IOSG: DeFi Is Rising, Users Are Falling—Who Is the “New Species” Curator Bridging the Gap?
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IOSG: DeFi Is Rising, Users Are Falling—Who Is the “New Species” Curator Bridging the Gap?
In the long term, Curator is not the endgame of DeFi, but it is nearly an unavoidable layer before DeFi scales to a significantly larger user base.
Navigating Web3 tides with focused insightsAuthor | Danny, IOSG
1. The Rise of the Curator Model
DeFi activity levels have rebounded to near “DeFi Summer” intensity—but on-chain stablecoin supply continues expanding. This signals that more capital is flowing onto-chain, while DeFi’s product forms remain difficult for broader users to understand, adopt, and distribute.
▲ DeFi TVL, Source: Defillama
▲ Stablecoin Market Cap, Source: Defillama
Over the past few years, DeFi infrastructure has solved accessibility and composability—yet it has also evolved into an extremely high-difficulty game. For ordinary users, even a seemingly simple stablecoin yield strategy may involve layered components: lending rate spreads, multi-tier incentives (funding rates/airdrops), structured products (e.g., Pendle), and leveraged loops.
▲ USDE AAVE Pendle Loop
Risks have long transcended smart contract hacks, evolving instead into mutually amplifying threats: loan-to-value (LTV) ratios, liquidation liquidity, and oracle failures. For example, in October 2025, an internal oracle failure at Binance caused a brief flash crash in USDe price on its platform, triggering cascading liquidations.
DeFi is undergoing a “counterintuitive” evolution: as technology matures (upward), user comprehension costs and risk-assessment difficulty rise sharply (downward). When individuals can no longer identify *whose money they’re earning* or *where the risks lie*, DeFi growth hits a ceiling.
The Curator role emerged precisely to address this distribution challenge. There is no direct Chinese equivalent; “strategy architect” captures its essence better than literal translation. As yield provisioning and risk-pricing authority shift away from protocols themselves, Curators become the encapsulation layer bridging complex protocols with broad capital pools.
2. What Does a Curator Business Actually Do?
In Morpho-style architectures, protocols provide neutral infrastructure—while Curators determine which assets are available, their risk profiles, and day-to-day management. They shoulder three core responsibilities:
Strategy Selection
A Curator’s value lies in distinguishing structurally sound yields from fleeting opportunities. Strategies aren’t deployed once-and-for-all—they must adapt continuously to changing fund size and risk exposure. Even identical USDC strategies produce vastly different outcomes across Curators during extreme market conditions—the critical difference being whether the Curator possesses sustained judgment and dynamic leverage contraction capability.
Risk Pricing
Within modular systems, Curators—not protocols—ultimately define risk exposure. Decisions about acceptable collateral types and maximum leverage levels are, fundamentally, risk-pricing decisions. Curators hold pricing authority—not just execution authority. Even top-tier Curators make mistakes: Re7 Labs suffered erroneous user liquidations due to delayed price updates from its relied-upon Pyth oracle. This underscores a stark reality: today’s largest systemic risk stems precisely from such dependencies.
Productized Distribution
For end users, productized Curators offer a single, unified interface for entry and exit. For frontends (CEXs/wallets), they deliver non-custodial, clearly risk-labeled yield modules. They do not compete with protocols for users—instead, they help capital locate risk structures it can both understand and tolerate.
Curator businesses operate as AUM-driven asset management ventures. Because revenue scales tightly with AUM, strong incentive tension arises: growing AUM boosts income, but overly rapid expansion erodes strategy capacity and magnifies tail risk.
Market cycles directly shape Curator behavior. During bull markets, Curators prioritize capital efficiency—leveraging, stacking incentives, and deploying looped structures. Borrower demand rises, beta masks risk, APY climbs, capacity expands—but so does risk.
During sideways or bear markets, strategies revert to genuine yield sources: lending spreads, RWA cash-flow assets, and low-correlation allocations. Real yield outweighs leveraged or airdrop gains; defensive capability supersedes offensive ambition.
▲ Defillama: Curator
3. Evolution of Distribution Paradigms: Institutional Adoption & Retail Future
Total TVL of Risk Curator Protocols ≈ $5.68B
AUM is highly concentrated: Steakhouse Financial ≈ $1.55B, Gauntlet ≈ $1.23B—the top two alone command nearly 50% market share, reflecting a classic power-law distribution.
As Curator-managed AUM surges (annual growth ~2000%), their role has evolved from strategy executors to central nodes governing DeFi risk and liquidity.
▲ Curator AUM, Source: Defillama
Per DefiLlama data as of February 2026, total Risk Curator TVL stands at ~$5.9B, with Steakhouse Financial ($1.53B), Sentora ($1.34B), and Gauntlet ($1.29B) collectively holding nearly 70% market share—exhibiting pronounced concentration. This implies that any systemic misjudgment in strategy or parameter settings by top Curators would ripple far beyond individual protocols.
Looking ahead, Curators will not converge into a single archetype—but rather diverge into at least three distinct types:
Type I: Capacity-First Curators
These Curators prioritize scalability and low volatility. Their strategies emphasize sustainable yield sources—lending spreads, stable incentives, and RWA returns—while stressing conservative, interpretable parameters. They integrate readily with CEXs, wallets, and fintech frontends, forming the dominant vault model across Morpho today. Some protocols even embed deeply into the vault tech stack, helping build institution-friendly Curator businesses from the ground up.
Many large-capacity Curators act primarily as borrowers—re-distributing their managed AUM to other Curators (discussed next) who pursue more diverse yield sources and aggressive strategies. They decide *who receives the loans*, thereby generating additional yield on their own AUM. Effectively, they become “Curators of Curators,” collaborating closely with opportunity-driven Curators described later.
