Tiger Research: On-chain risk operators, the gap between a market size of 147 trillion and 7 billion

This report is written by Tiger Research. The discourse power in the decentralized finance lending sector is gradually shifting from project protocol parties to professional operators who hold risk control decision-making authority. The essence of entering the industry has become a choice: to borrow others' judgment capabilities, to export judgment capabilities externally, or to build and control judgment capabilities independently.

Key Points

• The decentralized finance sector is giving rise to a new asset management role, and the era of protocols and community governance fully dominating the industry has come to an end.
• The sector is still in its early stages, but capital flow and channel resources have quickly concentrated towards leading risk management teams, whose past operational performance has become the core reference standard for institutional entry.
• There are currently three main paths for entering the industry: channel distribution (operating teams provide backend support), asset supply (on-chain integration of offline assets), and self-operated (building teams to become risk operators).
• The entry path directly determines the subject's discourse power, required core capabilities, and potential risk exposure.
• The core industry decision is not whether to enter decentralized finance, but how to delineate responsibilities: which risk control decision-making powers to delegate externally and which core authorities to retain.

I. Risk Operators: Professional On-Chain Asset Management Service Providers

Traditional finance has long separated decision-making judgment from transaction execution responsibilities. Now, as the crypto market matures, various specialized functions have formed dedicated professional operating entities.

Traditional Financial Function Division

• Asset Managers: The core decision-making center for capital operations, formulating overall investment strategies and issuing specific execution instructions to asset custodians.
• Asset Custodians: Responsible for the safekeeping of assets, strictly executing investment operations according to the manager's instructions and overseeing asset security throughout the process.
• Channel Distributors: Sell fund products to investors, completing market fundraising and capital aggregation.

The crypto industry has evolved a corresponding functional system. Early decentralized finance relied entirely on smart contracts, but market practice has proven that relying solely on code cannot comprehensively prevent various potential on-chain risks. To ensure the smooth implementation of on-chain lending operations, a group of professionals specializing in complex risk assessment and coordination has emerged, known as risk operators, who formally undertake the asset manager functions within the on-chain ecosystem.

II. Early DeFi Lacked Specialized Risk Control Roles

Early decentralized lending protocols like Aave and Compound deeply integrated lending infrastructure with risk control standards. At that time, although there were risk operators, all assets across the network were aggregated into a single capital pool, and operators could only act as global risk control administrators for the protocol, making minor adjustments to overall risk control parameters. Once high-volatility assets flowed into the capital pool, the single pool structure could easily trigger risk transmission, and losses from a single poor-quality asset could quickly spread throughout the ecosystem, necessitating dedicated management of such chain reaction risks.

It wasn't until Morpho emerged that the industry landscape was completely rewritten. This project split collateral asset categories and loan durations into independent trading markets, replacing the traditional single capital pool with a modular multi-vault structure, fundamentally reconstructing asset operation models. The functions of risk operators also underwent a complete transformation. Operators were no longer limited to passive risk control within a fixed protocol framework; external professional teams could independently formulate risk control rules and build and operate dedicated lending vaults. With the complete separation of underlying infrastructure and risk assessment authority, risk operators transitioned from global risk control managers of the protocol to professional asset operators in the crypto market, independently managing multiple capital vault operations.

III. Current Landscape of Leading Industry Players

As of May 2026, the global risk management sector manages approximately $7 billion in assets, with the top three teams accounting for 70% of the market share. This sector is expected to officially enter its explosive growth phase in 2025, and capital has quickly concentrated towards capable teams, with investors showing a strong preference for operational entities with mature practical performance.

