Hi Fintech Architects,
In this episode, Lex speaks with Marcelo Ruiz de Olano, Co-Founder of KPK (Karpatkey), an on-chain asset management firm born out of Gnosis DAO.
Marcelo recounts KPK’s evolution from stewarding Gnosis’s $1B treasury to advising on more than $2B for leading protocols like ENS, Balancer, and the Ethereum Foundation. The discussion dives into the mechanics of non-custodial treasury management - balancing governance, security, and risk - along with strategies across lending, liquidity provision, and stablecoin yields. Marcelo also shares why the rise of large Ethereum treasury companies could be a turning point for DeFi, injecting institutional-scale liquidity and potentially making ETH more liquid than Bitcoin.
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Thanks for your time and attention,
Matt Low
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Key discussion points:
Origins and Scale of On-Chain Treasury Management
KPK spun out of Gnosis DAO, which had one of the earliest and largest on-chain treasuries (~$1B). From there, KPK evolved into an independent manager now advising on over $2B of DAO and foundation treasuries (ENS, Balancer, Ethereum Foundation, etc.), pioneering non-custodial, fully on-chain asset management practices.Conservative, Mission-Driven Approach vs. Yield-Chasing
Unlike many DeFi actors during “DeFi Summer,” KPK deliberately rejected risky high-yield strategies. Instead, they prioritized capital preservation and mission alignment—for example, ensuring ENS’s treasury only supports Ethereum-strengthening initiatives (like minority client staking or avoiding centralization risks). This contrarian, values-driven approach built trust and positioned them as long-term stewards of DeFi treasuries.Transformative Potential of Ethereum Treasury Companies
Marcelo highlights that emerging Ethereum treasury firms (similar to MicroStrategy’s BTC play) could deploy $10B+ in ETH treasuries. A single such “mega whale” could inject unprecedented liquidity into DeFi—making ETH potentially more liquid than BTC, bootstrapping entire verticals (DEX liquidity, lending, insurance), and creating a flywheel where treasury strategies directly accelerate Ethereum’s adoption and price stability.
Background
Before founding KPK (Karpatkey), Marcelo Ruiz de Olano built a career that blended traditional finance with adventurous risk-taking. After earning degrees from ITBA, the University of Buenos Aires, and UPC, he worked at Chevron, where he developed financial models for large-scale capital projects worth over $100 million.
A life-threatening robbery at age 28 shifted his outlook, pushing him to leave corporate life and travel through Asia, funding his journey through arbitrage in stocks, bonds, and commodities. During this period, he discovered Ethereum, which inspired him to join OpenEthereum and collaborate with the Ethereum Foundation and Gnosis on client diversity and network resilience.
His growing passion for decentralized finance ultimately led him to co-found Karpatkey with a university friend, initially focusing on security tools like private key storage devices, before evolving into one of the leading firms in on-chain treasury management.
👑Related coverage👑
Timestamps
1’08: From Gnosis to KPK: Building the Infrastructure for On Chain Treasury Management
8’00: Playing It Safe: How KPK Built Long Term DeFi Strategies in a Risk Obsessed Market
11’50: DeFi Lending Unlocked: How KPK Assesses Risk and Builds Yield Strategies with Stablecoins and Leverage
17’11: Treasury Playbooks: Matching DeFi Investment Strategies to Risk Profiles and DAO Values
20’32: Stablecoin Farming and DAO Drama: Navigating Risk, Governance, and Community Conflicts
23’18: From Impermanent Loss to Long Term Gain: Liquidity Provision and the Case for OG DeFi Protocols
26’33: Behind the Smart Contracts: Why Human Ops and Governance Still Run On Chain Asset Management
30’11: The Rise of Ethereum Treasury Companies: How On Chain Giants Will Supercharge DeFi Liquidity and Revenue
36’34: The Ten Billion Dollar Whale: How Ethereum Treasury Giants Could Reshape Liquidity and Supercharge DeFi
40’51: The channels used to connect with Mercelo & learn more about KPK
Illustrated Transcript
Lex Sokolin:
Hi everybody, and welcome to today's conversation. I'm absolutely thrilled to have with us Marcelo, who is the co-founder at KPK. And we've known each other through the Ethereum and Web3 ecosystem now for a couple of years. I'm really interested in KPK as a firm. It's an on-chain asset management firm that has gone through DAO transitions various Treasury management approaches and is one of the best players in the space with that. Marcello, welcome to the conversation.
