Michael Egorov, Founder of Curve Finance and Yield Basis – Interview Series

Physicist-turned-crypto innovator, Michael Egorov has spent the past decade applying scientific thinking to one of finance’s most persistent challenges: how to make liquidity more efficient.

As the founder of Curve Finance and most recently Yield Basis, Michael is working to close structural gaps between DeFi and TradFi — including the multi-trillion-dollar inefficiencies that slow global capital flows.

Michael, you began your career as a physicist. How did that background influence your decision to found Curve Finance, and what gaps in the financial system were you trying to solve at the time?

I studied physics at MIPT and later completed a PhD in Australia working with cold atoms and Bose-Einstein condensates as an experimental physicist. The experiment was like obtaining a “miracle on Earth,” in a sense. Not just in terms of building a setup which could create the condensates, but also because it was necessary to optimize a lot of parameters based on real-time observations, so that everything could actually work in practice.

That experience has stuck with me as a mindset which turned out to be very useful when building in crypto later on. At the time I discovered this market, I realized two things. First is that decentralized systems had massive potential, and second is that many mechanisms inside early DeFi protocols weren’t modeled deeply enough. Problems like liquidity inefficiency or unstable incentives were treated as side effects, not core design questions.

When I first launched Curve Finance, it started out as a very scientific experiment. I wanted to build something that we currently call concentrated liquidity. In September 2019, I wrote the first simulator, and the results showed we could achieve much better liquidity than people expected. That eventually led to Curve becoming what it is today.

And what about Yield Basis? What inspired its creation, and which specific inefficiencies or market failures convinced you that a new liquidity framework was needed?

Yield Basis came from a very simple need: for all the progress DeFi made over the years, earning meaningful, sustainable yield on Bitcoin was still nearly impossible. Bitcoin doesn’t produce yield on its own, lending markets usually stay below 0.1%, and AMM pools have historically been unusable because of impermanent loss.

That’s the main reason why liquidity for volatile assets never fully migrated on-chain: liquidity providers took on too much risk for the rewards they received. Even the best opportunities rarely offered more than 1–2%.

At the same time, Bitcoin is the most widely held asset in the crypto ecosystem, yet very little of it exists on-chain in productive form. That mismatch signaled a bigger structural inefficiency: we couldn’t scale DeFi liquidity for the largest asset in the industry because the underlying math of AMMs punished LPs for volatility.

Yield Basis was designed to fix exactly that. The protocol builds on top of Curve’s time-tested infrastructure and introduces a new AMM implementation that eliminates impermanent loss (IL) altogether. With the removal of IL, providing Bitcoin liquidity into such an AMM makes a lot of sense due to a fundamentally improved risk/reward profile for LPs. As a result, deep on-chain (spot) Bitcoin liquidity becomes possible, and yield can come from trading activity rather than token emissions or artificial incentives.

As I see it, solving impermanent loss has always been the “final piece” needed to unlock scalable DeFi markets for volatile assets like BTC. With Yield Basis, we can finally offer a model where institutions and professional participants get transparent, organic yield, and where bringing more BTC on-chain becomes economically rational. It’s a step toward a more diverse and resilient DeFi ecosystem that can actually support the scale of institutional demand.

When you look at the $2.5 trillion trade finance gap, where do you see DeFi offering the most immediate structural improvements compared to legacy processes?

A large part of that gap comes from inefficiencies: fragmented liquidity, long settlement cycles, and the absence of real-time risk assessment. These are structural, not temporary issues.

DeFi already solves many of these problems at a technical level. Markets are open 24/7, liquidity is global, and settlement is instant. When you remove frictions like delayed reconciliation or manual compliance checks, capital simply moves faster. What’s missing today is scale and predictability — two things institutions generally look for. These are what they need before they can truly rely on decentralized infrastructure and start active participation.

That’s where protocols like Yield Basis contribute. Reducing risks like impermanent loss and making yield on core assets more stable helps create that predictability.

What are the core problems that Yield Basis tackles around impermanent loss, liquidity efficiency, and capital flow, and how do you communicate these benefits to institutions still built on outdated workflows?

Most institutions understand leverage, spot exposure, and hedging — so we frame Yield Basis in those terms. The protocol maintains a 2x leveraged position using crvUSD as the borrowing asset and BTC/crvUSD liquidity as collateral, and the key point is that the leverage is automated and risk-controlled at the protocol level.

This changes the payoff profile for LPs: instead of earning fees while losing value during volatility, LPs earn fees while keeping the economic exposure of holding BTC outright. Higher volatility means higher trading volume, which means higher fees. For a professional audience, it becomes a clean risk/reward story they can get behind.

And because Yield Basis relies on immutable contracts and Curve’s well-established and proven infrastructure, institutions can also have greater confidence in the quality of execution.

As traditional finance ramps up blockchain experimentation, which DeFi-related risks do you believe are most commonly misunderstood by banks and large financial players?

A lot of traditional finance teams still look at DeFi through the lens of their own systems, and that’s where misunderstandings start. For example, many assume decentralization is just a “cosmetic” design choice — something you can add or remove depending on preferences.

But in reality, decentralization is a security model. If no single party controls the platform, then no single party can be forced to change it, turn it off, or quietly adjust it. That’s actually one of DeFi’s biggest strengths, but it’s also something that people from TradFi often underestimate because it’s very different from how their own infrastructure works.

