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Matthias Knab, Opalesque for New Managers: When Evgeny Gokhberg presented at an Opalesque Investor Workshop in November 2024, the focus was on Re7 Capital's "liquid venture" Opportunities Fund. Since then, the other half of the London-based firm's business has reached a milestone. Re7's market-neutral DeFi yield strategy, launched in July 2021, turned five this summer. According to the firm, it has delivered double-digit average annual net returns over that period with low volatility, through a crypto bear market, the collapses of Luna and FTX, and the flash crash of 10 October 2025.
That crash is where the story of the past year starts. The 10/10 sell-off, which saw some traders on centralised exchanges liquidated in disorderly fashion, turned out to be the best single day in the strategy's history and produced most of that month's return. "Many things worked in tandem including arbitrages between CeFi and DeFi venues," Gokhberg has said. He attributes part of the outcome to the platforms themselves: while some centralised venues closed out positions in a way that was not orderly, DeFi protocols are fully automated and "performed as expected."
This article draws on recent material provided by Re7 and on Gokhberg's appearance on the 1kx podcast, recorded at the Out East Summit hosted by The Tie.
Paid for being the bank
The most common objection to DeFi yield is that it simply compensates investors for taking smart contract risk. Gokhberg agrees, and says that is precisely the point. On the podcast, he explained that his founding thesis for Re7 was that DeFi unbundles two roles that traditional finance combines. A bank sits between depositors and borrowers and absorbs the risk on its own balance sheet, backed by shareholder equity. A protocol such as Uniswap or Morpho provides the marketplace but holds no capital, so that role is outsourced to liquidity providers, who bear the risk directly. DeFi yield is therefore payment for performing that function and carrying the technical risk that comes with it, not a premium for holding crypto price exposure. That risk can be analysed, diversified and managed, which is where Re7's approach comes in.
"We do what banks do in the real world. We provide liquidity to the ecosystem," he said. "We're not getting paid because DeFi is risky. We're getting paid because there is economic activity on-chain, and we're the ones making it happen."
In practice, the strategy rotates between four broad sub-strategies - lending, staking, market making and trading - with delta on volatile legs hedged, typically through perpetuals, to keep the book market neutral. Leverage is rare and, where used in yield farming, stays on the same platform. Gokhberg compares the strategy to being able to move money freely between bank accounts whose interest rates keep changing. It is not high-frequency trading, however: the average relationship with a platform lasts three to six months, although automated risk monitoring runs around the clock. Some buckets can be empty when the risk-reward is poor. In early 2026, for example, lending rates on major DeFi protocols fell to levels that no longer compensated for the smart contract risk involved, so the risk-adjusted return did not justify deploying capital in certain pools.
A credit analyst's framework
Gokhberg spent about a decade in traditional finance before crypto, first on a fundamental emerging markets equity long/short desk and then in portfolio management at UBS and Deutsche Bank. On the podcast, he recalled trades such as buying Egyptian real estate stocks at around 30 cents on the dollar after the Arab Spring and shorting Australian iron ore miners as a proxy for Chinese property. The firm's name comes from chess, where Re7 is a well-known move.
That background shapes how Re7 treats DeFi. "Our approach is as traditional as possible," Gokhberg has said. "We view risk through the prism of a process somewhat analogous to credit ratings and have more in common with a traditional credit strategy than most trading strategies." On the podcast, he described DeFi as akin to high-yield bonds: some platforms will fail, and the job is to earn a yield above the cost of default.
That cost has fallen sharply. In DeFi's early days, sector-wide default losses ran at around 15%, against yields of around 40%. Today the sector's annualised default rate is roughly 2%, and Re7's is below 0.5% average. Every platform and protocol is rated from AAA to CCC using dozens of weighted criteria. Gokhberg compares the checklist to a mortgage application, with inputs closer to operational due diligence and cybersecurity audits. A minimum BBB rating is required, and exposure limits scale with the rating. Privacy protocols are excluded on regulatory grounds.
The process is selective. Re7 has investigated thousands of platforms but is typically exposed to only 30 to 40 of them at any time, across over ten blockchains. Judgement still counts: "We avoided some teams that passed technical due diligence because they did not feel right." The firm also shares its findings privately with the protocols it rates and may increase allocations to those that act on them, which Gokhberg describes as an activist approach to raising standards across the space.
The framework's best-known test came early. "We looked into Anchor, and it just didn't pass our DD. So we red-flagged it, and we have never had a single cent in it," he said of the Terra-based lending protocol whose roughly 20% yields collapsed with Luna in 2022. At the time, he recalled, other investors thought he was an idiot for passing on those yields, "and some of those people are no longer around." Re7 also reports no losses from liquidation gaps, which it attributes to conservative over-collateralisation and accepting only blue-chip collateral.
AI and the wooden doors
The newest risk question for DeFi allocators is whether AI makes smart contracts uninvestable. 2026 has seen a record number of hacks, particularly in March and April. Gokhberg noted on the podcast that losses in dollar terms remain below 2% annualised, but the number of incidents has jumped, and Re7 set out to find out why.
