What fresh insights does Andre Cronje (AC) bring to the evolution of Web3 upon his return to DeFi?

In the fast-paced and uncertain world of decentralized finance (DeFi), Andre Cronje’s name carries significant weight. Known as the driving force behind projects like YFI, Solidly, and Fantom, AC is now pushing boundaries again as CTO of Sonic. His contributions have left an indelible mark on the frontier of crypto finance.

In this episode of The DCo Podcast, AC openly shares his perspective on the bottlenecks facing DeFi, the challenges within the Ethereum ecosystem, and the brutal realities builders must face in a world where idealism and profit-driven motives collide.

From navigating regulatory battles to striking a delicate balance between decentralization and user experience, his insights serve as both a cautionary tale for industry builders and inspiration for those who still dream of a decentralized financial future.

Below is the full interview:

01 Tackling the Regulatory Challenges Around Crypto Assets

The DCo Podcast: Welcome to the show, Andre. You’re well-known for creating Yearn Finance, Solidly, and Fantom, and now you’re the CTO of Sonic. The past few years have been a wild ride for crypto. Can you share what the last three years have been like for you—especially the challenges you’ve faced and how you’ve dealt with them? I imagine you’re more focused on coding now than dealing with regulatory issues.

Andre Cronje: Thanks for having me. Honestly, I wish I could say I’m purely focused on coding, but regulatory and legal issues still consume a significant portion of my time. The past four years have been a steep learning curve. I had to deal with events like the Eminence exploit, which was a major lesson in building in public. Then, with the Solidly project, I came to realize the crypto landscape was shifting—people were becoming less concerned with true decentralization or immutability.

On top of that, even though I’m just a guy developing locally in South Africa, who didn’t raise funds or sell tokens, I ended up having to deal with the SEC. They sent me tons of letters and requests—it was exhausting. I learned a lot and grew from the experience, but it was definitely tough. Do you want to dive into anything in particular, or should we keep it broad?

The DCo Podcast: I’m really curious to hear more about how you handled all those SEC letters. Did you have legal help? How did you navigate that process, especially since it sounds incredibly overwhelming at the beginning?

Andre Cronje: At first, I was quite naive. The initial letters seemed simple—just requests for information, but with implied threats that things could escalate if I didn’t cooperate. They asked questions like, “Who did you sell tokens to?” The answer was straightforward: I didn’t sell any to anyone. Or, “How do you make money from the protocol?” Again, simple: I don’t.

I thought that would be the end of it. But the second letter was more detailed, and by the fifth or sixth one, it became clear that they understood DeFi, tokens, and how these systems worked. It felt like they were trying to catch me making a mistake, not actually seeking information.

By the third letter, I realized I needed help. I hadn’t raised any funds, so I had to rely on my network. I reached out to Gabriel from Lex Node, a prolific crypto lawyer who had worked with many DAOs. He was fantastic and very supportive. Through him, I got in touch with Steven Palley, another veteran in the field who really knew his stuff.

Gabe handled most of the early work, and Steven became heavily involved later on. They were critical, because it wasn’t just about what information you provide—it’s about how you phrase it. You have to use specific legal language to protect yourself.

The focus of the investigation evolved over time. Initially, they were concerned with tokens—whether I had sold them, and to whom. When they found no angle there, they shifted to how I might be earning from the protocol. When that also didn’t stick, they argued that the treasury itself constituted a security, citing the Howey Test, saying that users were contributing funds to a third party with the expectation of profit. It was frustrating, because they often asked me to prove a negative—like proving Santa Claus doesn’t exist. You simply can’t definitively do that.

The letters stopped because of the upcoming election. About six to eight months before the election, I got the last one. A month ago, I received a final letter saying they were not taking any further enforcement action, which was a huge relief. But the time and energy it consumed was insane.

For a while, I did nothing but collect data for them for three weeks straight—sometimes information I didn’t even have, like logs from third-party custodians I never used. That level of drain made it almost impossible to do anything else.

02 The Evolution and Stagnation of DeFi

The DCo Podcast: That sounds incredibly intense. You previously mentioned decentralization and hinted that people aren’t prioritizing it anymore. Do you think there’s an inherent conflict between running a crypto project as a sustainable business and keeping it decentralized? Is that why we’re seeing less emphasis on decentralization these days?

Andre Cronje: It totally depends on the market participants. Back when I launched Yearn, decentralization, self-custody, and immutability were critically important. The market was full of techno-anarchists—purists who were in it for the ideology, not for making millions. That old joke, “I’m in it for the tech,” was completely sincere back then.

