$1.1B Stolen in DeFi. Institutions Still Want In

gm, Defiers!

These were our top news today:

• Crypto liquidations near $1B in 24 hours as leverage unwinds
• Base hits Stage 2 with multiproofs, 99% fewer empty blocks
• Vitalik endorses Interfold, ZK+FHE privacy stack for voting and auctions
• Tempo L1 hits 3.9M transactions in two months, $25M+ stablecoin supply

It was a bit of a slow news day, but the standout for me was the livestream discussion we held on @DefiantNews X this morning: Are Institutions still coming to DeFi after the latest string of hacks?

As we reported yesterday, Manuel Araoz, the co-founder of OpenZeppelin, the security shop which reviewed Aave, Compound, and Maker, posted that he now considers "all of DeFi unsafe," arguing that AI coding agents have turned vulnerability-hunting into a game defenders structurally can't win. The backdrop is ugly: roughly $630M drained across 27 exploits in April alone, $1.1B over twelve months, KelpDAO down $292M to Lazarus, Drift down $285M.

So I sat down with John Zettler of Kraken, Sun Raghupathi of Veda, and Anthony DeMartino of Sentora, three people whose entire business is convincing institutions to route capital into this stuff, and asked: Are your phones ringing with panic, or worse, is it just crickets?

The opposite, it turns out.

"My phone has been blowing up since our launch," Zettler said of Kraken's new Bitcoin vault, which crossed $60M in TVL within a day. Sentora's DeMartino said his firm "landed three deals in the last five weeks," during the worst stretch of hacks, when he'd expected a pullback. "The conversations have heated up, not slowed down since the incidents in April. The coincidence is hard to explain."

Here's my attempt to explain it: The hacks aren't deterring institutions because they changed what kind of risk DeFi is.

As Sun put it, "risk is now moving from the smart contract layer into the operational layer." Almost none of the recent disasters were broken math in a contract. They were compromised keys, phishing, a permissioned role handed to the wrong wallet. Araoz is right that audits are a snapshot. But operational risk is the one kind of risk TradFi already knows how to price. SOC 2, custody standards, segregation of duties, who can touch what, key management. This is their native language.

In other words: The kind of risk institutions are seeing in DeFi right now is more legible than smart contract exploits. They see a way out of the current weak state. They're solvable problems — the kind of issues an asset manager's compliance team has managed for decades.

In the end, Treasury Secretary Scott Bessent projecting $3 trillion in stablecoins by 2030 is landing harder in a JPMorgan boardroom than any hack headline. DeFi and crypto rails feel inevitable, so right now the overwhelming sentiment is FOMO. Fintechs, banks and asset managers are realizing they better get their crypto act together now or be left behind. As Sun said, "the train has left the station," so they'll get on board and make sure the diligence team is extra careful.

The bittersweet part is, the natural customer of DeFi is no longer the degen. It's the neobank. We're entering, as one panelist put it, crypto's "collared shirt era."

Out of mom's basement. Not yet in a suit. But the diligence calls aren't stopping.

With love,

Cami, The Defiant founder

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WATCH

🟢 LIVE: Is it Over for DeFi?? w/ Kraken, Veda, Sentora

Camila Russo sits with John Zettler, product director at Kraken; Sun Raghupathi, co-founder and CEO of Veda; and Anthony de Martino, co-founder and CEO of Sentora — the team behind the new Kraken Bitcoin Vault that routes BTC to Morpho and Aave — on whether the recent string of exploits has changed what institutional DeFi exposure looks like.

MARKETS

Crypto Liquidations Near $1 Billion in 24 Hours as Leverage Unwinds

Crypto markets liquidated $934 million across 167,400 trader accounts in 24 hours, with Bitcoin and Ethereum carrying the heaviest losses. The unwind landed during a broader leverage reset; BTC traded near $73,600 (-1.1%) and ETH near $2,013 (-0.5%) as the cascade cleared. The scale puts the event in the same band as October 2025's $1.7 billion wipeout and the November 2025 $2 billion overnight reset.

Why this matters: The damage so far is confined to perpetual-futures leverage. Spot prices held within trend, no major lending protocol reported bad debt, and curator-led vaults on Morpho and Aave absorbed coverage without socialization. That is the operational metric editors should track over the next 48 hours — a clean liquidation unwind on the leverage side does not translate to a clean test until the bad-debt scenarios stay closed.

BLOCKCHAINS

Base Launches Azul Upgrade, Takes Step Toward Stage 2 Decentralization

Base activated the Azul upgrade on mainnet, combining TEE and ZK proof systems into a multiproof architecture and cutting empty blocks by 99%. The dual-proof model is a step toward Stage 2 decentralization in Vitalik Buterin's L2 maturity framework — the stage at which the sequencer and proof systems no longer rely on a single trusted operator. Base is the largest Coinbase-incubated L2 by activity and the first major rollup to wire multiproofs into production.

Why this matters: Stage 2 has been the L2 ecosystem's stated destination for two years and the actual destination for none. Base reaching it via multiproofs gives other L2s — Arbitrum, Optimism, zkSync, Scroll — a working architectural template they can copy. It also tests whether Coinbase, the original incubator, can credibly let go of operator control. If Stage 2 holds in production, the L2 trust assumption finally matches the L1's.

PEOPLE

Vitalik Buterin Endorses Interfold, Privacy Protocol for On-Chain Voting and Secret Auctions

Vitalik Buterin publicly endorsed Interfold, a privacy protocol that combines zero-knowledge proofs, fully homomorphic encryption, and threshold encryption for on-chain voting and secret auctions. The stack lets participants reveal that their inputs satisfy rules without exposing the inputs themselves — the property that has been missing from on-chain governance and sealed-bid market designs. The endorsement follows last week's Kohaku Initiative wallet-privacy SDK release.

Why this matters: The Ethereum Foundation's 'subtraction' mandate names privacy as one of the four CROPS pillars, and Vitalik picking specific protocols to publicly endorse is the operational expression of that mandate. Interfold extends the privacy stack from confidential payments (Aztec, Tornado-style mixers) into governance and auction design, which is where institutional users actually need it. Production deployments are the next milestone.

BLOCKCHAINS

Tempo L1 Hits 3.9M Transactions in Two Months

Tempo, the payments-focused L1 backed by Stripe and Paradigm, has settled 3.9 million transactions across 177,000 addresses since its March mainnet launch. Stablecoin supply on the chain crossed $25 million, and full Dune Analytics integration is live for usage tracking. MoneyGram joined earlier in May as the chain's anchor remittance validator.

Why this matters: Two months in, Tempo's transaction count places it among the more active payments-purpose chains, behind Stellar and Solana but ahead of newer L1 launches. The relevant metric for a payments chain is settlement consistency under load, not TVL — and Tempo's tuning for stablecoin transfers, with DeFi composability deprioritized, is showing up in the usage profile. MoneyGram as validator is the institutional credibility signal.

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• DTCC Picks Stellar for Tokenized Securities Rollout as Multi-Chain Push Expands
• Kraken Launches Bitcoin Vault Earning Product Offering up to 2.5% BTC Rewards