title: Introduction

The state of DeFi today suggests crypto has largely exhausted its early addressable market—serving the segment of users willing to interact with protocols directly through

Introduction

The state of DeFi today suggests crypto has largely exhausted its early addressable market—serving the segment of users willing to interact with protocols directly through self-custodial wallets.

Today, total value locked in DeFi sits at about $90B, down from over $180B in 2022, even with the circulating supply/market cap of stablecoins growing significantly.

Today, total value locked in DeFi sits at about $90B, down from over $180B in 2022, even with the circulating supply/market cap of stablecoins growing significantly.

DeFi’s inability to expand the pie and grow TVL can be attributed to three critical failures:

* DeFi protocols have focused on building for other crypto users, not the broader 5B+ smartphone users who could be engaging with DeFi in the form of yield-bearing bonds, diversified portfolio trackers, or easily integrated DeFi derivatives.

* CeFi institutions have largely failed to integrate with DeFi in meaningful ways that would allow them to deploy their capital more efficiently and creatively.

* DeFi protocols have struggled to create products that are compelling to both technical and non-technical users, combining high yields with the ease of use that would attract a wider audience.

DeFi and CeFi must converge and embrace one another to create undeniably better alternatives to TradFi products with more compelling yields and crypto flexibility, while being seamlessly integrated into apps real people use daily. This fusion would finally allow DeFi to expand beyond previous highs and achieve mainstream adoption.

In this report, I’ll outline why vaults, curators, and “DeFi mullets” may help DeFi cross the chasm, effectively ushering in what will later be seen as DeFi’s “ETF moment.”

Blackrock, Vanguard & State Street: The Original Curators

In the early ’90s, asset management was expensive, exclusive, and slow. Active mutual funds dominated the landscape despite charging high fees, being narrowly distributed through broker networks, and relying on brand rather than performance. While passive investing existed in the form of index mutual funds and institutional mandates, it was niche, clunky, and hard to access—requiring large minimums, no intraday trading, and limited distribution.

However, that all changed in 1993 when State Street launched SPY, the first U.S. ETF. For the first time, investors could buy the entire S&P 500 in a single, low-cost, liquid trade. Retail loved the access. Institutions loved the structure. Capital flooded in.

Since SPY’s launch, ETFs have gone from effectively zero to over $14T in AUM globally—including $10T in the U.S. alone—in just over 30 years. But the impact wasn’t just better packaging, ETFs fundamentally changed the economics of investing. They made market access cheaper, more efficient, and less reliant on intermediaries. Beta became commoditized, fees fell across the board, and distribution shifted from sales networks to self-directed platforms.

Since SPY’s launch, ETFs have gone from effectively zero to over $14T in AUM globally—including $10T in the U.S. alone—in just over 30 years. But the impact wasn’t just better packaging, ETFs fundamentally changed the economics of investing. They made market access cheaper, more efficient, and less reliant on intermediaries. Beta became commoditized, fees fell across the board, and distribution shifted from sales networks to self-directed platforms.

The firms that leaned in early—BlackRock, Vanguard, and State Street—now dominate, managing ~74% of all U.S. ETF assets.

More recently, we in crypto have felt the ETF effect too.

More recently, we in crypto have felt the ETF effect too.

Since launching in January 2024, U.S. spot Bitcoin ETFs have attracted over $92B in AUM, now holding 5.3% of total BTC supply across 12 products. The largest, BlackRock’s iShares Bitcoin Trust (IBIT), alone holds 572K BTC—more than 2.7% of supply—with nearly $47B in assets.

These ETFs didn’t generate new demand—they unlocked it, giving institutions a compliant, familiar wrapper to access BTC without touching native infrastructure.

DeFi’s ETF Moment

If ETFs were the infrastructure breakthrough that allowed traditional asset managers to scale passive investing and attract trillions in capital, then vaults and curators are playing that same role in DeFi today – albeit at a much smaller scale. It’s still early.

Curators function like decentralized asset managers, but with some critical advantages: they’re non-custodial, liquid, and permissionless. Depositors don’t need to “hand over” their capital—they can enter or exit at will. And curator incentives scale directly with TVL.

In many ways, this is asset management reimagined for the internet of value:

* Like a mutual fund, a curator combines liquidity from multiple depositors to deploy into various protocols and strategies.

* Like an ETF, a curator’s vault is a liquid derivative that can be traded on centralized exchanges or DeFi protocols.

* Plans are already underway to launch structured products (e.g., yield-bearing notes) backed by DeFi vaults, which could form the building blocks for broader capital deployment from institutions.

Top curators like Steakhouse and Gauntlet, for example, are already managing over $1B in TVL between them, each with their own strategies and product lines — from institutional-grade vaults to more