Ethereum co-founder Vitalik Buterin has raised concerns about the long-term value of decentralized finance (DeFi), a primary use case for the Ethereum network. In a recent tweet, Buterin emphasized the need for applications that are not only “useful in a sustainable way” but also align with fundamental principles like permissionlessness and decentralization. While he acknowledged the merits of key DeFi components such as decentralized exchanges, stablecoins, and the prediction market Polymarket, Buterin was critical of the unsustainable products that emerged during the “2021-era liquidity farming craze.”
Buterin’s remarks have intensified a debate within the Ethereum community, where some members feel that Ethereum’s most prominent figure is only “begrudgingly tolerating” DeFi. They argue that he is promoting other niche applications that have yet to achieve the same level of success as DeFi.
Kain Warwick, the founder of Synthetix, expressed frustration with Buterin’s stance, claiming that he has underestimated DeFi’s importance over the past five years. “He keeps trying to meme non-DeFi things into existence,” Warwick stated, adding, “The reality is that the market’s right—you’re not right.”
Following his initial comments, Buterin further clarified his position, criticizing DeFi protocols that generate yields for token holders through borrower interest and trading fees, rather than relying on token inflation or what he termed “ponzinomics.” He likened the current situation to an ouroboros—a serpent consuming its own tail—where the value of crypto tokens appears to stem from the ability to earn yield, which is itself fueled by crypto trading activities.
Buterin also expressed skepticism toward overcollateralized lending markets that use ETH as collateral, such as Aave, noting that the value of these markets is ultimately tied to the ETH market itself. “I would love to see a story for where the yield is coming from, or could come from, that’s rooted in something external,” Buterin remarked.
His comments have received mixed reactions within the Ethereum community. While some were disappointed by Buterin’s limited support for DeFi on Ethereum, others, including hardcore Bitcoin enthusiasts, found common ground with his critique, particularly his opposition to certain DeFi yield schemes.
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