On March 13, 2025, Pareto Co-founder Matteo Pandolfi sat down with Bart Hillerich, RockawayX, to discuss Pareto’s evolution from a DeFi yield aggregator to an on-chain credit marketplace, the push to unlock soft collateral, the growing role of RWAs in DeFi, and how Pareto is scaling on-chain credit and institutional adoption. Below, you'll find a summary of the discussion as well as the full transcript.
TL;DR
From Idle Finance to Pareto: Originally a DeFi yield aggregator, Pareto evolved into an on-chain credit marketplace to address inefficiencies in credit allocation and securitization.
Bringing $1T of Credit On-Chain: DeFi lending has been constrained by over-collateralization, limiting access to credit. Pareto aims to unlock provable “soft collateral”.
2025 as the Year for RWAs in DeFi: The focus is on integrating off-chain assets into DeFi, either by tokenizing them or verifying ownership for on-chain credit access.
Pareto’s Efficiency Campaign: A structured rewards program designed to drive real engagement and TVL growth, surpassing $50M in credit vault deposits.
Looking Ahead: Pareto is building the first open, credit-based money market, funding cash advances underwritten by future yield and commercial activity.
Not all points programs are created equal.
That’s the theme with @paretocredit’s Efficiency Campaign, where real contributions are coveted and a sustainable long-term vision guides each decision.
We sat down with Pareto founder @pan_teo_ to discuss this and more.
That’s the theme with @paretocredit’s Efficiency Campaign, where real contributions are coveted and a sustainable long-term vision guides each decision.
We sat down with Pareto founder @pan_teo_ to discuss this and more.
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Transcript of the Interview
Bart (00:00)
Matteo, thank you so much for joining me today. We're going to discuss the Pareto point system, recent developments at the company, and what everyone can expect moving forward. To start, it would be great to talk about the evolution of the company—how it transitioned from Idle Finance to Pareto. How did that process begin, and what has it been like? Where is it heading from here?
Matteo (00:37)
First of all, thanks for hosting me on this podcast. I'm honored to discuss the transformative journey from Idle Finance to Pareto and to share more about the efficiency campaigns we're currently running.
Our journey began with Idle Finance back in 2019, where we pioneered yield aggregation in DeFi—one of the first protocols to optimize capital across multiple lending platforms. Over time, Idle Finance grew to over $300 million in total value locked (TVL) at its peak. However, we recognized the need for more sophisticated risk management tools.
In 2021, we introduced senior and junior tranches to DeFi, bringing structured credit risk diversification on-chain for the first time. This innovation allowed users to select risk-adjusted returns suited to their investment profiles.
As DeFi evolved, we observed a growing institutional appetite for credit. However, inefficiencies in securitization and credit allocation persisted. Despite DeFi's rapid growth, the credit market remained largely off-chain, dominated by bespoke over-the-counter agreements requiring significant manual effort and customization.
This realization prompted a fundamental shift in our company’s direction. It was time to move beyond simply aggregating yield and managing risk. Instead, we needed to build a scalable on-chain credit marketplace. That’s how Pareto was born.
Bart (03:06)
Awesome. Through Pareto, you’re aiming to expand credit across DeFi. In terms of the grand vision, how do you think Pareto—and the industry as a whole—can bring a trillion dollars of off-chain assets on-chain into the ecosystem?
Matteo (03:35)
That’s a great question. When discussing this with my team, we started from the fundamentals. If you examine the modern financial system, it relies on two core pillars: a medium of exchange and the creation of credit. While stablecoins have solved the first problem over the past decade, DeFi’s growth remains constrained by the absence of a scalable, capital-efficient credit mechanism.
For DeFi to become a truly internet-native financial system—one that operates freely and across borders—a crypto-native credit primitive must emerge to enable economic expansion backed by future growth.