Marcelo Ruiz de Olano:
Thank you. I'm glad to be here with you, Lex.
Lex Sokolin:
So let's just lay down the basics. What is KPK and what does it do?
Marcelo Ruiz de Olano:
KPK is an on-chain asset management organization that was born around four years ago with this mission to how to manage treasuries in an ethereal way, following Ethereum values for the DAO, which in that moment was Gnosis DAO. It was the first organization that was becoming a DAO. It had a very big treasury, $1 billion. So, the challenge was how to manage the funds in a non-custodial way, following very strict security and risk management practices. So that's how we started making these proposals, working on governance.
Lex Sokolin:
You were part of Gnosis at the time when you started doing that?
Marcelo Ruiz de Olano:
Yeah. That's right. KPK is a spin-off of Gnosis but then became independent. And then we started managing the treasures of ENS, balancer, and Cow. And now we manage our advice. More than $2 billion in treasuries, including the Ethereum Foundation and other big DeFi protocols.
Lex Sokolin:
Let's spend just a little bit more time, I think, on those early Gnosis years, because I think many of our listeners will come from finance or fintech worlds, and they're not going to know the unique challenges of dealing with what you went through, right? So, Gnosis was a project that had an initial coin offering and raised quite a bit of money. How much was sort of the total ICO proceeds at the peak?
Marcelo Ruiz de Olano:
So back in the day was one of the first ICOs. They raised around $15 million in ETH, which they never sold. That's why. Good to see. Billion-dollar amount. And the main difference I think for managing assets on-chain is this idea that when you have an organization that is 100% based on-chain, absolutely every contract, every activity needs to be on-chain because many of these organizations don't have legal recourse. So, we were somehow forced to do absolutely everything on-chain. And that means making sure anybody who would actively manage the assets would not be able to run away or to have custody of the funds by any means. So that's how we build on top of save on top of rolls and zodiac, modifier sort of permissions to allow these very granular management assets within a predefined set of smart contracts. So that's basically a that's how we started.
Lex Sokolin:
It's an interesting origin story because I think Gnosis, the ICO, the original idea was close to. And again, correct me if I'm wrong, something like Polymarket today. So, prediction markets on the internet, the financial size of the res, sort of the gravity of it transformed what had to be done. And if all of a sudden, you're sitting on $1 billion and it's completely unchained, you have to develop all of the infrastructure for asset management in an industry which didn't have any of the pieces. Right. If you look back to 2018, not even non-custodial MPC or anything like that. And so, Gnosis kind of splintered into a whole bunch of different business units, including Gnosis Safe, which is now a multi-billion-dollar sort of institutional on-chain wallet management system, non-custodial custody into payment services and then into CBDC, which is sort of the investment management recommender as well as There's software, right? Like you guys have your own infrastructure.
Marcelo Ruiz de Olano:
Yeah. Yeah, exactly. So, you mentioned these non-custodial MPC wallets. You get an MPC wallet; you need to you need to sign a contract because all of this logic is mostly off chain. So that was the heart of everything we do is 100% on-chain. And also at that time, the main challenge for all of our treasuries was how to continue existing. You know, because in this very volatile market, we needed to make sure we had runway for paying to contributors.
So low risk investment strategies were paramount as well as making sure we wouldn't lose funds. Right. Because we, we never really behaved like a hedge fund. We were never chasing for you. We were chasing capital preservation.
Lex Sokolin:
Got it. So, what was your entry into realizing you needed to make investment decisions with the Treasury. And maybe in those early days, like, do you remember the first investment recommendation that you and the team had made and like, who did you make it to, and what was the context like? Who were the relevant players at the time?
Marcelo Ruiz de Olano:
So this was in the beginning of DeFi summer 2020. There was this point where all of the assets in this Treasury were just not being utilized in any way. So that's when we started getting yields of 50%, 100%. You know, all of these insane returns due to these new governance tokens, it was very clear that all of these treasuries were leaving money on the table. That's why when it really made sense to start thinking of ways to manage assets, but at the same time keeping these organizations with a cash flow of funds fans at all times and without outsourcing the fans.
