Ethereum has faced its share of criticism about whether decentralized finance (DeFi), one of the main use cases, has genuine long-term value.
Ethereum has faced its share of criticism about whether decentralized finance (DeFi), one of the main use cases, has genuine long-term value. This time, Ethereum’s own co-founder, Vitalik Buterin, is raising questions.
In a recent tweet, Buterin expressed his desire to see applications that are not only “useful in a sustainable way” but also adhere to core principles like permissionlessness and decentralization. While he praised certain DeFi staples like decentralized exchanges, stablecoins, and the prediction market Polymarket, he was critical of what he described as unsustainable products emerging from the "2021-era liquidity farming craze."
Buterin’s remarks come amid growing frustration within the Ethereum community, where some feel that the network’s most influential figure is only "begrudgingly tolerating" DeFi while promoting other niche use cases that have yet to achieve the same level of product-market fit.
Kain Warwick, the founder of Synthetix, voiced his dissatisfaction, arguing that Buterin has underestimated the significance of DeFi over the past five years. “He keeps trying to meme non-DeFi things into existence,” Warwick said, adding, “The reality is that the market’s right—you’re not right.”
Buterin later clarified his stance, extending his criticism to DeFi protocols that generate yield for token holders through borrower interest and trading fees, rather than through token inflation or what he referred to as "ponzinomics." He described the current situation as akin to an ouroboros—a serpent eating its own tail—where the value of crypto tokens seems to be derived from the ability to earn yield, which itself is paid for by crypto trading activities.
He was also skeptical about overcollateralized lending markets that use ETH as collateral, such as Aave, pointing out 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.
Buterin’s comments have sparked a mixed reaction. Some in the Ethereum community were disappointed to learn that Buterin hasn’t been more supportive of DeFi on Ethereum, aside from the few exceptions he mentioned. On the flip side, some hardcore Bitcoin enthusiasts found common ground with Buterin’s critique, especially regarding his opposition to certain DeFi yield schemes.
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