AJ Warner on Building for the Programmable Economy, Arbitrum's Future, and Tokenized Equities

AJ, welcome to the show. How's it going? Good. How are you? Thanks so much for having me on. We're doing great. Thanks for your patience. We're we're two yappers sometimes, so stories stories run long, but we're excited to to dive into it with you as well. Those are usually the best stories. Awesome. Well, let's let's kick this off. I mean, obviously, most most reviewers are gonna be familiar with Arbitrum, but I've seen you've you've been with them for is it going on three years now, give or take? About six.

About six. Wow. Okay. I may I may have been just looking at your last role then. So, yeah, bring us into, you know, where'd you start with off chain labs and, you know, the the cliff notes version of where you're at in 2026.

Yeah. No. For sure. So the way to think about sort of the history is the company was founded in Princeton. The launch story is actually really cool. So Ed was our chief scientist today. Was a professor at Princeton. First smart contract papers were coming out. And Ed said, if this is gonna scale, we wanna make sure it can remain security centralized. We're gonna need what we now call, like, layer two technology.

So you can find on YouTube his fall twenty fourteen class was dedicated to, like, an early prototype of Arbitrum at Princeton. And then fast forward, he went to Obama's White House. He was the deputy CTO of the White House from 2014 to 2018. When he came back in 2018, it the first time Ethereum congested. Right? CryptoKitties had launched. People were getting excited, and that's when they decided to build a business. They launched in late twenty eighteen. I joined to lead the business development functions.

It was Steven, Ed, and Harry were basically two PhDs at Princeton, and Ed was the professor. And then I joined to lead the business functions once we were starting to get ready for Testnet launch. And in the early days of Arbitrum, like, you know, if you've been around in the crypto space for a while, it's really how do we scale Ethereum? How do we make sure that we can get, like, way cheaper transactions?

NFTs were basically trading gas at a $100 a pop, and Arbitrum launched, some other l twos launched, gas fees came down significantly. In the early days of Arbitrab, like, that was our mandate. That was our goal. That was our focus and story. Over time, what we've realized, and obviously as the ecosystem has continued to mature, the technologies continue to improve and harden and scale, we really have an incredible mandate to build what we call now the programmable economy.

And the way we think about what those words mean, it sounds like a fancy tagline. The way we think about it is how do we build back end infrastructure for financial services and trading? Right? How do we get from a brokerage account or a bank account into an on chain or involved? How do we get tokenized equities into a place where anybody can access them in the world? How do we improve the operational expenses and efficiencies and the distributions of dividends from money market funds?

All of these things are what we call the programmable economy. How do we take these software improvements that we have to create operational efficiencies the same way the Internet's done that with communication? It's done that with the way that we consume information. We see this playing out. This is what our focus is. So, you know, Arbitrim as one of our core products plays this role really well, both on the public chain, which is, like, very focused on DeFi, particularly purpose as a category.

But the way we've scaled our product is there's people using our technology stack like Robinhood, for example, they're building their own chain using the Arbitrum technology stack to bring tokenized equities on chain. So we think about Arbitrum as a platform that is intended to enable all financial use cases that are contributing to the programmable economy.

We wanna make sure that our technology stack is flexible enough so that either compliance needs, policy needs, regulatory needs, privacy are all things that can be built into the stack. And what we're doing now at off chain is, you know, we've got another product in our suite called Serodev, which sits really at the wallet layer doing something very similar. Right? So we're trying to take account abstractions, smart accounts, all of these different things, which really is the user component of, alright.

Blockchains can scale. They can be customizable to bring my assets on chain. How can I get my users to use it? So at off chain, what we're actually trying to do is build all the infrastructure that can enable the success of what we call programmable.

So, Drew, I know I know you just he pinged me on the side. He said he wants to dig into the Robinhood chain and Perp ICP. I think before we dive into that really quick, you mentioned a quick analogy with with the Internet. How can you dive deeper into that? And I I think especially for the viewers that are more on the side of fintech, modern money, the these analogies can be really helpful in in kind of distinguishing where the world was into where the world is going with modern money. Yeah.

So I think that there's, you know, the way I think about this is we have all this technology and this technological

infrastructure. You know, I'm about 35 now. Even since I was a kid, right, in the earliest days of dial up Internet, if you look at sort of the way the Internet did, what the Internet solves originally was my ability to consume information. Right? If you fast forward to the mid to late two thousands, what we really accomplished with smartphones is communications and the efficiencies associated with that.

