Empire
June 21, 2025

Supra’s Vision For Automatic DeFi aka AutoFi Featuring Joshua Tobkin

Joshua Tobkin, Co-founder and CEO of Supra, joins Empire to unveil "AutoFi," a vision for transforming DeFi into an automated, real-time economic system. This episode dives into Supra’s vertically integrated architecture, its approach to oracles, and how it plans to make DeFi run on autopilot.

The Vertically Integrated Counter-Narrative

  • "Our thesis is basically the opposite of the modular thesis. Ours is the vertically integrated thesis full vertical integration single layer one that also has built-in Oracle protocol that's very high performing very secure cross-chain communication and on-chain randomness as well as automation."
  • Supra champions a "mega monolith" design, integrating its Layer 1 with oracles, cross-chain communication, randomness, and automation. Tobkin argues this offers superior security, speed, and cost-efficiency over the prevailing modular approach.
  • While monolithic, Supra is built with modular internal components for upgradeability, aiming to deliver high performance by having its nodes handle multiple services simultaneously.
  • This philosophy is driven by the belief that a focused, expert team can build more performant and secure full-stack infrastructure.

Oracles: Beyond Price Feeds

  • "What we are doing is prioritizing giving priority access and block space to Oracle data that's generated from our system... we prioritize it so that in case of high congestions... we want to make sure that Oracle data lands."
  • Supra ensures oracle data lands on-chain (approx. every 600-900ms) by giving it priority blockspace, crucial during high congestion when DeFi liquidations are common.
  • The vision extends to "Threshold AI Oracles"—committees of AI models that debate and cryptographically sign outputs, enabling qualitative data like market sentiment to be used on-chain.

AutoFi: DeFi on Autopilot

  • "AutoFi transforms blockchains from passive settlement ledgers into proactive real-time economic systems capable of autonomously coordinating liquidity provisioning adaptive vault strategies arbitrage and liquidation."
  • AutoFi leverages Supra’s integrated stack to enable complex, automated financial strategies that execute in real-time based on diverse on-chain and off-chain triggers, including AI-driven insights.
  • Automation tasks are registered on L1, allowing nodes to execute them within the same block (up to 3 times/second) if conditions are met, moving beyond simple price-triggered actions.

Sustainable Revenue and Value Recirculation

  • "Our moonshot kind of aspiration is to be off of like 90% of block rewards within three years, driven purely from the other value capture that we're able to."
  • Supra aims to become sustainable by capturing revenue from "good MEV" (arbitrage, liquidations) and automation fees, significantly reducing reliance on token inflation within 2-3 years.
  • The "Supra Treasury," a network-owned vault, will collect these revenues and redistribute them to dApps and node operators, effectively socializing MEV benefits.
  • Mechanisms like randomized execution and just-in-time decryption are designed to mitigate "toxic MEV" like front-running.

Key Takeaways:

  • Supra is betting against the modular trend with a vertically integrated approach, believing it can deliver a more performant and secure platform for the next generation of DeFi. The introduction of AutoFi, powered by on-chain automation and AI-enhanced oracles, aims to make DeFi strategies more sophisticated and autonomous.
  • Vertical Integration is Supra's Edge: Supra’s all-in-one L1 aims to outperform modular systems by tightly coupling core services, reducing latency and complexity for developers.
  • AutoFi Leverages Full Stack: The true power of AutoFi comes from the synergy of a high-performance L1, embedded oracles (including AI), and native automation, enabling proactive economic systems.
  • Revenue Model Targets Sustainability: Supra is intensely focused on capturing and redistributing on-chain value (MEV, automation fees) to build a sustainable ecosystem independent of inflationary block rewards.

Podcast Link: https://www.youtube.com/watch?v=LIz0Qz3mJf0

This episode of Empire with Josh Tobkin, CEO of Supra, unveils "AutoFi"—a groundbreaking vision where blockchains evolve from passive ledgers into proactive, AI-enhanced economic systems, fundamentally reshaping how investors and researchers approach decentralized finance.

The Genesis of Supra: A Vertically Integrated Vision

  • Josh Tobkin, co-founder and CEO of Supra, explains that Supra's core thesis is a departure from the prevailing modular approach in blockchain architecture.
  • Supra champions vertical integration, believing that if a Layer 1 (L1)—the foundational blockchain layer—has sufficient compute and bandwidth, it should handle multiple services simultaneously.
  • This includes a high-performance oracle protocol, cross-chain communication (mechanisms allowing different blockchains to interact), on-chain randomness (unpredictable number generation crucial for security and fairness), and automation.
  • Josh emphasizes, "really the magic happens when you combine smart contract platform high performing consensus with... access to oracle data." This integrated stack, he argues, is where true innovation lies.