So, the key decision makers here were when it came to proposals, token holders, delegates, usually founders because traditionally they are the largest token holder’s investors. In the beginning, the process involved a lot around governance, engaging with the risk appetite of these projects. With time when they realize we were serious, we had good risk management practices. We were trusted by many other players. At the end, for the most part, we were the ones making the decisions and creating these investment policies for these projects and following those investment policies.
Lex Sokolin:
Were you inspired by any traditional asset managers in creating the investment policies, or like, did a lot of it have to be kind of de novo? And then what kind of engagement from the community or from the DAOs did you need to get to get the implementation to get going?
Marcelo Ruiz de Olano:
I think that the inspiration came from avoiding most of the players at the time were very risk tolerant; our industry is full of demons. So, the inspiration came from, okay, let's do exactly the opposite.
Let's aim for a very, very long-term list and to build a reputation and make sure we are very serious with this. This when managing this fund because it's very serious. You know, it's runaway money. The main goal for this project is to fulfill the mission and divisions of these DeFi protocols, like the mission of Aave is much more important than any yield, any return they can get from their treasury. So, I think yeah, maybe like an inspiration to be different.
Lex Sokolin:
How did the complexity of investment strategies evolve, like over the next couple of years as you went through DeFi Summer and then the FTX crash? I'm sure lots of people wanted to do capital preservation and generate yield, but most crypto treasuries were completely caught, you know, out of position, lots of exposure to their own token. Can you talk about those following years and just the evolution of what you saw in terms of what your clients wanted and what they could get done?
Marcelo Ruiz de Olano:
The first years negotiating early allocations for these projects as liquidity providers from the treasuries was, I think, probably the most profitable strategy because we would have this arbitrage, we would know that the teams, some few teams were building safe DeFi protocols, but they could not with bootstrapped funds.
You know, blood for data, DeFi protocols. I'm thinking about DEX's fixed market protocols. Options protocols. So, in the beginning it was mostly about that. That was very profitable. Then when the bear market started, most of us started thinking in, well, how to tokenize treasury bills because there was this inflection point where the T-bills rate were higher than the rates you could get on-chain. So, there was a big, big flow into these real-world assets. Now it's changed again. Definitely bull market rates on-chain start being very interesting. So yeah, we've had these changing strategies based on my macro environment. And also, we started having these new protocols for example these fixed yield protocols where would I say Treasury? They were very attractive. And then always the basic DeFi primitives lending, borrowing on Aave or Sky market making with these automatic strategies on Uniswap or Balancer. They were always I wouldn't say a low risk, but definitely we understood those risks. So, we were able to manage them.
Lex Sokolin:
So let's take them one at a time. Right. Because I think they're well known to you, but they're not well known to everybody else. You started saying the lending strategies at maker. You know, maybe Ave can you walk us through two things. One is how did you assess what qualified as a good enough DeFi protocol for a Treasury to put meaningful amounts in number one? And then number two, like, what is the investment strategy that you liked? Or in this case, like what are the protocols provide your idea.
Marcelo Ruiz de Olano:
So while this list lending protocols are the basic primitives, lending is a basic primitive of any financial system. And DeFi it's not different. So, we had this money market like Aave where people can borrow and lend pooled assets. Then we also have Sky Money that in a similar way, but they would create this stablecoin that in some form behave like a private central bank was a very interesting concept. Now also has this go stablecoin. So how we assessed the risk in the beginning there were a lot of hacks with the lending markets, and the big players were able to serve this through very strict risk management practices, hiring very competent risk management providers, managing the risk, and also later on doing formal verifications of their contracts.
That's really the standard, the safest security practice. Also, very expensive because it's very resource intensive. So, it's really choosing the protocols. Who have the experience against this very adversarial environment. You know, we have even state actors like North Korea trying to attack all of our protocols constantly. So, what's a combination of Lindy effect? the track record, all of the experiences from these hack attacks, but also speculative attack, very complex financial engineering attacks to create bad debt in the lending market. Now we can say it's the big ones are ready are mature for institutional use I would say. Then you also mentioned Strategies. There are a few strategies depending on risk appetites. One that was very I was working very well for some time. And still depending on the timing, it can work very well. Is using your crypto collateral borrowing stablecoins? Usually, you can do it at a very usually at a low rate on Javi and use those stablecoins to farm higher risk opportunities and let's say L1, L2 protocols who are very thirsty for stablecoins are willing to pay extra incentives.
