EtherFi and SharpLink CEOs share what risk frameworks DeFi needs for legitimate institutional adoption

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When it comes to making idle assets productive, a lot of investors think about how to get the best return possible, but what’s more important in DeFi is for protocols to adopt a risk management framework to keep those returns in their pockets. 

Joseph Chalom, CEO of Sharplink, one of the largest Ethereum digital asset treasuries with over $2 billion in assets, says his job is making investments “as productive as possible within a risk manager framework.” That means making sure his firm is only investing in highly secure platforms to minimize risk. 

In April alone, two major exploits rocked crypto: the hack on Kelp DAO resulted in more than $290 million being stolen, and the Drift Protocol one yielded losses of about $285 million. While recovery efforts recouped a lot of the stolen capital, people are still wary. 

When Sharplink started building out its digital asset strategy in June 2025, the firm set out to form a team for managing risk and analyzing everything on the risk front, from smart contracts and protocols to deep hedging and liquidity, Chalom said on StrataMedia’s Talking Tokens podcast recently. “We've diligence-d dozens of protocols, and most don't meet institutional criteria.”

In January, Sharplink finally made the plunge, deploying about $200 million in ETH on EtherFi, Linea and other protocols. 

But in finance, risk is an ongoing problem that needs solving, even though there really isn’t one, established playbook to go about managing it in crypto. 

“When looking at these hacks, it's easy to point and say, here’s five dumb reasons why it happened,” Mike Silagadze, founder and CEO of EtherFi said on the episode. “And we can say, well, we didn't get hit by those, but it's not like there's a clear, roadmap and playbook of how to do it correctly.”

Institutions, however, look at it differently. “The playbook is to go slow when you're deploying, but be prepared to go unbelievably fast when you're monitoring and you discover a problem,” Chalom said.

“And crypto has a bad reputation because when something goes bad, people call it tail risk,” Chalom said. “Guess what? Tail risk is still risk. And in traditional finance tail risk is part of the valuation.” 

It’s really not about rewriting the proverbial playbook, but more about being aware of the risks involved, and understanding that you’re being rewarded for taking them. With that in mind, in response to the recent hacks, EtherFi plans to put in place a functionality that preserves its non-custodial nature and DeFi values while giving it a way to address emergencies. 

“In emergency situations, there's a big red button that can be pushed that ensures that the bad guys can't get away with the leaks,” Silagadze said. The firm has talked about this functionality publicly, and it’s going to put out a statement to allow the community to have a say. 

Silagadze believes that DeFi’s risk problem will be solved one of two ways: either DeFi gets backed by more productive and real economic activity instead of speculative premiums. Or, the other angle is there’s only so many “low hanging fruits” for DeFi protocols that are "incompetent at risk management,” he added.

Even with all of this in mind, Chalom is optimistic about there being room for improvement, saying, “We’re in the bottom of the first inning for DeFi.” When thousands of public equities are tokenized, that’s when the industry will really begin to kick off, he added. 

“Wait till people own tokenized securities and funds in their wallets. They're going to be participating in DeFi or just finance at a level that we've never seen before,” Chalom said. “And the reason why I think it's interesting is that a lot of these security issues are being discovered in the early innings. You have to work this through before the real money, the tidal wave of tokenized assets comes in.”

Check out the next section for more details and the full episode.

For today’s episode, I interviewed Mike Silagadze, founder and CEO of EtherFi and Joseph Chalom, CEO of SharpLink. This conversation comes after Sharplink deployed $200 million of its $2 billion ether treasury into EtherFi in January — and what the due dilligence process actually looked like from both sides. Mike explains why EtherFi is building a “DeFi bank,” with end-to-end self-custody alternative to traditional banking with hundreds of thousands of users and over $5 billion in deposits.

Joseph, who spent two decades at BlackRock before joining SharpLink, walks through how his team hired people from Bridgewater and FalconX specifically to underwrite DeFi risk, why tail risk is still risk, and how its permanent capital gives SharpLink an advantage most crypto allocators don't have. The conversation covers why the recent wave of DeFi exploits could have been stopped with basic intervention tools, why stablecoin rails will be the main way crypto reaches the real economy, and tokenization growing as NYSE and Nasdaq opens up for 24/7 trading.

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