How To Make DeFi Great Again | Adrian Cachinero Vasiljevic & Luca Prosperi

Watch on YouTube ↗ | April 13, 2026 at 12:01 | 1:26:46 | Empire

Speakers

Luca Prosperi — Head of Content, The Block

Adrian Cachinero Vasiljevic — Co-Founder, Enzyme Finance

Santiago Santos

Summary

Adrian Vasiljevic (Steakhouse) and Luca Prosperi (MZero) join Santiago Santos to dissect the current state of DeFi, focusing on persistently low lending yields. They debate whether prime overcollateralized lending vaults are efficiently priced near the risk-free rate or inadequately compensate for smart contract and tail risks. The conversation explores the structural reasons for low demand, the borrower/lender risk asymmetry, and forward-looking solutions like fixed-rate terms, insurance primitives, and prediction markets. Both guests remain committed to building DeFi infrastructure but emphasize playing to crypto's unique strengths rather than recreating all traditional finance on-chain.

Debate on whether current low DeFi lending yields (near risk-free rate) adequately compensate for smart contract, hack, and market risks.
Analysis attributes low yields to excess supply of capital, lack of borrowing demand, and DeFi's 'brutal' instant liquidation mechanisms for borrowers.
Distinction made between 'crypto guarantees' (simple, immutable overcollateralized lending) and 'social guarantees' (more complex, risky lending).
Discussion of potential solutions: fixed-rate term structures, insurance protocols, and better risk pricing frameworks.
Highlight of prediction markets as a promising primitive for expressing uncorrelated, long-dated risk in crypto.
Critique that DeFi excels at margin lending/trading but struggles with complex credit (e.g., private credit, mortgages).
Regulatory constraints preventing stablecoins from streaming risk-free yield on-chain identified as a market inefficiency.
Recurring 'bi-weekly 10 sigma' hack events (e.g., Drift) increase the cost of capital for DeFi and highlight operational security as a critical vector.

Trade Ideas

Luca Prosperi Head of Content, The Block 11:34

Prime vault yields are too low for the risk.

Prime vaults (overcollateralized Bitcoin/ETH lending vaults, e.g., on Morpho) offer yields too close to the risk-free rate and do not adequately compensate lenders for the underlying risks, which include market risk (volatility gaps), smart contract risk, hack risk, and operational security risk. The current low yields are driven by an imbalance of excess supply over demand and the protocols being 'brutal for the borrower' with instant liquidations, requiring low borrow rates to attract users. A fair spread above risk-free should be several hundred basis points.

Adrian Cachinero Vasiljevic Co-Founder, Enzyme Finance 38:37

DeFi fixed-rate lending should yield above variable.

The fixed-rate term lending structures being experimented with (e.g., in Morpho v2) should, in an efficient market, settle at a yield above the variable rate to compensate lenders for the borrower's protection against instant liquidation (i.e., the 'phone call' restructuring benefit). This presents a developing opportunity in DeFi term structure.

Luca Prosperi Head of Content, The Block 69:43

Bitcoin as insurance reserve reduces volatility.

Bitcoin's volatility could decrease and its long-term value increase if it becomes a reserve asset for long-dated balance sheets like life insurance companies, which have a multi-decade investment horizon and would be uncorrelated, patient buyers. This would change Bitcoin's price behavior from being dominated by traders and arbitrageurs.

Luca Prosperi Head of Content, The Block 75:15

Prediction markets are a great uncorrelated risk primitive.

Prediction markets are a superior primitive for expressing and hedging uncorrelated, long-dated risks, which is a major need in crypto currently dominated by short-term, correlated trading assets. They represent an area where crypto's permissionless, global distribution channel is a clear advantage over traditional finance.

Luca Prosperi Head of Content, The Block 83:03

Stablecoins should stream risk-free yield on-chain.

Stablecoins should be allowed to stream the risk-free rate (e.g., from treasury holdings) directly to holders on-chain. Current regulation prevents this, forcing the risk and search for yield onto DeFi protocols and retail users. Enabling this would repricing the entire DeFi yield curve and make markets more efficient.

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This Empire video, published April 13, 2026, features Luca Prosperi, Adrian Cachinero Vasiljevic discussing Prime Vaults (e.g., Morpho prime vaults), DeFi Fixed-Rate Lending Protocols, BTC, Prediction Markets sector, USDT. 5 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Luca Prosperi, Adrian Cachinero Vasiljevic · Tickers: Prime Vaults (e.g., Morpho prime vaults), DeFi Fixed-Rate Lending Protocols, BTC, Prediction Markets sector, USDT