What happened after that and really with blockchains, I think sort of when we think about the smart contract, stablecoins has spent the last five years really scaling payment infrastructure. Right? Finance tokenized equities at capital formation. We had our ICOs in 2018. But if we wanna do this in a way that's compliant, globally scalable, and accessible, there's a lot more both plumbing and regulatory clarity that's needed. And that's where we're at today.

You know, the bottleneck and limitations of blockchain adoption are not scalability anymore. If you look at Arbitrum, if you look at Solana, if you look at MegaEth, these are not the limitations that we have today. There's plenty of block space.

The question is is how do we make sure that the plumbing, the user experiences, the wallet layer, the compliance layer, the privacy layer, the chain layer, the customizations associated, which each of those things work for the financial institutions, the asset issuers, and the users that come downstream downstream from from there. There. You know, one of the large money market funds when they, you know, bid a launch about two and a half years ago at this point, which is BlackRock's tokenized money market fund.

I remember speaking with them, and one of them it wasn't BlackRock. It was one of the other large issuers. He mentioned to me that tokenized money market funds decreases their operational costs by 17%. Wow. Right? So we look at blockchain as this enabler of, you know, we can get permissionless token trading or we can get perps or we can do all of these things which are really important.

But, like, even something like how do I reduce OpEx by 17% is, like, a huge unlock for major financial institutions, which look at, like, a single BPS or two, three BPS as a huge win. Right? So for us, we wanna make sure that we can be that connective tissue to enable these efficiencies, to enable both access sovereignty efficiency, and the massive increase in distribution of assets.

What we're starting to see today on chain is, you know, where three, four, five years ago, people were trading, you know, major crypto tokens. Now people are using crypto rails to trade tokenized equities or to trade pre IPO stocks. Or, you know, there's a project we work closely with at Arbitrum called USDAI, which is essentially debt capital markets for AI infrastructure. Right?

All of these things are absolutely critical, enabled by block chain, enabled by composability, enabled by shared liquidity, and are just better mousetraps. So as an industry, I think we're becoming much more focused. I think tokenized I think stablecoins has done a good job. It's obviously grown. I think we're at about 250,000,000,000 or a little north of that in stablecoin issuance on chain.

Tokenized equities, debt capital markets I'm sorry, capital markets for, you know, the equivalent of what we call ICOs is still very far behind, and we wanna make sure that we can enable that that sort of growth that we're seeing on the stablecoin and payment side. On the timeline, the last twenty

four, forty eight hours, there's been a lot of, like, murmurs or, like, hints at the president coming out with some more clarity around tokenized equities specifically and, like, the trading the trading unlocks that that would have surrounding that. Have you been following that closely, or any thoughts just on what you're seeing with clarity and how how some of these things, especially for Americans, are are starting to become unblocked in the near future? Yeah.

I don't have any alpha, unfortunately, to share, so I'll just tell you sort of what I've heard. I spent some time in Washington speaking with policymakers and regulators. There is a very strong appetite for increased innovation in this administration, both congress and the White House, and it's been extremely refreshing to see just sort of in contrast to, I think, the last five years previously prior to sort of the Trump administration.

And we have an incredible opportunity, I think, to get both innovation continuing to grow in America and also getting the regulatory frameworks and policies in place that ensure that there still is consumer protection. This idea that we're going to be able to sort of create the Wild West without any sort of rules or frameworks in place really is never going to scale, and, really, I don't think with anybody's help and expectations.

When we say that, like, we would love rules, I think this is a good example of where we're looking for rules that allow for this innovation to occur. Right? Allow for how can we get 17% decreases in operational efficiencies for assets that have core utility? How can we get the benefits of earn vaults? These things that are primitives that are unavailable, you know, from a lending perspective to people necessarily all over the world. How can we make sure that if I have Tesla stocks, I can easily borrow against it?

That's not something that's easily accessible to everyone. So these primitives are enabled because the costs associated with allowing these things to users comes way down with on chain primitives. And I I really hope that sort of we can get to a place where clarity will pass. I hope that there will be some work and guidance from the SEC that can enable both of the tokenized stocks. Also, I think, for example, I care a lot about primary issuance.

