#105 | The True Cost of Capital & Why Aave Got Bailed Out w/ @jaibhavnani & @SaulCapital

Is the DeFi lending market fundamentally mispricing risk? In Episode 106, 2lambro and Marco sit down with Jai Bhavnani (Co-Founder of Waymont and contributor to Royco Protocol) and Saul (Yields and More / Re) to diagnose the awkward "teenage phase" of DeFi. We break down the massive Aave/Kelp DAO situation and the resulting negative carry trap. We also debate whether Aave is now officially "too big to fail" following the massive community bailout. Plus, we dive into the 12% "fair value" interest rate debate, exploring how off-shore Chinese whale capital is artificially suppressing on-chain yields. Finally, we explore how risk tranching and uncorrelated Real World Assets (RWAs) are creating the next frontier of sustainable yields.---------Follow Marco's Twitter https://x.com/ManoppoMarco/Follow Lambro's Twitter https://x.com/2lambro/Read our free newsletter for the next best web3 products, strategies, and trends. Join 17,000+ web3 builders and investors at: https://launchy.app/--------Chapters[01:20] Intro: Jai (Royco) & Saul (Re) Backgrounds[02:58] The Aave & Kelp DAO Crisis: Are Yields Dead?[06:00] How Royco Escaped the Negative Carry Trap[11:44] Is Aave Too Big to Fail? The Bailout Debate[18:19] The 12% Fair Value Yield Debate & Chinese Whale Capital[22:44] The Cheat Code: You Are Secretly Selling Discounted Put Options[25:40] RWA Trends: Uncorrelated Yields vs. Bad Private Credit[28:04] Tranching: How Royco Protects Senior Depositors[34:57] What It Actually Takes to Make It in Crypto------------------------------DisclaimerAll views expressed by the me is solely my opinions. I may maintain positions in the assets discussed in this podcast. This podcast is for informational purposes only and nothing in the podcast is intended to be financial, legal, or even life advice.