So then basically, yeah, carry trade of stablecoins. Then another one that was interesting and still is very interesting in protocols like Morpho and Aave - is leverage being able to get a yield. And if you're bullish and the yield? You can use it as you use a yield bearing token as a collateral. Borrow stablecoin and buy more of that yield bearing asset and deposited again as a collateral. That's basically leveraging any yield varying asset in a in a way that is, I think, much more efficient than, than synthetic leveraged ETFs. So, I think that's but yeah, I could go on I don't know, like.
Lex Sokolin:
You absolutely should go on. Yeah. So just to play back what I'm hearing. Right. So, in something like Sky. Well first of all, if you can deposit collateral and get a stablecoin, you can also deposit a stablecoin and get Treasury-ish equivalent yield. And then in the lending markets, you can deposit an asset and get paid for other people who are borrowing it.
Sort of like in a margin account, but you can also use the receipt token for the underlying and then loop at several times. And I think I read somewhere a while ago that given that you need to be around 50% collateralized, give or take, like the most leverage you're going to get on the loop is somewhere around 3X. Like it's not, you know, 40X perpetual. Is that correct?
Marcelo Ruiz de Olano:
That really depends on the expected drawdown of that asset for assets. If the leverage is for assets that are heavily correlated, like the case of derivatives of the same token, for example, let's say staking derivatives of Ether or yield bearing tokens of stablecoins, the leverage could be higher. But still the risk of liquidation is very high. And usually, liquidations are very expensive. So, we try to avoid them at all cost. Yeah.
Lex Sokolin:
What would you recommend to. I'm a modest DAO with $100 million treasury. And I'm looking at leverage. I'm looking at stablecoin yields. What would you recommend for me? Like should I sell my own token to go into USDS and get my 5% from Sky? Like how much leverage should I get? What are the parameters there?
Marcelo Ruiz de Olano:
If you're a treasury of this DeFi protocol, or I really make sure there have enough runway, I would try to do as low risk as possible. Like this. Yeah. T-bills. I would say it's very different. The goal of the Treasury is getting yield or maybe bootstrapping the Ethereum ecosystem like with these new Ethereum treasury companies. So, I think it really depends on the risk profile of this organization.
Lex Sokolin:
What are the risk profiles that you've seen? How do you assess risk profile outside of. We need four years of runway. Is it the personality of the founders? Is it the voice of the community? Like, how do you boil it down?
Marcelo Ruiz de Olano:
Yeah, it's a combination of all of that. I would say from the treasuries we manage. NS is the one that is most conservative, not only from risk, but also, they're very value driven, which means that they want to invest even in something that will help Ethereum. The Ethereum network, for example, investing in liquid staking providers who stake their nodes in minority clients to help the health of the network, or avoiding investing in any DeFi protocol that might represent a centralization of Ethereum or a weak spot.
So, you can imagine there are many constraints which force us to do very, very low risk simple strategies so that would be an example of a very low risk. Then the ones who are much more restrained usually go for private deals, because it's possible to negotiate these early liquidity mining programs or these promises of points that were very, very popular with the risk-taking infrastructure. So, yeah, many of them are investing in projects that are still not proven, are still bootstrapping liquidity and need to prove that they can deliver value. So, in some sense the Treasury as liquidity providers is it’s a I wouldn't say a VC, but it starts getting similar to VC risk or for these funds. Yeah.
Lex Sokolin:
Just one more question before moving off of this. You had mentioned using stablecoins to farm other L-2s who are willing to pay for stablecoin supply on their markets. How does this happen in practice? Like again, let's say you have a chunky allocation from these 100 million treasuries, which is saying put $10 million into USGS and then you find out that arbitrage or you know, someone else is offering rewards, right. Like how do you think about the bridging risk and the smart contract risk? You know, bear a chain or whatever. And how do you go out further on that stablecoin farming frontier?