Since the launch of Aave and Compound in 2017, DeFi has followed an over-collateralized lending model. This ensures lender solvency in an anonymous, adversarial environment by requiring users to post collateral greater than the loan value. While this approach supports over $50 billion in DeFi TVL and more than $10 billion in outstanding loans, it presents two major challenges:
Capital Inefficiency – Over-collateralization locks up more capital than it provides in liquidity, fragmenting liquidity across protocols and chains.
Narrow Collateral Base – DeFi lending is restricted to a limited set of on-chain assets, while trillions of dollars in off-chain wealth remain inaccessible to DeFi lenders and borrowers.
As a result, credit access has been limited to existing market participants who already hold on-chain assets. This has prevented billions of dollars from being efficiently allocated, both to existing DeFi users seeking larger loans and to a broader global population currently excluded from DeFi credit markets.
Now it is now time to unlock over $1 trillion in provable soft collateral.
As an industry, we have prioritized solvency over growth in recent years, which was necessary to develop the infrastructure. However, we believe it is now time to unlock over $1 trillion in provable soft collateral through robust, private creditworthiness verification and crypto-economic security. This will usher in a new era of credit expansion for DeFi.
Bart (07:33)
Looking at 2025 as a pivotal year, imagine yourself in January 2026 reflecting on 2025. What would you need to see to consider the year a success for credit expansion in DeFi?
Matteo (08:02)
That’s a great question. For real-world assets (RWAs) in DeFi, 2025 is the year.
There are two ways to solve the problem of bringing $1 trillion in off-chain assets on-chain:
Fully tokenizing these assets.
Proving their existence and ownership via crypto-economically secured APIs, allowing credit to be extended against them on-chain.
With Pareto, we aim to build the first open, credit-based money market in 2025, funding cash advances underwritten by future yield, asset growth, and other commercial activity - what we call “soft collateral”
The model we envision extends credit against both crypto and cash assets, including DeFi assets, exchange-held crypto, and bank cash balances. Coinbase alone holds over $250 billion in crypto assets, nearly twice the size of DeFi, across a 70 million user base. Meanwhile, U.S. commercial banks hold approximately $18 trillion in retail deposits.
Bart (11:35)
Bringing it back to Pareto’s work in 2025, one major initiative has been the Efficiency Campaign and its point system. What inspired its design, and what key learnings from other projects influenced it?
Matteo (12:11)
We launched the Pareto Efficiency Campaign to reward early adopters for engaging with our Credit Vaults. However, we noticed that many reward programs in the industry focus on vanity metrics rather than driving meaningful engagement. Worse, some campaigns stretch for months without clear milestones, leading to user fatigue.
Our approach is different. The Efficiency Campaign directly rewards actions that build liquidity, expand participation, and reinforce Pareto’s long-term credit model.
Bart (16:35)
We’ve seen Pareto’s TVL rising with the Efficiency Campaign. What has the community's reaction been so far, and how do you measure its success?
Matteo (17:04)
Both the community and our team have been thrilled. The campaign’s success is evident—our Credit Vaults surpassed $50 million in TVL, a significant milestone.
Bart (19:07)
Matteo, it’s been a pleasure. Best of luck with the Efficiency Campaign and everything else you’re working on this year.
Matteo (19:22)
Thank you. It’s been an honor to be here.
About RockawayX
RockawayX is a digital asset firm with over $1bn in assets under management across its divisions. It has been investing in early-stage crypto companies and token projects since 2018. RockawayX’s top-performing credit strategy is an active liquidity provider across DeFi protocols and serves as a private working capital lender to varied projects and companies in the industry, including market makers and trading firms.
About Pareto
Pareto is a private credit marketplace that connects institutional lenders and borrowers, offering scalable yield opportunities and bridging institutional capital with on-chain regulatory-compliant credit markets.
Built on transparency, scalability, and automation, Pareto’s Credit Vaults eliminate bureaucratic friction, reduce operational costs, and enhance capital efficiency. As the financial landscape evolves, Pareto aims to set a new standard for institutional credit with fully automated, data-driven lending solutions.