But the participant base has changed. Yield farming, the NFT boom, and now meme coins have lowered the entry barrier. You don’t need to understand the tech anymore—just install a wallet, tap a few buttons, or log into an app with your fingerprint. I’d say 90% of the market today doesn’t share the original technical ideals. They’re here for token appreciation or yield—not the philosophy.

That creates a mismatch. If you’re building foundational DeFi primitives—things others will build on top of—they must be immutable. You can’t have someone build a business on your primitive and then you go and change it, causing their system to break. For example, 90% of DeFi still relies on Uniswap V2 because it’s predictable and immutable. If Uniswap had made V2 upgradeable via proxy and changed the LP logic overnight, DeFi would have collapsed.

Andre Cronje: These days, projects have become more siloed. Everyone is building their own AMM or lending market instead of using third-party primitives, because those third-party systems are often upgradeable. If you build an immutable product that depends on an upgradeable system, your product might break when they push an update. So composability and reliance on third parties have taken a backseat.

The market has shifted from building immutable, composable primitives to creating companies focused on revenue or token value. It’s a snowball effect: the more projects prioritize revenue, the fewer immutable infrastructure options remain to build upon, which in turn pushes more projects to follow suit. Back in 2019, I wrote that we vote with our money. Where we put our capital determines what gets built. In early 2021, people flocked to Uniswap and Compound forks because they were seen as “safe.”

New primitives are riskier—they have higher chances of getting hacked or exploited—so innovation has stalled. That’s also why memecoins are so popular right now. Since 2022, DeFi innovation has largely stagnated. We’ve built better products, like Hyperliquid, but those are iterations of existing primitives—not fundamentally new ones.

The DCo Podcast: You previously mentioned that DeFi innovation has stagnated and composability—building on top of other products—has diminished. With liquidity being siloed, things like using an asset as collateral across protocols have become harder. Is there enough incentive to break out of this isolated approach, and how might we achieve that?

Andre Cronje: This might sound a bit arrogant, but the issue is that you need a rare combination of skills: someone who can code, who can come up with genuinely novel ideas and primitives, and who doesn’t need external funding. That intersection is incredibly small. I can use myself as an example, but it’s very rare. Most builders need funding—but raising capital and building are entirely different skill sets.

I’ve tried fundraising—it’s not my strength, so I chose to build without financial backing. Others have brilliant ideas but struggle with pitching or networking. Meanwhile, you’ll see the 99th fork of a project raise $50 million overnight just because they know the right people.

Real builders struggle to get the funding they need. Most people can’t afford to go six months without income to pay their bills. Hyperliquid is an exception—they didn’t raise funds because the team had previously run a successful market-making operation, giving them the resources to build and even run a massive airdrop.

But when you raise funds, you deal with VC pressure. VCs want ROI—they’re not investing because they believe in your vision. That’s their job, and it creates a misalignment of goals.

Historically, in traditional finance or Web1/Web2, companies would build stable businesses and spin off small R&D teams to test new ideas. We’ve seen a bit of that in crypto—like Aave launching GHO, Lens, or Family—but it’s not enough. The social and reputational risks are too high. If a sub-product gets exploited, even for just $50, headlines will scream that the main project was hacked. The risk-to-reward ratio is totally skewed.

So it’s a tough problem, and there’s no immediate solution. Most developers are already crazy enough to try—dealing with exploits and reputation damage requires a bit of a masochistic streak.

The DCo Podcast: Let’s circle back to DeFi primitives. You mentioned you’re working on new ones. Where do you think DeFi stands in terms of its foundational building blocks, and what immediate primitives can we build to push the space forward?

Andre Cronje: DeFi is still in its early stages. Even fundamental primitives like Automated Market Makers (AMMs) are far from perfected. We’re still using constant product formulas like X*Y=K. Curve Finance introduced stable swaps, and I brought in the X3Y model with Solidly—but innovation has mostly stagnated there.

With blockchain speeds improving, we’re starting to see the emergence of Dynamic Liquidity Market Makers (DLMMs), which is a step forward. There’s still a lot of work to be done with AMMs—new curve models, trading mechanisms, and liquidity provision strategies.

The next major breakthrough will be on-chain oracles. DeFi has traditionally avoided them due to fears of exploitation, but they can be made safe with alternative implementation methods. Without oracles, we lack critical data like volatility, implied volatility, or order book depth. Once we have robust on-chain oracles, we can build proper pricing models, run Black-Scholes calculations, and enable European or American-style options. This will unlock on-chain perpetuals and delta-neutral strategies—both of which are currently not feasible.