Marcelo Ruiz de Olano:
Yeah. So first there is a technical evaluation of the protocol. If the position justifies it, we will do some internal smart contract audit. Then let's say depends on if it's a crypto foundation or a company, that process for decision making is very straightforward. It's basically just depositing the funds. But if it's a DAO, an untrained organization usually requires more engagement, creating a proposal to change to add the permissions to invest in this new protocol. So that usually requires approval from the DAO to a governance vote. You can think of these DAOs as yeah, like governments because everything is public. Anybody can give their opinion. Any token holder has a voice. So once these allowances for working these new protocols are approved by the DAO, then it's possible to do these deployments in these new chains or these new protocols.
Lex Sokolin:
Have you had a situation where you knew there was a smart asset allocation strategy and sort of the founders and core contributors agreed. And then, you know, somebody in the community who is just blew the whole thing up. Does that happen?
Marcelo Ruiz de Olano:
I think yeah. Yeah, for sure. So, we have for these DAOs, all of the proposals, let's say the contracts are public, but we're still humans. They are informal networks. Many of these deals happen behind the scenes. Many times, contributors or community members don't really know what's happening. They don't have enough information that's that can create a conflict. Usually, it's solved when somebody trusted in the community gives their opinion. Somebody like the founder. So usually everybody aligns behind the founder. But those conflicts are yeah, definitely very common in the DAO space and describe the foundation space.
Lex Sokolin:
You mentioned another strategy which was providing liquidity into decentralized exchanges like Uniswap and maybe hyper liquid or others. I've definitely lost money trying to do that, and I feel like it's gotten quite complicated as the DEX graduate from, you know, V1 to V2 three and four to the intense world where it's like quite technical. Can you talk about the viability of liquidity provision strategies and any sort of advice for allocators that have a conservative outlook?
Marcelo Ruiz de Olano:
Providing liquidity on these DEX's short term is quite risky because of the stock risk you are you're committing and also impermanent loss. Usually, these strategies play very well long term. If you're able to provide liquidity on a place like Uniswap, Balancer for a long period of time. And when I say a long period of time, it means a complete cycle. If you're able to to provide these funds for a complete cycle, then all of the fees you get for market making, let's say the fees the users pay for using the pool of the assets you provide is usually larger than any risk you can get from toxic flow or yeah, impermanent loss. So yeah, this is strictly talking about these automated money market strategies then on well hyper liquidity. That's a different story because it's yeah, it's possible to farm the funding rate. This is something that is very popular and then well leveraged. But that's something we don't usually recommend because you know it's super risky with these very high volatile markets.
Lex Sokolin:
So if you were to put it all together and you look at your firm today and the people in the firm and the types of strategies that you think are appropriate, you know, we are in a pretty aggressive market at the moment. ETH is recovering. A lot of the DeFi protocols that may have treasuries are now generating revenue. They're doing token buybacks. When you look at where we've come to in terms of all the infrastructure in place to manage money, to do self-custody and so on, like what's a template for success? Yes, there are differences in terms of risk tolerance and goals and so on. But you know, if somebody comes to you today, where do you point them to in terms of structuring their on-chain treasury, like the tools that they use and the correct ways to get started?
Marcelo Ruiz de Olano:
So I would point them to the OG DeFi protocols. I think, you know it's been almost a decade of development. These foundational protocols have matured. They're now receiving infrastructure, and they've operated through all of these market cycles without major failures. Yeah, I don't think these are experimental any longer. I would definitely point them to the ones who are to the oh geez, I'm thinking, yeah, Uniswap, Aave, Lido, Maker, Sky, Balancer, Gnosis.
Lex Sokolin:
And when you look at the team that you've built in the company, what are the functions that people split into? You know, because I think you've had pretty fast growth in terms of headcount. Like our most people investment in finance people. Are they developers, are they salespeople? Like, how do you look at the company as a structure?
Marcelo Ruiz de Olano:
Yeah, right now we're around 50% Operations. Those are. Financial engineers. People with finance background. But they also need to understand smart contracts. Then we have a team doing engineering and product for the on-chain investment vehicles we are developing. Also, something very important is the governance team that acts as a nexus between the asset management teams and the community’s delegates. Yeah, I would say that most of us are engineers.
Lex Sokolin:
So the challenge is getting the money into the right place and then getting the community to say yes to the sort of the conservative investment decision, rather than trying to sort of boil the ocean and do something super complicated.