We're looking now at some of these AI companies are, you know, north of a trillion dollars in the private markets. You know, one of the earliest dreams of crypto when I got in were how do we make these things accessible? Right? Bitcoin was accessible to the entire world as a product. On chain capital formation is a vehicle to raise capital from retail in a very effective manner designed correctly.

So I I do hope that as we get more regulatory clarity, we can bring some of this into the frameworks that, let's say, non crypto organizations can view crypto in in a in an enabling fashion. Jack, it's reminding me of what we were discussing

top of the show with Startup fund. What we were yapping about before keeping you in the waiting room. Start up fund and what they're doing with with livestreams for for capital formation. It's it's essentially No. What is this? Shark tank for startups where they'll they'll recruit three early stage founders. They'll do a livestream. They pitch their products, and then they're essentially, you know, whoever they have some sort of, like, token, Vulcan voting mechanism.

And whichever project wins, they'll they'll put onto their platform to do, you know, a capital formation. They actually use this model. They they livestreamed, I think, for about a week. Just had a, you know, camera up in their office as they were building to launch, and then that's actually how they even raised their first round, I think, of of 500 k. So it's interesting. You have this I'd love to talk to the team. Sounds good. Yeah. They're great. They're great. Yeah. This is good. Hit up, Adam.

But you have, like, these different approaches. Like, we you have this, and then you also have, like, Echo getting bought by Coinbase, And then we saw Magna. We were reporting on that with Payword and Kraken kind of that group buying them up. How are you thinking about the advantage of, like, having something primary or directly? Like, how would that how are you guys thinking about that from a strategic

standpoint? Maybe this relates with some of the work with Robinhood you mentioned. Like Yeah. Would love to hear more about that too. We sit pretty tightly at, like, the infrastructure and plumbing layer. Right? So, like, we don't really develop first party applications as much. I mean, some of these things and we also sit more like the software layer. Right? So, you know, an echo is more of, like, a compliance piece than it is, like, a major technical innovation.

So where off chain likes to set, we like to we've got, like, an incredible research team and an engineering team. Think, you know, that's probably where we're best recognized for our strengths as well as ecosystem growth and development on the DeFi side in particular. We love working with those teams. They're probably, like, partnering with organizations that are doing this kind of stuff is much more up our alley than directly verticalizing it.

The broader point, though, is I think there's a ton of consolidation happening in the industry. So if you look, I would say, let's say, general tech over the last twenty five years is a lot of startup work that is being designed and built with the thought of I can grow this to x, and then I'll be bought by a Facebook or a Google or or somebody for you know? And and it'll kinda get rolled up into, you know, a a tech conglomerate.

Crypto for a while was, like, the antithesis of that, and I think that was probably directly related to the ability to launch tokens, get liquidity, etcetera. I think as the industry has matured and the business models have become more sophisticated, you're probably gonna see a lot more of this Coinbase echo payward Magna type of startup design happening in crypto. I think we're very much in an era of consolidation. I think it's somewhat healthy.

I also think it's, you know, partially maybe in contrast to some of the original, you know, ethos of the industry, but it it goes both ways. From my perspective, what we need as an industry to do is make sure that we're solving problems. And for me, that is how do we enable the programmable economy to bring and connect the best DeFi primitives with the most significant assets in a way that works for asset issuers for their users to come on chain.

And that's, like, really where we're where we're we're, like, super focused. Yeah. Go ahead. Go ahead. Where were you gonna go, Drew? Let's see first. Where do you think? I don't know. And And this one, don't know. I don't know if you saw my message or not. No. I didn't. So it's probably not where you want. Okay. Well, I was gonna say, you know, you mentioned

USDAI, and this is a very fascinating project. It's almost one too where I think from a consumer perspective, and I've even seen, know, a little bit of Twitter where it's like, oh my gosh. 1010% a a p y or APR on a on a stable coin. This is gonna blow up. Right? This this is the next doomsday disaster. Talk a little bit more about the actual model here of of debt financing.

I think this is kind of this is one that most people look at, and they actually don't understand how it works under the hood and how this especially ties into the larger narrative of the, you know, the agentic economy.

