Ethereum has spent years under fire from critics who question the wisdom of its flagship use case, decentralized finance (DeFi). Suddenly, one of the spearheads of that criticism is the network’s founder, Vitalik Buterin.
“The types of apps I want to see are apps that are (i) sustainably useful, and (ii) don’t sacrifice principles (permissionlessness, decentralization, etc.),” Buterin tweeted Sunday while discussing his views on DeFi.
He praised decentralized exchanges, stablecoins, and Polymarket as examples, but criticized unsustainable products that emerged from the “2021-era liquidity farming craze.”
The types of apps I want to see are apps that are (i) useful in a sustainable way and (ii) don’t sacrifice principles (permissionlessness, decentralization, etc.)
I think DEXs are awesome and I use them every week.
I think decentralized stablecoins…
— vitalik.eth (@VitalikButerin) August 25, 2024
Buterin’s latest comments come in response to growing frustrations within the Ethereum community that the most influential voice in the ecosystem is only “reluctantly tolerant“DeFi while trying to champion other niche use cases that haven’t found the same product-market fit.
“One of the most critical things he’s misunderstood over the last five years is the importance of DeFi,” Synthetix founder Kain Warwick said during a podcast appearance Friday, accusing Buterin of “moralizing” other industry leaders to “stop doing DeFi.”
“He keeps trying to make things happen that aren’t related to DeFi,” Warwick continued. “The reality is the market is right, but you’re not right.”
After the episode, many were disappointed to learn that Buterin did not welcome or encourage DeFi on Ethereum, aside from the exceptions he mentioned. On the other hand, several hardcore Bitcoiners were pleasantly surprised by Buterin’s comments, finding unexpected common ground with him on his opposition to DeFi yield-based systems.
As Buterin later clarified, his criticism even extends to DeFi protocols that provide token holders with yield from borrowers and trading fees, rather than token inflation or “ponzinomics.”
“It’s like an ouroboros: the value of crypto tokens is that you can use them to earn a yield that’s paid by… people who trade crypto tokens,” he said. wrote.
Even overcollateralized lending markets that use ETH as collateral, like Aave, are limited according to Buterin, since the value and existence of these markets ultimately lies downstream from the ETH market.
“I would love to hear a story about where the yield is coming from, or where it might be coming from, that is rooted in something external,” he said. “I’ve heard some plausible candidates… I’d like to hear more.”
Edited by Ryan Ozawa.
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