Just look at traditional finance: futures and options dominate, but they’re almost non-existent on-chain. The roadmap is clear—you need the data first. Yet no one wants to build that, mostly out of fear. But it’s possible to implement highly secure, entirely on-chain solutions, or to use off-chain oracles with zero-knowledge proofs or decentralized methods to avoid trusted intermediaries.

Beyond that, we still lack solid insurance primitives. DeFi has vast untapped territory. This is still the early phase, and if we can overcome our fear of innovation, the potential is enormous.

03 Balancing Decentralization and User Experience

The DCo Podcast: Do you think user experience (UX) and decentralization are inherently at odds? Is that part of the challenge?

Andre Cronje: Absolutely—100%. True decentralization means no websites, no third-party browsers—just downloading node software, running a local node, and using a command line interface (CLI) to submit transactions and interact with immutable smart contracts. That requires deep technical knowledge—syncing software, encoding transactions in base-64 hash formats, not just calling JSON RPCs. Globally, maybe only 10,000 people can do that, maybe even fewer.

On the flip side, a great UX means users don’t have to think about private keys or gas fees. Look at successful Solana apps: you download a mobile app, log in with Google or Face ID, and tap a button. That’s miles away from decentralization—it’s an entirely different thing.

Today’s successful apps hide more and more from the user—for example, managing private keys on their behalf. Hyperliquid is excellent, but once you deposit funds, it’s no longer decentralized. Your assets are held in a wallet they control, and the private key is stored on their servers. It’s a great user experience—but it’s centralized.

My approach is to build for the decentralization ideal first—raw on-chain contracts that CLI users can interact with on their own nodes. Then I add abstraction layers on top: a simplified API that removes the need for wallet passkeys or abstracts away gas fees. Eventually, you get a UI where a user just clicks a button, and behind the scenes, it converts their action into a smart contract transaction through an API and signing wallet. \
Andre Cronje: This is the “correct” way to do things—but for the small number of people who can use the CLI, it demands a massive amount of supporting infrastructure, which can feel futile. Decentralization and UX are like security and UX—real security requires complex passwords, isolated systems, and key rotations, but no one’s doing that for a free mobile game. Historically, when security and usability clash, usability always wins. The same will happen with decentralization.

The goal is for users not to even know they’re using a blockchain—no wallet, no gas fees. Right now, this is being achieved through centralized workarounds, like APIs or backend servers. But I believe we can eventually make these features first-class citizens of the blockchain, allowing users to enjoy great UX without having to trust third parties.

At present, we implement these things manually through centralized solutions, but eventually, we’ll codify them into decentralized systems. It’s like when I first started programming: do things manually first, then automate them. We just need time.

The DCo Podcast: Two follow-up questions: First, how do we achieve that decentralized yet user-friendly future? And second, if decentralization and UX are in conflict, where do you draw the line—when would you sacrifice decentralization for a better user experience?

Andre Cronje: I’ll answer the second one first. The boundary depends on what the user is willing to tolerate, and that varies by application. For a free mobile game, users expect zero friction—install and play. If they’re asked for a username, password, or social account link, they won’t bother because the perceived value is low.

But for a banking app with $100,000 in it, users are okay with 2FA or extra steps because the value is high. Every app has to find that balance point based on the psychological value the user assigns to it.

Right now, crypto apps don’t offer many choices. Whether it’s a game or a DeFi protocol, you still need to download a wallet, secure your keys, fund it with gas, and sign messages. That’s a huge barrier. We saw a similar pattern in cybersecurity in the mid-2010s—sites demanded 32-character passwords with symbols, but users would forget them, and resets were painful. Eventually, apps let users choose their own security level while providing some backend protections. Crypto will evolve similarly.

For the first question—how do we get there—we need builders who are willing to execute. Ethereum has long been a leader, and its research, such as Ethereum Improvement Proposals (EIPs), has laid out a roadmap for the next five years. Features like transaction bundling and account abstraction are steps in the right direction, but they’re not yet first-class citizens—you still need third-party infra or deep knowledge to use them.

The upcoming PCRA upgrade will make them native features, which is critical. The roadmap already exists; the key is execution. But few teams are willing or able to pull it off. Ideas are cheap—execution is everything. I believe this year we’ll see major progress, like fully on-chain gas and account abstraction, meaning no need for a wallet or gas at all. That’s a massive leap in UX—users won’t need to know what blockchain they’re on or use MetaMask. It’s coming, maybe this year or next. The roadmap is clear.

04 Ethereum’s Challenges and Advice for Developers

The DCo Podcast: You mentioned Ethereum earlier. What’s your take on its current state? There’s been a lot of criticism that it lacks direction, focus in execution, or that Layer 2 (L2) scaling has fractured the ecosystem.