Yep. So one thing I would say is if you haven't had David on the show, you should have him on. I can happy to make the intro. He's Yeah. We'd love to. We tried to have them on m zero is who still, I believe, issues their stablecoin, and we tried to get them on the m 0 season, but weren't able to. So that would be that would be really great. Let me see if let me see if I can help make it happen because they're fantastic and visionaries, David and Connor and the rest of the team.

So at a high level, I think that, you know, obviously, it's represented as a single dollar, but when you think of sort of what Athena started in this wave of how do you sort of package yield in a composable liquid stablecoin structure, it's kind of, I think, a new wave of capital financing and economic exposure to opportunities. Right? We're starting to see this play out across energy, across AI, obviously. With with with USDAI.

We're looking at this in real estate opportunities that we're seeing on our side as well. So there's a lot of different components and places where where we're seeing this. But USDAI in particular, their goal is that they wanna solve as a particular problem, which is how do we get debt financing for GPU lending in a certain class of size of loans?

And the reason it's hard is because if it's too small for some of the large players, it doesn't make sense for them to underwrite it, and it's very hard for an individual to sort of get this exposure. What they do is, basically, they are going to, you know, enable people to contribute dollars into this, and they're basically backing and sourcing and diligencing these loans. Right? So you're getting a more diversified set of loans, getting diligence, and borrowing against it.

This is a pretty high yield product generally. Their cost of capital, and, you know, David can talk about this better than I can, is lower than traditional financing through some of the stuff enabled by crypto primitives. But I think it's a really good example of where you can see some of the on chain efficiencies both from you can get a very clear sense of what your collateral is, also what your yield is when it's gonna get paid out, liquidity around these assets. Right?

You know, lending against, you know, these types of assets typically are not liquid, and how can you unlock that with crypto? So at a high level, that's, I think, like, what makes that project so exciting. It's an asset class that that that starved for capital. It's serving a a sector of the of the capital stack that's underserved today. It's giving exposure to users at a lower cost of capital for borrowers.

So it really is just, again, I think one of those examples of where crypto can enable things that are otherwise, you know, inaccessible. Yeah. My my brain goes to okay. So what else can we do this for? You know, what other business models? Oh, yeah. So me and my team have been jamming on that a lot. We're seeing this across a lot of different financing. So real estate's an interesting vertical where this where this plays out. It's a little bit more complex, I would say, in terms of, like, collateral basis.

We're seeing this right now. There's a team that might still be in stealth that's doing this with, like, pre IPO equities for early stage employees, so I don't wanna spoil them too much. We're seeing this across energy, telecommunications infrastructure. So this is a model I think that will actually be replicated across a number of verticals again. And what's interesting is those are not like crypto verticals. Right?

Like, this is crypto and blockchain empowering traditional businesses with the rails and the efficiencies, the way that we can improve the value proposition of money market funds through tokenization. We can improve the value proposition of equities through tokenization, and that's this is doing the same thing on the debt side.

Jay, just question on this and and stepping back macro a little bit on this specific even mental model for you guys. Like, as you think about this opportunity categorically that USDAI fits in, how would you simplify that framework and how you might be thinking it or applying it to other industries just from, like, a first principle standpoint? Like, how what are these consistent threads?

The threads are how can you take how can you lower the cost of on the debt side in particular, how can you lower the cost of capital through the liquidity premium, ability to easily pool capital and pool assets, and composability of on chain financing? That's like the high level framework. Right?

So if you have any vertical in which it's, you know, certain financing is expensive or it's hard to accept be accessible for certain market participants either because they're too small or because, you know, they they might be more challenging to underwrite in isolation from traditional financial institutions.

How can you find a way to match the cost of capital on chain with these market participants And this synthetic dollar architecture of a USDE of a USDAI is actually quite elegant mechanism to do it because it gives stronger liquidity premiums. It does give you the ability to earn through different either vault infrastructure, Pendle type products where you can basically split between the principal and yield token.

So the primitives that are in place, like, are I I think are there, and it's about an education process to see if we can continue to attract, or, you know, I would say, innovative businesses

that are open and willing to to come to on chain financing. Yeah. Did did you see there was actually this tweet. It was from, May 14, you know, with the with Figure, the Providence blockchain, and and their Heloc product. I mean, they cut lending costs by a 117 basis points. And nondimensional, they're also closing loans. I this is near and dear to my heart. I actually used to sell this product when it first came to market when I was in the mortgage industry. And it was like, hey.