From Randomness to a Full Stack: Supra's Origin Story

  • The initial spark for Supra, as recounted by Josh, dates back to 2017, driven by the challenge of incorporating randomness onto deterministic blockchains.
  • Initially, he envisioned oracles—third-party services that feed external data to smart contracts—as a means to generate this randomness by combining diverse data like stock prices and weather data.
  • This foundational idea expanded: if oracles are essential, they should be built-in.
  • This naturally led to recognizing that other critical functions like cross-chain communication and automation are also, fundamentally, oracle problems.
  • Josh also credits Anatoly Yakovenko of Solana for reinforcing his view that nodes can and should do more, further maturing Supra's vertically integrated philosophy.

Prioritizing Oracle Data for DeFi Stability

  • A key design decision for Supra is ensuring its oracle data can land reliably and quickly.
  • While Supra's blockchain can produce three blocks per second (achieving finality in about 300 milliseconds), its oracle protocol finalizes data in 600-900 milliseconds.
  • This means oracle updates occur approximately every two to three blocks.
  • Crucially, Josh highlights that Supra "prioritizing giving priority access and block space to Oracle data that's generated from our system." This is vital because, historically, network congestion has often prevented timely oracle updates, leading to significant problems in DeFi, such as cascading liquidations.
  • By prioritizing oracle data, Supra aims to maintain DeFi solvency even during periods of high network stress.

Challenging the Modular Thesis: Supra's Stance on Infrastructure

  • Josh Tobkin expresses strong reservations about the modular approach, where different blockchain functions (like execution, data availability, and settlement) are handled by separate, specialized layers.
  • He argues this introduces "security vulnerabilities... additional cost and complexity for developers... it's also slower."
  • The reliance on multiple external networks means an application's security is reduced to its weakest link, and communication between layers adds latency and cost.
  • Supra’s alternative is full vertical integration, though Josh clarifies it's a "mega monolith but it's built in a modular fashion," meaning individual components like the consensus algorithm or oracle protocol can be updated independently without affecting the entire system.

Building In-House: The Power of an Expert Team

  • Supra takes a strong stance on developing its core components in-house, driven by a high-caliber research team led by Dr. Aniket Kate, the "K" in KZG commitments (a cryptographic primitive underpinning technologies like zk-rollups and Ethereum's data availability roadmap).
  • Josh states, "the contrarian view is that we actually think we can develop protocols for each of these components that are actually outperforming the other projects and it's because we assembled like the Avengers."
  • This commitment to internal expertise and rigorous academic validation (publishing in top-tier computer science venues like CCS) underpins their belief in creating superior, integrated solutions.
  • However, he notes Supra's modular internal design allows for adopting external innovations if they prove superior.

Enshrining Applications: Beyond Infrastructure to Primitives

  • Drawing an analogy from a Steve Ballmer quote about platforms needing strong first-party apps, Josh reveals Supra's strategy extends to building and "enshrining" key applications.
  • They plan to build a "dynamic function market maker" (a novel AMM type) into the system as a social good and are incubating next-generation perpetual exchanges (perpexes).
  • This philosophy suggests that fundamental financial primitives should be network-owned.
  • Josh articulates this by saying, "Anything that's a primitive, aka it's always going to be on every chain might as well be owned by everyone."
  • This approach aims to capture value for the entire ecosystem—node operators, dApps, token holders, and the community—with a long-term goal of reducing reliance on inflationary block rewards.

Perspectives on Other L1s: Learning from Solana and Hyperliquid

  • Josh Tobkin shares his analysis of other Layer 1 blockchains.
  • Regarding Solana, he notes that its original Proof of History consensus mechanism was seen by Supra as an "inefficiency."
  • However, Solana's recent move towards "Outflow," incorporating classical BFT (Byzantine Fault Tolerance) algorithms and BLS signatures, aligns more closely with Supra's own research, exemplified by their "Hydrangea" consensus paper.
  • On Hyperliquid, Josh sees its structure (L1 with integrated oracle, bridge, and dApp) as an "instantiation of vertical integration," which "basically cement[s] our thesis."
  • He acknowledges that Supra's vertically integrated path has been somewhat "lonely" in a world largely focused on modularity, but remains firm in the belief that capable nodes should perform multiple functions.

The Future of Blockchain: AI-Driven Automation

  • Looking 5-10 years ahead, Josh envisions blockchains characterized by high performance, low latency, and affordability.
  • A critical missing piece today is robust on-chain automation.
  • He foresees AI playing a transformative role, stating, "AI ain't going nowhere... it's a major platform."
  • The challenge lies in bridging AI's non-deterministic nature with blockchain's deterministic environment.
  • Supra's vision is for high-throughput systems with secure access to AI for on-chain actions and workflow automation, particularly for sophisticated trading or hedging strategies.
  • Josh conjectures that "you need to vertically integrate to do this," while emphasizing that this integration must maintain decentralization.

