of, you know, being in this convergence and really, I think it's this tokenization supercycle that is the opportunity for Aave. And so,
if I just were to give some context to the audience briefly and then I'll let, you know, Stani give a ton of alpha and answers here. You know, when we started back in 2020 in on-chain DeFi, 2019 obviously, you a couple of years earlier, we were really orienting around building products for crypto assets, right? We had Ethereum as collateral, you know, wrapped Bitcoin, we had Chainlink, we had Aave token. These were the things that we oriented around. And so, when you look at the TAM for that market, you know, we're talking about two to three trillion dollars of total market cap,
you know, 150 billion dollars of DeFi TVL primarily on Ethereum. Very quickly, as you've seen this tokenization boom accelerate, you start to think a lot bigger as to what we're actually trying to do here. Because what we're really thinking about is how do we get, you know, bips and bips of the total asset size of the world, right? And we're seeing high-quality assets like tokenized equities, stocks, bonds, T-bill funds, etc., etc., etc. And so, I guess, Stani, just from the lens of this tokenization supercycle, how do you think about the TAM increase for what we're doing here on chain as it applies to Aave and just broadly for all DeFi builders?
Yeah, I think it's a really exciting chapter for the whole industry. So, obviously, we all started from like crypto-native assets and Bitcoin, Ethereum as collateral and expanding from there. We grew up to 76 billion in net deposits last year. And it's fundamentally a great example of how you can have a resilient system running on chain 24/7 providing lending and borrowing. Now, this is all great and Aave does best in the space for lending and borrowing when it comes to stablecoins against digital assets, providing yield, providing a lot of economic opportunity around the world. I'm sure there's plenty of people here that has used Aave or using it on an ongoing basis. Now, the next exciting chapter for the whole space, in my opinion, is this sort of expansion to traditional assets. So, we're going to see more and more assets coming on chain and tokenized assets, and this starts from, we've already seen money markets, T-bill funds and so forth, but now we're starting to see also tokenized stocks. So, last week we launched Coinbase tokenized stocks on Aave. So, you can use a Mag 7 stock as collateral on Aave and borrow against USDC.
And have people been actually, you know, trying that out? Has there been some uptick in?
Yeah, and it's quite interesting because it is a 10 million market in terms of deposits and over 1.5 million in outstanding borrowing volume. And this is when you put into the actually sizing the whole market cap of the Coinbase tokenized stocks is between 20 and 30 to 40 million. So, we're talking about really small market cap on chain of these like bigger equities that are traded globally. So, why this is very exciting is because we are seeing a transition, moving a lot of these opportunities that exist in traditional finance on chain and providing that opportunity for everyone. And then when you add these DeFi primitives and protocols like Aave, you get the efficiency and you get that lending and borrowing make these assets more productive and eventually you can be able to do it better than the traditional brokerages transparently as well.
Yeah, I mean, if you just think about it, you know, I get a bit disillusioned when we just come on and talk about tokenizing other assets because I'm just a crypto bull. But when you think about the actual use case here of, hey, you know, in order to do actual lending on equities in your brokerage account, you likely need a prime broker, which means you're a high net worth individual in the US and you have a very specific banking relationship that allows you to get a credit line on equities. Cuz look, I mean, these things are volatile assets, they don't want to just have the average Joe have especially leverage on their assets. That being said, I don't believe in that. I believe in optionality and I believe in access. And so, you know, I think you obviously do as well. And so when you just think about these assets being collateral assets, being yield generating assets, right? You know, for that $1 million of outstanding loans more or less on Aave, that means that they're getting paid a fee to supply those assets and they're also paying interest to borrow, you know, stable or whatever it is. So there is now a yield, you know, machine for equities. You know, I think these small things, well, for us it's like still a small market. These are going to be monumental breakthroughs for Wall Street to understand the value of what we're building here.
Yeah, I think this is really exciting. And obviously a lot of these tokenized assets, whether it's stocks or other RWAs, we see a lot of different mechanisms how they're actually constructed. You know, there is certain things that are debt notes, there are certain things that are, you know, direct ownership through a trust and it is very unclear obviously like what is the sort of like a winning path. But also if you think about how cash was moving on chain, it happened to stablecoins and stablecoins happen to be effectively, you know, assets tokens that are wrapping T-bills. So we don't have a perfect solution today, but also stablecoins that we use today came out of like a solution of actually how we move these types of, how we solve things on chain and that was the sole stability. And here actually we're trying to provide access to these products across globally. So I think for Aave it's very important to actually be everywhere and be on the frontier. So we're known for obviously for safety and security, doing things very efficiently, but also for being innovators in the space and that is the reason why we have to be there in the forefront to actually get this opportunity and provide that to our users. And doing it on chain obviously where users own their control of their funds, have the full transparency and get the smart contract based execution.