The three leading teams have different paths to entry:

1. Steakhouse: A conservative risk management institution that was the first to promote compliant on-chain collateralization of high-quality real-world assets like U.S. Treasuries. As the exclusive backend risk control partner for Coinbase's lending business, it boasts top-tier traffic channels, managing $1.53 billion in assets as of February 2026, ranking first in the industry, while also leading the establishment of compliance standards for real assets eligible for DeFi ecosystem collateral.
2. Sentora: Built on artificial intelligence risk control models and institutional-level data systems, it has deep integration with Kraken exchange as a backend service provider, solidifying institutional capital flow channels, managing $1.34 billion in assets, ranking second, and focusing on connecting exchanges with institutional clients' capital flow.
3. Gauntlet: An established on-chain quantitative risk modeling institution, specializing in simulating various market risk control parameters. In October 2025, it managed a significant influx of $775 million in funds, completing annualized yield anomaly corrections in just 10 days, gaining industry recognition for its strong capabilities in managing large fund risks and crisis response, currently managing $1.29 billion in assets, recognized as a benchmark for large fund inflow risk stabilization.

At this stage, competition in the sector has moved beyond mere asset scale comparisons, with the core competitive focus shifting to three major barriers: collateral admission standards, capital distribution channels, and emergency response capabilities for sudden risks.

IV. Traditional Asset Management Model vs. DeFi Risk Management System

With Morpho completing the modular separation of the market, different categories of collateral assets require dedicated professional teams for independent assessment and management. Professional risk management teams like Steakhouse have entered the field to become dedicated risk operators for DeFi, gradually aligning the decentralized finance operation model with traditional mature asset management processes.

From top to bottom, it is clear that the current DeFi underlying architecture has fully replicated the traditional financial full-process division of labor system:

1. Top-level capital fundraising and distribution: Institutional investors are the core source of capital, with massive funds flowing into the on-chain ecosystem through mainstream centralized exchanges and comprehensive service platforms, corresponding to the functions of traditional financial brokers and capital distribution channels.
2. Mid-level strategy formulation and risk control: DeFi risk operators plan capital operation models, analogous to traditional asset management portfolio fund managers and risk control committees, setting asset admission thresholds and position limits, and building overall capital operation strategies.
3. Bottom-level product construction and asset custody: Relying on capital vaults, operational strategies are transformed into on-chain financial products for external investment; the underlying lending protocols are responsible for asset storage and on-chain settlement execution, undertaking the functions of traditional financial asset custody and transaction clearing infrastructure.

From capital fundraising, strategy operation to asset custody and clearing, the entire operational process has fully aligned with the mature system of traditional finance. For traditional financial institutions, on-chain lending is no longer an unfamiliar emerging sector, but a logically clear and well-structured standardized market, significantly lowering the entry barriers for institutions.

V. Benchmarking Traditional Asset Management: Distribution of Sector Opportunities

After on-chain lending completes the functional separation akin to traditional asset management, it officially opens the door for various institutions to enter, but the entry barriers at different levels of the sector are significantly different:

• Channel distribution layer: Facing the end-user market, leading crypto institutions have completed market monopolization, making it highly competitive for traditional financial institutions.
• Strategy management layer: The core competition lies in financial professional judgment capabilities and talent reserves, with asset risk assessment, control, and product packaging being the core main businesses of traditional asset management. There is no need to develop complex underlying technical systems; relying on mature modular infrastructure to implement their own risk control systems allows for the rapid establishment of stable profit-making business models, making it the optimal entry path.
• Asset custody and underlying facilities layer: Focused on blockchain technology research and implementation, this is a technology-intensive field with very high requirements for underlying public chain development capabilities, making it extremely difficult for traditional financial institutions to independently build systems for entry.

Compared to other sectors that rely on traffic resources and underlying technology, the entry barrier for the strategy management and risk control layer is the lowest, allowing traditional financial institutions to quickly seize industry dominance with their well-established risk control systems accumulated over years.

Currently, institutional entry into DeFi can be categorized into three main models. Regardless of the chosen path, the core competitive advantage in the sector remains the professional risk judgment capabilities of the risk management team.

5.1 Channel Distribution Model: Leveraging Professional Teams for Backend Support

Holding mature external risk management teams as backend services to quickly capture market share. This model is suitable for exchanges and fintech platforms with massive user traffic but lacking independent on-chain risk management capabilities. In this model, investment strategies are fully outsourced, but the brand reputation risk and business responsibility risks brought by the cooperating team are still borne by the institution itself. Centralized exchanges that hold terminal traffic and are unwilling to delve into complex on-chain lending risk management commonly adopt this model: connecting with authoritative compliant external risk management teams as business backends to launch lending financial services. The platform is responsible for leveraging its own traffic to complete large capital inflows, while collateral review and full-process risk management are entirely handled by the cooperating risk management team.