Marcelo Ruiz de Olano:
Well, yeah. Exactly. But also, the main focus is how to avoid an early dieback, how to remove liquidity - a programmatic leaf. There is a liquidation cascade. Yeah. How to prevent or act very quickly in one of these speculative attacks, so many of us are working hard with service providers like hyper Native that provide alerts to automate many of these risks. So, I would say its investing is this is the easy part remaining without any losses. That's the tough part.
Lex Sokolin:
It's a funny thing to say about what's supposed to be this like hyper automated, you know, robot financial system where smart contracts and cryptocurrencies make everything easy. And it sounds like operations, and the human management side is the most complicated part.
Marcelo Ruiz de Olano:
Yeah, yeah, yeah, I agree. So OpSec is the operation security of the team emergency processes Making sure we can react 24 over seven. If there is something that is unexpected and was not automated, that's a big challenge.
Lex Sokolin:
So I want to switch gears a little bit and ask about this next wave of developments in the industry, which is the launch of a number of really large public equity companies that have an Ethereum focused treasury.
And so, we have things like Sharp Link Dynamics, Thomas Lee's Fund, Stratos Equity Vehicle. And the playbook for these companies is to go raise either in-kind ETH or dollar capital. And they do this either by issuing debt or by issuing equity and then using that to acquire a whole bunch of underlying Ethereum. And in other cases, of course, Bitcoin, as it was with MicroStrategy or now, you know, longer tail Retail assets, whether it's Athena or Solana or hyper liquid or bit tensor like treasury companies are everywhere. And the market rationale for this is that public equity investors often have a mandate to, you know, hold individual securities and they might not be able to reach and hold on chain tokens. And so this is sort of a substitute for them to access the new asset class. I'd love to get just your reaction to the trend. And then we can dive into how these companies should be managing the Ethereum on their balance sheet.
Marcelo Ruiz de Olano:
You know, everything we do is Ethereum based. We're very, very excited with these Ethereum treasury companies that are emerging, especially the ones who are following the book of Michael Saylor, because he did some very smart financial engineering, especially from the debt side, because, you know, by raising debt, That they created this convertible bond that allows lenders to compare the bond to the stock at a premium.
So the interesting thing is these lenders keep the upside for the stock but also are protected for the downside because in the worst-case scenario they would just remain with a very low coupon bond or now they being issuing zero coupons. So that's very smart. So, kind of having a leveraged BTC with a protection for the downside. And I'm excited because we could offer those things on chain on D5 or for Ethereum treasury companies. So basically, giving these opportunities for lenders to retails DeFi protocols. So, I think that's very exciting. Also, the obvious thing is well on Ethereum you can get actually yield. So on.
Bitcoin companies you basically have in the best-case scenario. Yeah, just a high beta leverage Bitcoin bet. And that's okay. That's interesting for big players who want to invest in strategy and want to somehow yeah front run acquiring let's say cheaper Bitcoin. But the interesting thing for Ethereum transfer companies that they can really build revenues, all sorts of revenues. They can get revenues and take value from centralized exchanges by providing liquidity on these automated markets and become the market.
Market makers, the largest market makers on chain, they can bootstrap all of these lending protocols and become like this, you know, very big financial actors who can intermediate. All of these other financial, centralized financial institutions and basically the company owning the capital could be absorbing all of these businesses. So, I'm really excited for that. So basically, I mentioned two things getting real revenues. I'm not only mentioning about staking, which is what's very popular today with these Ethereum treasury companies. I'm talking about much more than staking, thinking about lending, borrowing, doing more complex financial strategies. So yeah, I'm very excited for that. I mentioned that on chain. That's something that is going to be huge, very profitable. And it's going to democratize access to these preferred lending deals. I think this is very interesting. So, everything I've just mentioned so far is ways to get more revenues, save costs on debt. But something I haven't mentioned and I'm very excited, is the role of these treasury companies on the DeFi ecosystem, because we've never had really, really mega whales like billion dollars asset allocators on DeFi.
