At a recent DevConnect panel we hosted three builders at the heart of crypto infrastructure came together to reflect on where DeFi stands today — and where it’s headed next. Michal Zajac (Nethermind), Michael Lewellen (Turnkey), and Austin Ballard (Offchain Labs) joined Nexus’s Steve Yu to unpack stablecoin adoption, liquidity fragmentation, smart contract risks, the role of AI agents, and how institutional participation is quietly reshaping the onchain economy.
Here’s a look at the most insightful takeaways from the conversation—and where the speakers believe the biggest opportunities (and risks) lie.
Maturing stablecoins and DeFi
Across the board, the panelists agreed that stablecoins are DeFi’s most mature product. They’ve reached institutional scale and are powering meaningful real-world flows.
“Stablecoins are working,” Michal said early on. “They’re popular, they’re adopted, and the volume is real. USDT alone saw over a trillion dollars in monthly volume recently.” But as Michael pointed out, much of that activity still happens offchain. “Even natively issued assets often end up relying on centralized exchanges. That’s where most of the real volume lives,” he noted. “We’re still not at a point where DeFi can fully replace traditional finance.”
Austin pointed to what he called the “stablecoin sandwich”— a setup where institutions use stablecoins briefly for settlement, but continue to rely on fiat systems before and after. “They’re using it to move money from point A to point B, but not holding or building on it,” he said. “That’s still the default.”
There was consensus that this isn’t necessarily a failure—just an early step. Regulatory uncertainty, unclear custody models, and outdated infrastructure are still keeping much of the financial system in “hybrid mode.” But that may change quickly. As Austin noted, when regulators gave the green light for large banks to hold ETH and pay gas fees, it unlocked a wave of operational efficiency that could push more assets — and institutions — onchain.
Liquidity is fragmented. Security is fragile
The discussion turned next to risk—both the visible kind (hacks, exploits) and the invisible kind (composability, key management, upgradability). Michael called out upgradeability as one of DeFi’s most misunderstood vulnerabilities.
“There’s a catch-22,” he explained. “If you build immutably, it’s safer in the long run, but you lose flexibility in emergencies. If you build upgradeable contracts, then you’re implicitly trusting the team behind them—especially if there’s no clear governance or time delay on changes.”
That trust problem compounds in a composable system, where one protocol might unknowingly depend on a dozen others. “We’ve seen protocols unknowingly rely on smart contracts that suddenly change underneath them. And when it’s all interconnected, one weak link can bring down an entire chain of integrations.”
Michal agreed — and added that security in DeFi can’t just be about code. “It’s also about how keys are managed, how governance is handled, and whether institutions feel they can trust those systems. We’re not there yet.”
Austin pointed to another gap: risk curation. “In TradFi, if an asset manager blows up a fund, there’s recourse. In DeFi, too often the message is just: ‘Sorry, we had some bad debt. Hope you pulled out in time.’ That’s not sustainable.”
Liquidity will decide everything
When asked how AI might reshape the onchain economy, Michal didn’t hesitate. “Agents won’t be loyal. They’ll optimize for the best execution at every moment—best price, lowest fee, best outcome based on user-defined risk. And that’s going to put a lot of pressure on liquidity.”
Austin echoed that sentiment from the Arbitrum perspective. “Our goal is to make sure that, when an AI agent scans the landscape, Arbitrum is where it finds the best rates, the best execution, and the deepest markets. That’s how you win in that world.”
Michael focused on the mechanics of how AI will interact with finance—and why security will matter more than ever. “You never want to give an AI agent raw key access,” he said. “You need granular permissions, intent-level access, and a delegated model that limits what it can do. Otherwise, you’re just opening the door to new forms of automated exploits.”
There was optimism about the long-term impact of AI—especially in treasury management and user interfaces—but also caution. “You don’t want a half-baked agent with lots of users and no guardrails,” Michal warned. “One bad actor—or one dumb agent—can set adoption back years.”
Composability, cross-chain UX, and real-world integration
Despite progress, there was agreement that core infrastructural issues remain. Interoperability between chains is still too slow and fragmented. Integrations with traditional finance are still clunky.
Michal made the case bluntly: “In TradFi, you have standards—ISO 20022, FIX for trade messages, SWIFT for settlement. In blockchain, we act like those don’t exist. And that just makes it harder to onboard institutions.”
The panel also touched on opportunities that feel underexplored. Austin pointed to the rise of fixed-rate DeFi instruments like Pendle, as well as Morphos’ vault design. “We’re seeing early signs of real fixed-income products onchain. That unlocks a lot—especially once you bring in risk curators who can compete on pricing and underwriting.”
Looking ahead: Regulation, realism, and the end of theater
As the discussion wrapped, the tone turned reflective. Michael noted that decentralization is finally being built for the right reasons—not just for regulatory arbitrage, but for real resilience.
“There’s been too much decentralization theater,” he said. “We’re now seeing protocols that are still credibly neutral, but also usable by institutions. That’s the balance we need.”
Austin closed with a quote he borrowed from Pantera Capital:
“Assets will flow where they move most freely, trade most cheaply, and are priced most completely.”
“That’s the future we’re building toward,” he said. “And it’s working.”
Michal agreed — and emphasized the role of engagement. “It’s time to take the suits out of the closet,” he said. “Regulators are finally ready to have a real conversation. We need to meet them there.”
Final thoughts
The road to verifiable finance won’t be linear. It will require better infrastructure, better abstractions, and better alignment between users, builders, and regulators. But as this conversation made clear, the foundations are falling into place—and the industry is learning to focus on what really matters.
Thanks again to Michal, Michael, and Austin for joining us in a high-signal discussion.