Andre Cronje: I’ve always been outspoken in saying that L2s are a waste of time and effort. The resources and capital poured into them reflect the same misalignment issue I mentioned before—we vote with our money. When only forks of known apps get funded, that’s all we end up seeing. Now L2s are absorbing capital, but while claiming alignment with Ethereum, they’re becoming increasingly centralized.

My issue isn’t with L2s existing—I think they’ll ultimately be necessary for scaling. But Ethereum is nowhere near its scalability limit. It’s probably only using 2% of its maximum capacity. There’s still a lot of room on the base layer. Chains like Sonic, Avalanche, and Solana have shown that you can achieve high throughput at the base layer without L2s. The current focus on L2s is premature—it fractures the ecosystem and harms composability and UX.

L2s were supposed to be composable and interoperable, but they’ve become silos—sidechains with centralized sequencers extracting MEV for profit. That’s not the original vision. The bigger question is why this happened. Ethereum is following the typical lifecycle of a company: initially nimble, fast-paced R&D, lots of experimentation. But as it gained attention and grew, it became more cautious—adding compliance, oversight, testing, committees, and boards.

This bureaucracy has slowed it down to the point of stagnation. It’s now too large to move quickly. At this stage, an organization either strips down and refocuses on its technical roots or gets overtaken by faster competitors. Ethereum is at that crossroads. We’re seeing internal tremors—CEO changes, board reshuffles, Vitalik trying to steer things. I hope they find their focus again, because I’m loyal to Ethereum; it’s why I’m in DeFi. But we can’t sit around waiting for them to sort it out.

Their research—especially the Ethereum Improvement Proposals (EIPs)—still sets the bar for the next two to five years, particularly in UX, account abstraction, and on-chain oracles. But most of it was written between 2018 and 2020. The ideas are there; implementation is lagging. On scalability, Ethereum’s base layer is using just 2% of its capacity. Even without L2s, there’s massive room for growth.

My work on Phantom—now Sonic—proved this. Back when Ethereum used Proof of Work, we noticed its throughput was limited by block time constraints. We redesigned the consensus mechanism using asynchronous Byzantine Fault Tolerance (BFT), achieving 50,000 to 60,000 transactions per second. But the Ethereum Virtual Machine (EVM) became the bottleneck, capping us at around 200 transactions per second.

We analyzed the EVM and identified clear areas for improvement. The biggest issue is the database—LevelDB, PebbleDB, etc.—which spends most of its time on read and write operations. These databases are overkill for blockchain; they were designed for general-purpose queries, not for the simple address-nonce-data structure that the EVM uses. We built SonicDB, a custom flat-file database for blockchain, which increased the EVM throughput by eight times and reduced storage requirements by 98%. Ethereum could implement this tomorrow and see huge gains.

We also made other adjustments—new compilers, supersets, etc.—but the database change was the easiest win. Why haven’t they done it? Because they’re risk-averse. Their tech handles billions of dollars in assets, and any change is scary. The trade-off is losing SQL query functionality, but in reality, no one uses SQL queries on large-scale blockchain data—tools like Dune or Tenderly process individual transactions. It’s not a real loss, but Ethereum is so resistant to change that even low-risk improvements are being shelved.

The DCo Podcast: You’ve mentioned ideas like on-chain credit scores, which we can dive into next time. But finally, what’s your most important advice for new builders in this space?

Andre Cronje: My advice has evolved over time. Honestly, developing in the crypto space isn’t the smartest choice—it’s more complicated, less secure, and with greater potential negative impacts than other fields. But if you decide to go for it, build in public. Share your work on Twitter, open-source your GitHub, let people see and test your code. Build a community of contributors, not just a community of people exploiting vulnerabilities.

If exploits are inevitable, it’s better for them to happen early, when the risk is only $50, rather than later when the risk could be $50 million. Build your social profile, communicate what you’re doing and how you’re doing it, and invite testing—hopefully white hats, not black hats. Small vulnerabilities can be fixed; big ones cannot.

If you can secure funding, prioritize security. Work with teams like TRM, Chainalysis, or Seal Team 6 to do audits and red team exercises. Audits from companies like SlowMist are critical. Learn how to handle security disclosures and emergencies as early as possible.

This space isn’t for everyone—some people walk away at the first crisis because the pressure is too much. Building in public is a litmus test: you’ll know quickly whether you’re cut out for it. Embrace it—you’ll either find your place or realize it’s not for you.

The DCo Podcast: Thanks for your time, Andre. I really enjoyed this conversation, and I hope we can do it again soon.

Andre Cronje: It’s been a real honor. Just let me know, and we’ll do it again.

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