Author: William Peaster

Translated by: Deep Tide TechFlow

Deep Tide Introduction: The crypto gambling business is highly profitable but struggles to retain regular users. EtherFi chooses an anti-gambling approach, integrating stocks, lending, and self-custody into a new banking entry point, which may be a sustainable path for crypto finance to go mainstream.

EtherFi bets against the crypto gambling economy

EtherFi CEO Mike Silagadze believes that the crypto industry does not have a product problem, but rather a distraction problem:

“Look at Pump.fun, centralized exchanges, or even crypto consumer applications like Polymarket; they are all casino 1.0, casino 2.0, just with different facades. 'Come gamble on the weather now.' This is very profitable because gambling is a highly profitable industry.”

In the latest podcast episode, Silagadze made this statement to David Hoffman while outlining the alternatives that EtherFi opposes. EtherFi is a self-custody new bank that is evolving into a de facto new brokerage.

EtherFi clearly aims to be the more boring, more sustainable alternative, seeking to provide genuinely useful financial products that can attract and retain ordinary people. This vision naturally became the driving force behind the platform's summer feature releases, including expanding fiat channels, Aave credit lines, and tokenized stocks.

As David mentioned in the program, EtherFi's roadmap to date consists of a series of gradually unlocked "money verbs," synchronized with the maturity of the Ethereum infrastructure itself. The first step is saving, leveraging liquidity to staked vaults to establish a reputation. The second step is consumption, where stablecoins and the EtherFi card convert these re-staked assets into everyday usable items.

This summer release introduced two new verbs at once: investing and lending.

Investing means that EtherFi's application can now hold tokenized stocks and metals beyond crypto assets, launching xStocks. According to Silagadze, plans are also in place to expand permissionlessly to any assets that emerge on Ethereum in the future. “I believe this is the first time a crypto new bank allows people to trade stocks with the same non-custodial advantages.” he said.

Lending means that EtherFi now has a new Aave V4 market, treating your entire portfolio (crypto assets, stablecoins, stocks, gold, etc.) equally. Users can obtain a single credit line from a collateral pool without needing to borrow separately for each asset. The design of this lending market is also where EtherFi’s anti-gambling philosophy is written into the code. In Silagadze's view, most DeFi lending markets are built for gamblers:

“It’s just a wood chipper. You feed users into it: they lose money, get liquidated, earn a bit back, and then invest more. That’s the casino business model. We cannot treat our users like that, or we will go bankrupt ourselves.”

Therefore, EtherFi intentionally built something more conservative. Regarding this new Aave integration, there are several details worth noting:

A typical Aave market has only one line; crossing that line results in liquidation. EtherFi's market adds an earlier, gentler threshold that only pauses further borrowing, with liquidation being triggered much later. As Silagadze said: “We have a conservative threshold that won’t kill you even if the price fluctuates by 40%, and there’s a much higher threshold that will trigger actual liquidation. We don’t want people coming here to gamble recklessly with leverage. This should be a personal finance tool.”

Additionally, the current market is a single unified pool on Optimism, and there are reports of plans to add a second spoke for more DeFi activity. Deposits are permissionless and open to anyone seeking to earn returns, while external capital effectively funds loans on the other end.

As for the economic model, according to the public Aave governance proposal, the plan is for EtherFi to retain 80% of the revenue generated from its market, with Aave taking 20% as a fee for underlying infrastructure services.

Will this new product succeed? We shall see. But ultimately, the key point is that crypto gambling seems to be leaving the ordinary non-gambler's income on the table. As Silagadze said:

New banking, let alone the entire banking industry, is currently a $300 billion revenue industry. That’s about 300 times DeFi. What we are doing with these gambling things is actually just distraction. The sooner we get past this stage, the sooner the actual returns from cryptocurrency will begin to accumulate.

Similarly, whether the new brokerage model can replace the "casino" as the biggest growth engine for cryptocurrency remains an open question. But EtherFi has spent multiple product cycles refining in that direction. If any team can do it, they currently have the best chance to be the first.

Meanwhile, we can only look to the future, and we have already seen a preview. The next version of EtherFi was teased in the program as “Autumn.” It reportedly aims to implement a social peer-to-peer layer for the application. Silagadze describes the idea this way:

Imagine transferring $10 to someone, and they open it as a fully functional account, without needing a bank account. They can spend it or transfer it to someone else. The monetary unit itself achieves self-sovereignty.

This is quite an interesting idea and is a natural area for EtherFi to expand into next. So now, let’s see if these experiments will translate into deeper adoption of the EtherFi tech stack.