You're also closing the loans in seven days versus maybe twenty one, you know, on on the quick end. It's really easy as a consumer just kinda glance over these things. But when, you know, when you talk to a loan officer that's been doing this for thirty years, you know, they're like, how are you even how is this possible? Right. No. 100%. I used to be a real estate lawyer. When I was doing that, I was doing a lot of work around securitization.

And the thing that always started out to me is like, this thing's actually a brilliant financial product. The problem is there was no transparency. There was very little auditability, and there was way too much leverage in the systems. It doesn't mean that the concept is bad. It means that the implementation wasn't good.

And I do think we're probably gonna recreate a lot of this with on chain primitives over the next five to ten years in a way that's much more auditable, transparent, can make sure that there's no double pledging.

I'm actually very excited for all this. Really, really interesting. Yeah. What what's on the what's on the horizon? What are you looking forward to in this year? You know, especially we we go through these cycles, we kinda go through these these slower seasons, and it's kinda like, okay. Back to building. We got our we got our we got our limelight. Like, you know, what's your focus? What's the strategy, you know, throughout 2026 into 2027?

Yeah. At the high level, you know, there's this dissonance between, I would say, the crypto native builder who's maybe who's an early stage adopter attracted to the industry because of the ethos, you know, the opportunity to to make significant wealth, symbols of censorship, resistance, sovereignty, like, all of these, like, reasons why people got into crypto, let's say, in 2021, 2022. A lot of those things are currently being challenged by, like, the crypto natives as, are these things valuable?

Are they not valuable? Will this thing ever grow? Will it ever mature? And we've lost a lot of those people from the industry, I would say, over the last eighteen months, unfortunately. What I would say is somebody who kind of has a lot of those philosophical views but also sits in a place where I work really closely with a lot of institutions, both banks, fintechs, enterprises, is that there will probably be some compromise across, like, the original principles.

But overwhelmingly, this idea of, like, permissionless network, censorship resistance, sovereignty of assets, the efficiency and liquidity that's, like, associated unlocked with that is extremely exciting to a way larger set of market participants than have ever happened before.

And it is you know, where five years ago you talked to a bank and it was, like, very clear you're talking to them from, like you know, you're talking to one person who has a salary and it's just because the bank wants to be able to say, like, we're we're we're we're dedicating resources to this. Today, you have actual product teams and engineering teams dedicated to solving these problems and how they can leverage its infrastructure.

So for us right now, I guess, like, as a message I would say to the industry, like, if you're in this industry and those are your beliefs, recognize that, you know, maybe with, like, some small compromises, like a lot of this is actually what you were hoping was gonna happen is actually gonna start happening. But where I'm focused is is how can we make sure it happens?

How can I make sure that this vision of a programmable economy where every asset's on chain, every asset's available and accessible in a way that is providing value to users and asset issuers and the plumbing is replaced from legacy systems in the seventies? How can this happen? And that's where I'm focused. So for us, sales cycles are a little longer. We're working with larger institutions. We're respectful of that.

We're also trying to be very product oriented and very product focused to make sure that we can help enable this to occur. That's that's our that's our goal. Our goal is to be able to enable it. That's our strategy for 2026. It's our gonna be our strategy likely in 2027. You're seeing a ton of trading activity start picking up again. It's just not as much as crypto native assets. It's much more in commodities, organized equities, especially in the derivatives and perp side.

Obviously, Hyperliquid's doing a lot of that as well as Variational and Austium, who are other two teams on the Arbitrum ecosystem we were close with in those categories. It's starting to pick up, but we've got to accelerate this because there really is a 100 x growth from here if we can do this right. Incredible. AJ,

before we part, I know we're a little bit over time here.

Just wanted to ask you, given what you just said of, like, thinking from first principles, and thinking strategically, taking more time to go peel back a lot of these layers and work very, very early with bigger institutions on, I guess, how I would describe what you just said is this moment we're in of, like, we're evolving from the employee embedded the internal champion who's just there, like, waving the flag to actual business units and teams around these people who actually are tasked with, like, really implementing new things.

Your work with Robinhood for me and Robinhood Chain, I mean, this is something that we've been following, and we're really excited to see this. It looks like this has been a partnership, a really marquee one. Can you speak a little bit to maybe how that fits as a use case or an example of how you're helping some of the world's most innovative institutions here think from first principles about what's possible.