AutoFi: Transforming Blockchains into Proactive Economic Systems

  • Supra's whitepaper introduces AutoFi (Automatic DeFi), a concept designed to shift blockchains from "passive settlement ledgers into proactive real-time economic systems."
  • Josh explains that currently, actions on a blockchain are reactive.
  • Supra's on-chain automation, however, allows tasks to be registered across the L1, enabling automatic execution within the same block (up to three times per second) when predefined triggers and conditions are met.
  • This creates an "autopilot" for DeFi.
  • The more futuristic aspect involves Threshold AI Oracles (TAOs)—committees of AI models that debate and cryptographically agree on decisions, allowing automation logic to be dynamically adjusted based on real-world events and qualitative data.

Threshold AI Oracles (TAOs): Decentralized AI Decision-Making

  • Josh elaborates on Threshold AI Oracles (TAOs), describing them as committees of AI agents designed to debate, reason, and reach a cryptographically signed consensus.
  • The current prototype involves a small number of agents, but the plan is for a permissionless system where anyone can stake and participate with fine-tuned AI models.
  • "The key fundamental thing is that we move away from just classical oracles doing just data price feeds... to systems that can actually debate and reason," Josh explains.
  • This mechanism aims to bring qualitative data, like market sentiment, securely onto the blockchain to inform automated actions.

AutoFi Use Cases: Complex Strategies and Enhanced Prediction Markets

  • The combination of AI, oracles, blockchain, and cross-chain communication through AutoFi enables highly sophisticated automated strategies.
  • Josh provides an example: "if the sentiment of X token is X Y and Z as well do this."
  • This allows for complex, multi-conditional "if-then" statements incorporating data like price, CPI, and even AI-analyzed sentiment.
  • For prediction markets, TAOs could offer automated, human-intervention-free resolution, potentially addressing issues of bias or manipulation seen in current models.
  • Supra also plans an AI-assisted strategy builder, allowing users to define strategies in natural language and backtest them against historical oracle data before deployment.

The Supra Treasury: A Network-Owned Auto-Vault

  • At the heart of AutoFi is the Supra Treasury, envisioned as a network-owned, programmable "auto-vault" that dynamically allocates capital.
  • It captures value through "auto primitives" like automated liquidations and arbitrage opportunities missed by the community.
  • This revenue, instead of leaking out as MEV (Maximal Extractable Value – profit extracted by reordering or inserting transactions), is redistributed.
  • A portion goes to the dApps where the opportunities originated and helps fund the network, with the aim of replacing toxic MEV incentives for node operators.
  • Josh explains the treasury can "deploy as a liquidity provider starting with a little bit... monitoring it... increasing the amount that's deployed slowly over time," acting in a missionary, not mercenary, capacity to support the ecosystem.

Revenue Generation and Sustainable L1 Economics

  • Josh Tobkin emphasizes Supra's focus on revenue for long-term sustainability, especially as Supra is a fixed-supply asset aiming to "wean off of block rewards within two to three years."
  • He critiques reliance on base transaction fees as a business model for high-throughput chains, as these fees are designed to be minimal.
  • Instead, Supra focuses on capturing value currently lost to MEV.
  • The system aims to mitigate toxic MEV (like front-running) while capturing revenue from "good MEV" (like arbitrage and timely liquidations) and redistributing it.
  • This includes an "automation priority auction," where entities bid for priority execution of automated tasks, with that revenue also feeding back into the ecosystem.

Navigating the "Cool Kid" Crypto Dynamic

  • Addressing the "cool kid" phenomenon in crypto, where certain projects gain disproportionate attention, Josh acknowledges Supra has "struggled with this a lot," partly due to their contrarian stance and geographical distance from some epicenters.
  • He notes that Supra, by competing with established L1s, oracles, and bridges, didn't benefit from typical cross-promotional synergies.
  • His strategy is clear: "to do something no one else is able to do that actually has product market fit."
  • Supra aims to earn attention by building unique, valuable capabilities, with Josh stating, "I think we'll become the cool kids by next year," driven by the real-world utility of their integrated AI and automation stack.

Strategic Conclusion

  • This episode highlights Supra's ambitious plan to merge AI with decentralized infrastructure through AutoFi, creating proactive financial systems.
  • Crypto AI investors and researchers should monitor Supra's development of on-chain automation and Threshold AI Oracles, as these could pioneer new models for autonomous DeFi strategies and qualitative data integration.

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