Host: DeFi, or decentralized finance, has built up billions in liquidity, but new research suggests most of it is sitting idle. Dune Analytics found that 85% of concentrated DeFi liquidity is underutilized, costing liquidity providers an estimated $150 million a year in foregone fees. Now joining me to talk through why that's happening and what his company is doing about it is Sergej Kunz. He's the co-founder of 1inch. Sergej, welcome to Capital Markets Wall Street.
Sergej Kunz: Hi everyone, it's a pleasure to be here. Thanks.
Host: Now first, 1inch-commissioned Dune research showed 85% of DeFi liquidity is sitting idle. Why is that happening, first of all, and why has it taken so long to fix it?
Sergej Kunz: Yeah, um, this is by design. Uh, so, um, the DeFi space is also new, uh, compared to the traditional finance, and there were some, uh, new techniques, new, uh, architecture, um, introduced. Um, and, uh, it's by design that, um, we have liquidity pools in decentralized finance, like, uh, in protocols like Uniswap. Um, and users need to provide these two tokens, um, and have to lock the liquidity. And the, uh, most of the liquidity, 85, around 85%, just sits idle and just participates in the price formation. Uh, it does something, but it's not efficient enough, so, and we came to something what changed it.
Host: Yeah, and that's really fascinating. You launched Aqua recently, um, and it has already crossed $3 billion in volume to date. In simple terms, what does it actually do, if you can explain it to us?
Sergej Kunz: So, um, we, we, uh, implement something different than, uh, what is right now existing in the DeFi space. Uh, you don't need to lock anymore your assets. You don't need to deposit it in a smart contract custody, in a, in a, in a program which, which, which allows someone to exchange assets. Um, your liquidity, uh, you just keep it on your wallet, and then, uh, you create trading strategies, and then you can reuse the same liquidity for multiple positions. So in, in the, in the traditional decentralized finance world, you need to split your, um, your, your, um, liquidity, your amount of money you want to provide, um, and earn on, uh, into multiple positions. In our case, you just create on, uh, on your own wallet multiple positions on the same liquidity, so you can have higher utilization based on your strategies.
Host: Mhm. Now, what does this mean for someone providing liquidity? Is it just better returns, or does it change the risks too?
Sergej Kunz: So, um, uh, our solution, uh, offers, uh, a lot of, uh, possibilities to create very advanced strategies, yeah. Uh, for this, uh, you need to be a very advanced user, uh, or you need a good AI agent what, uh, can help you by creating the strategies. Um, maybe it just opened the doors for, for a market where people can participate in liquidity provisioning what they cannot do in traditional finance. You cannot go to your bank and say, OK, I would like to provide liquidity for Tesla stock and Apple stock, uh, and maybe Apple stock to SpaceX stock, and I would like to charge fees on, on, on, on, on trades on these, um, um, positions. Um, and we, we, we make it happen now, so with the protocol where everyone can just, uh, build any position they want.
Host: So 1inch has already moved close to $7 billion, as we're saying, in tokenized real-world assets. Does that kind of liquidity, uh, need different infrastructure than regular crypto?
Sergej Kunz: Um, I would say no, but it's beneficial to use, um, specific architecture, specific, uh, um, uh, system design, I would say. Uh, we are, um, the RWA, maybe tokenized stock, uh, is, uh, created by, by, uh, demand. So someone wants to buy Tesla stock, announces intent, announces that I want to buy for $1,000 USDC, US dollars, uh, Tesla stock, and there are professional market makers who, um, look like on eBay marketplace, you know, and settle the trades by themselves with you in a P2P manner. Um, so, and the, uh, tokenized, uh, real-world assets are created on demand, so they're not, um, held by the market makers all, all the time. It's on demand. They can print it on demand. There's, there are different, um, um, RWA issuers. They have different rules, like Robinhood, uh, or Coinbase. They have a little bit different approaches, uh, but work in, in the same manner that they allow to, to mint these RWAs on demand.
Host: Yeah, it's very interesting, and another interesting topic as well that we keep talking about here is the AI, AI agents trading on behalf of, of people. Um, now, we didn't see it exists now yet, I think, but this is what we've been talking about. What actually needs to exist before this becomes the real deal?
Sergej Kunz: Uh, it's already there. It's already here. Yeah, OK, let people, uh, know that, um, you can just install your OpenClaw on, on your Mac Mini, for example, and then you can give access to, for example, 1inch MCP server. Um, this is, um, an API service where, uh, the AI model can request specific data. For example, OK, what, what, what are the current prices? Uh, how have the prices changed over time? Um, what are the volumes for specific tokens? And then it can use also the, um, MCP to create the position itself on demand of the user. So actually it's already there, and you just use it. Um, we, uh, got already integration, for example, for MCP source. So, um, a lot of these, um, AI tools are already kind of, um, ready to connect to all the DeFi services. It's already working, and people already started using that. There are some, um, people what we have seen before Aqua, uh, creating these positions completely, uh, automatically by using the MCP and the, uh, it looks like AI agents, yeah, but it moves really, uh, fast, as we're seeing now.
Host: So thank you so much for being here with us on the show today, Sergej. Thank you.