5.2 Asset Supply Model: Compliant On-Chain Integration of Quality Offline Assets

Asset management institutions holding real-world assets and quality credit-type underlying assets directly supply existing assets to the on-chain market. Taking Apollo as an example, the institution, while completing the supply of assets on-chain, also lays out governance tokens for lending protocols, deeply participating in the formulation of industry collateral admission rules that fit their own assets. The core challenge of this model lies in completing the standardized compliance review of assets and building a comprehensive regulatory adaptation system. Large private equity institutions and holders of offline physical assets can directly connect their quality existing assets to on-chain financial channels. Apollo goes beyond merely supplying assets, increasing its holdings of governance tokens for leading lending protocols, deeply participating in rule-making for the industry, and promoting its offline assets to become officially recognized compliant collateral with higher market acceptance and stronger risk control priority. However, asset suppliers cannot arbitrarily include any assets as collateral; the market requires professional third-party verification of the real safety of assets to confirm that assets can be quickly and fully liquidated in on-chain clearing scenarios. This process relies on the rigorous qualification review and credit endorsement of the risk management team, ultimately depending on the asset supply model's long-term implementation on the asset management institution's own professional risk verification capabilities.

5.3 Self-Operated Model: Building Teams to Become Risk Operators (Representative Institution: Bitwise)

Asset management institutions independently develop investment strategies and build and operate dedicated on-chain capital vaults. Bitwise was the first to define on-chain capital vaults as version 2.0 exchange-traded funds, formally entering the sector. This model has the highest autonomy over fee pricing and collateral admission standards, but all risks and losses arising from business operations are fully borne by the institution, suitable for large asset management institutions that can build their own professional risk management teams. Traditional asset management institutions transitioning directly to become independent risk operators without relying on external platforms represent this model. Bitwise leverages its mature asset portfolio to build systems and risk control frameworks, independently designing and fully managing the operation model of on-chain vaults to directly obtain stable management returns on-chain.

VI. Industry Landscape on the Eve of Massive Traditional Capital Entry

From the perspective of industry development trends, as the on-chain lending ecosystem continues to mature, traditional large asset management institutions possess the strongest advantages for entering the industry. After the DeFi ecosystem completes modular functional separation, the core market demand has shifted: the industry no longer lacks smart contract development talent but is extremely eager for professional financial capabilities accumulated over years in traditional finance, such as collateral due diligence and risk limit setting. The practical risk control experience accumulated by traditional asset management institutions over decades can seamlessly adapt to on-chain financial scenarios.

However, at this stage, the overall market size of DeFi is still unable to accommodate the direct large-scale entry of top global asset management institutions: the total scale of the global traditional asset management industry reaches $147 trillion, with BlackRock alone managing assets amounting to $14 trillion; in contrast, the entire crypto DeFi sector is only $80 billion, with the risk management sub-sector size being merely $7 billion, insufficient to reach even one two-thousandth of BlackRock's managed scale.

The significant disparity in scale precisely confirms that the sector has enormous growth potential. Institutional capital has always adhered to the principle of risk control priority, only entering mature markets with well-established risk control systems. Once risk management teams establish a safe and stable on-chain capital flow system, supported by a regulatory framework, the industry will undergo a qualitative change. Even a small diversion of funds from the $147 trillion traditional asset management market will quickly leverage the $80 billion DeFi market for explosive growth.

Many industry benefits only exist in the early development stage of the sector. Currently, there are only a handful of high-quality leading risk management teams globally, and for institutions to enter on a large scale, mature industry operational rules are urgently needed. Teams that first build the underlying operational systems of the industry will firmly grasp the dominant power in rule-making. Later entrants, while enjoying a more refined and regulated market environment, can only participate in market competition by adhering to established industry rules, missing out on the core discourse power and first-mover advantages of early positioning.