Its conclusion is that almost all of these attacks were not AI discovering new ways to break smart contracts, but AI finding and exploiting legacy operational security weaknesses. "AI doesn't invent an amazing drill that breaks through a metal vault. What AI does, it finds 100 old banks with wooden doors that you can knock in with a kick," he said. Of the roughly 60 platforms hacked so far this year, Re7 had not even heard of about 50 - a sign, in his view, that the victims were mostly small and not serious operations. Operational security has therefore become the most critical part of Re7's assessments right now.
Re7 also uses AI itself. About 18 months ago, the firm quietly launched a fully autonomous AI agent venture fund, tokenized on Base, without marketing it or raising outside capital, and Gokhberg says it has done very well. The lesson, he said, was that agents can take over a junior analyst's repeatable tasks but cannot replace a senior expert, and that AI research produces many false positives for non-specialists. "It accelerates your work by a magnitude of ten times, if not more, but it doesn't replace the need to think."
Returns through the cycle
Because Re7 earns its yield by servicing on-chain activity, its returns are cyclical: they follow demand for leverage and trading, though not the direction of crypto prices.
The strategy's two strongest years, 2021 and 2024, combined surging DeFi total value locked (TVL) with bullish sentiment, which gives the strategy some upside when parts of the crypto market are in a strong bull run. The supply of capital matters too: a glut of capital slightly depressed yields in early 2022, while outflows lifted funding rates in 2023 and 2024.
Dispersion can be extreme. "We sometimes find on-chain yields as high as 30-50% on platforms with acceptable risk. At other times it is hard to even make 5% annualized," Gokhberg has said. In June 2026, Re7 briefly captured annualised returns of 100% on Hyperliquid, but only for around eight to twelve hours. Gokhberg sees annual returns of 20-35% in the most benign conditions and 10-17% in positive ones, falling to low single digits in a year like 2022. Re7 sets no minimum return target and takes risk only when it is adequately compensated.
Asked on the podcast why Re7 has grown while DeFi as a whole has not, Gokhberg gave a simple answer: "I think just surviving." Few people moved into DeFi after a decade in traditional finance, he noted, and a risk framework developed from DeFi's first days gave the firm the confidence to launch.
Tokenized Nvidia and new rails
The most exciting opportunity in DeFi right now, Gokhberg says, is tokenized equities. With AI stocks in a bull market, Re7 is running its established market-neutral trades on tokenized versions of them. "The same things we used to be doing with meme coins or other assets, being fully market neutral, we're doing with tokenized Nvidia," he said. He also highlighted tranching, a long-standing idea that DeFi protocols have only recently begun to implement.
This is where the worlds collide. When crypto-native platforms pay a premium to borrow stablecoins against bitcoin, Re7 is explicitly taking smart contract risk. When someone wants to borrow against tokenized Nvidia, it is competing with traditional finance. Gokhberg said the firm is in talks with banks looking to lend stablecoins into vaults it runs, and with parties interested in tokenizing equity or credit positions to put into those vaults. He resists expanding into traditional markets directly, however: "When I think of myself going to our investors and telling them that I can trade Apple better than Citadel, I don't think I can do that."
Access to the strategy has broadened. The market-neutral strategy is available in USD, BTC and ETH denominations, each in both traditional and tokenized fund formats. The tokenized funds can also be reached through Telegram wallets. Anchorage Digital provides qualified custody for the ETH-denominated mRe7ETH share class, which is built on the Ethereum layer 2 network Optimism. Zodia Custody provides on-chain representation and custody through its Interchange network, and the BTC Yield fund runs on Starknet. On the podcast, Gokhberg added that Re7 has been approved for the wealth management platforms of several very large global investment banks. Investors include family offices, funds of hedge funds, foundations, endowments and crypto-native and corporate treasuries.
Beyond market neutral
The directional liquid venture fund presented in the 2024 webinar is attracting renewed interest as altcoin prices have fallen. "The altcoin space now has businesses with genuine cashflows that have been dragged down by overall sector volatility," Gokhberg has said. Re7 also runs a venture fund targeting very early-stage agentic and consumer social projects, and a multi-strategy fund combining all three approaches for investors who want to stay diversified through cycles. The strategies feed each other: a new protocol might receive venture funding for pre-launch tokens and liquidity from another Re7 fund, which in turn creates arbitrage opportunities during price discovery.
A measured outlook
Gokhberg is no maximalist. DeFi TVL peaked around USD 180 billion in 2021, spent roughly two years near USD 50 billion, almost regained its high in early 2026 and then fell by half again, to near USD 100 billion by June. He considers that volatility natural in a procyclical, over-levered sector and does not expect tokenized venues to make traditional exchanges obsolete, since both are growing. He is confident Re7 can deploy around USD 1 billion in the strategy, although the best risk-adjusted opportunities do not scale without limit.
Tokenization, he argues, is steadily widening the opportunity set, and rising stablecoin settlement volumes should speed up the circulation of capital on-chain. As for the long-awaited US Clarity Act, Gokhberg does not see it as a game changer for his strategies: "We do not see any direct impacts for lenders/traders and market makers, though it may reshuffle the areas for best and most sustainable alpha."
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