Arbitrum has seemed, even when this has gone public and started, like, when Robinhood was really building this team out and doing their beautiful, like, Italian demo day that everyone saw that was epic. Like, Arbitrum was at the table that whole time. So would love would we only have, like, a few minutes on this, but would love high level, like, the story of that as well. Yeah. It's a good example because we've been working with them for, again, two and a half, three years. Right?

So, like, that castle moment in Econ, right, where Vlad was wearing his incredible outfit and there was this magnificent

background. A ton of work went into getting to that moment. And for us, we recognize that we have a partner who wants to be at the forefront of innovation, who understands the importance of democratizing finance, wants to increase access to the world. So they use tokenization as a mechanism to go global. And that is how tokenization help them solve their business needs. They also wanna bring more utility to these assets on chain, obviously subject to getting regulatory clarity about what can and cannot be done.

So for us, it was really exciting to be the the exclusive tokenization agent and partner of this organization as they want to recreate their business model on chain. What was nice about where Arbitrum sits is that we have a lot of flexibility in our platform. So if you look at sort of today, the tokenized equities product on Robinhood is on the public Arbitrum chain. So for them, was really important that they wanted to be able to get this into production as soon as possible.

And they actually went live at that event. In parallel, they've been spending the last, you know, ten or so months building and designing the Robinhood chain using the Arbitrum infrastructure stack, which actually is a very unique value proposition of working with off chain and Arbitrum. You know, if you were on a stack that is only a public chain, this ability to eventually own your own rails becomes much more challenging.

Or if you wanted to start on another layer two stack, which maybe doesn't have the liquidity depth that Arbitrum does. Right? Arbitrum is the largest layer two, you know, by assets and, you know, that Arbitrum and and Coinbase is based on the largest by by DEX volume and most other metrics, you don't have the ability to start on a public chain. So Arbitrage kind of sits in this unique place where we have a a top five blockchain by economic activity and also, you know, one of the industry leading stacks for adoption.

And for Robinhood, that was really important, and we talked to a lot of enterprises that's really important. They don't know if their journey is gonna start with a chain. It might start on the public chain and eventually migrate there, but they have the flexibility of working with us, and off chain can power their infrastructure across the entire journey.

So for us, it was about forming a deep partnership with an organization that we believe is aligned across values and initiatives in this goal of bringing finance on chain, creating a programmable economy, and we're the infrastructure layer that can provide that for them. I hope that was fast enough. No. Absolutely.

Drew, you're muted. I don't know if you It was. My AirPod my AirPods died. We we would love to you should you you would die laughing. Look at look at all of these AirPods. I'm I'm Do remember them? Dude. Do do Like, I only have one of them for this one, and then I put the right one in. I was like, oh my gosh. I'm gonna put I'm gonna be, like, connected to two at one time. So my daughter loves stealing these. It's like her favorite thing. So my I have a lot of these laying around, but I'm prepped today.

Don't worry, Zach. AJ, we would love to we would love to just, like, continue to dive into I I I feel like we barely are getting started in some ways, and I feel like you are just a repository of just insight and, honestly, a perspective and a an approach that we really respect, and we wanna cover more people who are focused more on doing things the right way over long time horizons.

So would love to, one, have you back, dive deeper into some of these use cases that are lighthouses for, like, where you wanna go with with off chain and be a part of helping expose some of this and just tell that story. And then, yeah, if you have any teams or people, builders that like USDAI who kinda fit the bill of also doing that sort of thing, we'd love to cover them and, yeah, be be more integrated with with you guys. So really exciting stuff. That's awesome. Well, thank you so much for having me.

This was great. Yeah. With you're you're in New York as well?

Yep. We got an office in New York. I I live in the suburbs. So

Nice. Sort of summertime. We are in New York a lot. Maybe we can get you stable minded, which is our podcast. We could have more time to go deeper there. That'll be fun. Zach, any final thoughts from you? No. Sweet. Nope. Well, yeah. Our version is short. No. Our version is short. Yeah. We'll we'll we'll be sure to see you on next time, and I'm excited to dive into USD I USDAI one of these days. Awesome. Thanks so much, guys. See you. Thanks.