For institutions entering DeFi, the choice now pivots between building in-house Curator operations or partnering with leading Curators. Morpho—with its open, modular architecture—is emerging as the preferred infrastructure for institutional Curator builds. Bitwise exemplifies this trend: in January 2026, it launched a non-custodial vault Curator service on Morpho, operated entirely by its internal team—marking a pivotal shift from DeFi *user* to DeFi *builder* among professional asset managers.
Coinbase, meanwhile, chose another path: outsourcing the backend of its lending products (USDC lending and borrowing against XRP, ADA, etc.) to third-party Curator Steakhouse Financial—operating on Morpho. Its frontend retains the familiar fintech interface, while the backend runs on DeFi—what’s dubbed the “DeFi Mullet” model.
▲ Coinbase DeFi Mullet
Institutional participation is accelerating rapidly. Apollo Global Management—managing over $938 billion in assets—signed a strategic partnership with Morpho in February 2026, committing to acquire up to 9% of $MORPHO governance tokens over four years. Apollo’s approach is twofold: First, its credit funds have been tokenized via Securitize and Anemoy into RWA assets like ACRED and ACRDX, curated onto Morpho’s lending markets by top Curators including Steakhouse. Second, by holding governance tokens, Apollo directly shapes the future of on-chain credit infrastructure.
That same month, Taurus—which provides custody services to over 40 banks—integrated Morpho into its custody platform, enabling traditional financial institutions to allocate capital directly to Morpho Vaults within existing regulatory frameworks, with Curators managing those funds outright. The question for institutions is no longer *whether* to enter DeFi—but *at what level*.
Type II: Opportunity-Driven Curators
These Curators focus on novel structures, new assets, and early-incentive windows—willing to sacrifice scale and accept higher risk for superior alpha. Hallmarks include explicit AUM ceilings, short strategy lifecycles, high volatility tolerance, and targeting professional capital or DeFi-native communities. They pioneer emerging L1/L2 ecosystems—for instance, launching vaults immediately upon the launch of new chains (e.g., Hyperliquid, Plasma, Monad, Megaeth), leveraging deep expertise to capture one-off early rewards like airdrops and high-yield liquidity mining incentives.
Beyond chain launches, they explore new assets, structures, and DeFi primitives. Unlike blue-chip Curators focused on mature assets (e.g., ETH, USDC), opportunity-driven Curators actively incorporate emerging asset classes. Re7 Labs, for example, became the Curator for BlackRock’s BUIDL RWA assets—pioneering large-scale RWA integration into DeFi lending.
Another advantage: acute market sensitivity. They rapidly respond to volatility or specific events for arbitrage—embedding sophisticated logic into strategies, such as cross-protocol interest-rate arbitrage or profit-taking via liquidation mechanisms. Though riskier, these strategies can deliver returns far exceeding market averages.
Type III: Productized Curators
Productized Curators move beyond backend configuration—packaging strategies into Vault-as-a-Service, tokenized assets, or stablecoin-like instruments directly accessible to end users. This path demands exceptional rigor in risk control, transparency, and clearly defined accountability boundaries—but offers the highest distribution efficiency once achieved.
The key challenge: identifying strategies that deliver both high yield *and* large capacity. Nearly all DeFi strategies face strict capacity limits. Take current mainstream looping/basis strategies: their market size has surged to ~$20B (≈10% of DeFi TVL), up from ~$5B just six months ago. As capacity fills rapidly, marginal yields decline sharply—and parameter error margins shrink drastically.
Successfully productizing such Curators enables seamless integration into fintech apps and unlocks Web2 capital—making it a critical step toward mass adoption.
4. Returning DeFi to Users
DeFi’s greatest current challenge is that its complexity and risk exposure patterns have surpassed individual users’ decision-making capacity—causing users to hesitate depositing funds. High-profile collapses like Streamfinance—a yield-bearing stablecoin that abused user funds—combined with bearish markets, have driven down yield-bearing stablecoin TVL, pushing capital back toward conservative lending protocols.
Today, roughly 45% of DeFi TVL (~$56B) chases new yield opportunities—concentrated in protocols like Aave, Morpho, and Spark—yet vast amounts of USDC remain idle. Not due to lack of opportunity, but because strategy comprehension, risk assessment, and dynamic management costs remain prohibitively high.
Most users don’t need more protocol choices—they need:
- Simple, trustworthy entry points;
- Diversified, dynamically adjusted yield structures;
- Clear, understandable risk exposure profiles.
Entry points can be consolidated via vault abstraction or productization. Yield structure quality improves as more high-caliber Curators enter the market. But what currently undermines confidence most is the absence of a healthy, transparent Curator audit framework—including:
- On-chain verifiable asset allocation paths;
- Structurally labeled risk exposures;
- Explicit user exit conditions and pathways under extreme scenarios.
This won’t eliminate risk—but transforms vague systemic uncertainty into intelligible, priceable choices. Without such transparency, Curators risk devolving into shadow banking systems indistinguishable from Celsius or BlockFi. Conversely, if Curators effectively decompose, price, and proactively contain risk at the middleware layer, they become buffers—not amplifiers—for protocol-layer risk, placing overall DeFi risk under professional stewardship.
▲ DeFi Dashboard for Asset Management Transparency
Long-term, Curators aren’t DeFi’s final form—but they’re an indispensable layer before DeFi can scale meaningfully. DeFi has already proven its infrastructure’s viability. What remains missing is a middleware layer capable of packaging, distributing, and embedding those capabilities into real-world usage contexts. Curators are stepping into that role.
Only when complexity is thoughtfully encapsulated, risk explicitly labeled, and accountability boundaries unambiguously defined can DeFi truly fulfill its original promise—not serving only a tiny elite of experts, but becoming a finance system broadly accessible and participatory.
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