Or, to put it in other words: while there is no counterparty risk in real DeFi, there is also no “safe perimeter” in it. So if a technical error is made, it is very likely irreversible and fatal. This risk CAN be managed, but addressing it looks very different from typical banking-like approaches.

And on the flip side, what advantages or strengths of decentralized liquidity systems does traditional finance consistently underestimate?

I’d say there are two main aspects that many still fail to understand properly: transparency and distribution.

In DeFi, everything happens on-chain and in real time — every trade, every loan, every fee is visible. There’s no delay, no hidden books, no need to rely on end-of-day reports or monthly statements to understand what’s actually happening in the market.

Everything is updated instantly on the blockchain, and for anyone managing risk, that level of visibility is incredibly powerful. But traditional markets usually don’t operate with this kind of openness, so it takes them a while to appreciate how different it is.

Secondly, distributed liquidity is extremely resilient. In DeFi, it comes from many independent participants around the world, not from a single market maker or a centralized venue. So it doesn’t disappear the moment one party goes offline. Markets continue running 24/7, even during stress events, when a CEX might suffer an outage.

This distributed structure makes liquidity much harder to “break,” and that’s something traditional finance isn’t used to because centralized systems have single points of failure almost by definition.

Thirdly, true DeFi can continue to operate even if the “operator” becomes malicious or somehow disappears. Because there is actually no operator when everything is built in an immutable way. Not every project works this way, and there are different degrees to that kind of decentralization, but when things are done correctly, the principle is simple: your keys = your coins.

Hybrid architectures combining TradFi’s compliance and scale with DeFi’s openness and programmability are emerging. What do you think the first widely adopted hybrid models will look like?

I think the first hybrid models are likely to be the ones that feel familiar to traditional institutions on the outside — at the “front end” — but use decentralized on-chain liquidity underneath. This approach would let institutions benefit from DeFi’s efficiency without having to completely change how they interface with financial products.

Another area where I suspect we’ll see greater adoption is tokenized assets being used inside DeFi strategies. As more BTC and real-world assets move on-chain, they can be treated just like any other digital asset: used as collateral, placed into liquidity pools, or combined with automated strategies.

With these tokenized assets plugged into DeFi-native protocols, we essentially get a natural bridge between TradFi-grade assets and DeFi-grade automation. The best of both worlds.

Liquidity fragmentation remains one of the biggest barriers to institutional adoption. How do you see smart routing, standardized pools, or new AMM designs addressing this challenge?

As I see it, the biggest “fragmentation” barrier right now is the fact that most of the liquidity does not live on-chain at all. The majority of it is still on centralized exchanges, which leaves DeFi markets looking much smaller by comparison. I believe, as AMMs grow in efficiency, this will change. Once deeper liquidity can move on-chain, the fragmentation problem will solve itself.

Even if that liquidity ends up being split between different AMMs, exchange aggregators are a very well-tested tech which addresses this issue. They are designed to route trades efficiently across pools, so end users will still get a “unified” market even if liquidity sits in different places.

As for fragmentation between multiple chains — it hardly exists today. There are not that many chains which see significant trading use. We have Ethereum and Solana with their own strong and highly developed ecosystems. We have Base and BNB chains which essentially serve as the next step in the evolution of CEXs, so their liquidity can still be counted as almost CEX liquidity. But numerous alt-L1s and L2s out there aren’t really used much, especially now that Ethereum is actively scaling its L1.

So overall, I believe that the fragmentation problem will naturally stop being a problem as soon as we have efficient and profitable AMMs scaling up.

As more real-world assets move on-chain, how do you envision protocols like Curve and Yield Basis interacting with tokenized trade instruments, receivables, and other digitized financial products?

I’d expect Curve rather than Yield Basis to be doing that. It feels like a more natural platform for such activities to develop on. Curve is already designed to enable efficient trading between different types of assets, so adding new products like these fits with what it does.

As tokenized instruments become more widespread, it’s not hard to see them being integrated into Curve’s pools, where they would be able to take advantage of deep liquidity. I do believe that this can — and probably will — happen.

Looking ahead five years, what do you expect the relationship between TradFi and DeFi to look like, and where do you see the most significant breakthroughs coming from?

The most significant breakthrough, in my opinion, will be most of the liquidity moving on-chain, with trading activities shifting away from orderbooks and toward AMMs. I fully expect that orderbooks will still be relevant, but AMMs will handle a much larger portion of global liquidity than they do today.

As for the relationship with TradFi, I saw someone make a point that Ethereum might become for finance what Linux is for the world of operating systems. Most people in the world don’t use Linux directly as an OS, but it quietly powers the majority of what goes on under the hood: phones, web servers, cloud services, and so on. People rely on it constantly without even realizing it.

And I think this is exactly what might happen with Ethereum and DeFi: they’ll become the new “backend” for most TradFi activities, while the user-facing “frontend” would largely stay the same. People might rarely interact with this layer in their daily lives, but it would nonetheless take its place as the underlying infrastructure for global finance.

Not necessarily the “revolution” everyone expects, but something which I find to be very likely.

Thank you for the great interview. Readers who wish to learn more should visit Curve Finance or Yield Basis.