That's something that we've always missed on chain. If you check the largest liquidity provider on the largest lending market, a protocol that is heavy today, you will see that the largest whale deposits less than $1 billion. And usually, it's not high-quality collateral. And if you check on Uniswap, the largest pool of USDC, Ether, which is the most popular pool for buying and selling ether is only $100 million. So, when you see these things, it's very natural to understand why DeFi never scaled so far. Because the infrastructure is ready when the protocols are ready for institutional adoption. But still, they're lacking blood. They're lacking the liquidity to make markets with, let's say, indexes, we have low slippage debt. Then on lending protocols, we never had the liquidity required to be able to borrow, let's say $100 million without changing rates, without heavily changing rates. I think this new wave of Ethereum treasury companies is going definitely transform DeFi and take it to a global level, right to a level where everybody is trading on Unchained Node because it's cool and it's permissionless and you can hold custody of the funds not because of that, but because you have the best execution, because you have the best price.
And that's basically removing a suck in the air from all of these centralized players into DeFi. Yeah, this is not related to any Ethereum company in particular, but probably the sum of all of them. I'm very, very excited for that.
Lex Sokolin:
It's a very meaningful amount of ETH. And all the companies that I've seen launch are headed by people who are crypto native, which means they're going to take ETH and they're going to stake it at least, and then maybe access some of the stablecoin protocols and get some of the kind of smaller loops going on top. But if you do the math, that's like 3% to maybe 5 or 6%, I think you could squeak out if you had $1 billion sitting in a public equity vehicle of ETH and you had a mandate to deploy it on chain, like, how would you actually go about it? Which protocols do you think are the right choice for a strategy like that, where you're still primarily exposed to ETH, but you are getting something else out of DeFi.
Marcelo Ruiz de Olano:
Yeah. Yeah. I would like to elevate the stakes a little bit more. And instead of thinking of 1 billion, think of a $10 billion treasury, because that's possible in the short-term strategy is holding $70 billion of Bitcoin. If we assume there's going to be a proportional appetite on Ether proportional to its to its market cap, that is a seventh or something like this. It's very I think it makes sense to say that somebody like a SharpLink, the company that is being led by Joe Lubin, the co-founder of Ethereum, make very makes sense to have a treasury Ethereum treasury company with $10 billion in the. In the short term, I think a $10 billion project could influence a DeFi at a scale that nobody was able to do glue before. So, I'm thinking this player could dramatically change the liquidity of either somebody depositing $2 billion of liquidity of Ether on DEX would do easily a 20X 30X in liquidity. So basically, only this player could make ether more liquid than in any other central axis changes.
So that would be a huge bootstrap of liquidity of Ether. And you know, Ether as a reserve asset, it's benefited from being more liquid. So, you have a more liquid asset, you have less volatility, you have less spread. So that's the liquidity is probably yeah, I would say liquidity is the most important property of a reserve asset. So only this whale could potentially make ether more liquid than Bitcoin. So, this is. This is big. This is very big. And we only talk about the access. But the thing would be if this player let's say, of course they would stake their Ether. But they would also get a liquidity staking token that is a representation of those staking assets that could also be used to provide more liquidity to Ether and also to loop strategies, bootstrap all of the lending markets. So basically, only this whale, this $10 billion whale could take DeFi to the next level. You know, this whale could deposit this liquid staking derivative on a protocol like AB, borrow all type of other tokens and do strategies with those Tokens.
Only this player could have, you know, they could have their own liquid staking token and be a big competitor to Lido, for example. And this is just a start. If they tokenize their stock of their, they could tokenize their debt. That would be a big bootstrapping, you know, to these markets. Also, a large player, a $10 billion player could bootstrap the insurance vertical of DeFi that today one of the most important players is Nexus Mutual, a project we manage here, manage their treasury. They need liquidity to make it make their offerings more competitive. So basically, every DeFi vertical needs more liquidity to be more competitive. So, we see that all of these bootstrapping of the DeFi ecosystem will of course be definitely translated to ether price creating this flywheel effect for the same treasury companies His main goal is to increase their holdings.
Lex Sokolin:
I hope that the loop works, and I think we finally have the Enterprise Ethereum Alliance that we've all been hoping for since 2016. Yeah, exactly. Marcelo, it's been fantastic to have you on today. If our listeners want to learn more about you or about KPK, where should they go?
Marcelo Ruiz de Olano:
You can visit our website, KPK.io
Lex Sokolin:
Thank you so much for joining me today.
Marcelo Ruiz de Olano:
Thank you. It was a pleasure.
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