In summary
- Ethereum founder Vitalik Buterin recently criticized decentralized finance (DeFi), questioning its usefulness and sustainability.
- Buterin praised decentralized exchanges, stablecoins and Polymarket as examples of useful applications, but criticized the unsustainable products of the “2021-era liquidity farming craze.”
- Synthetix founder Kain Warwick accused Buterin of “moralizing” other industry leaders to “stop building DeFi” and of not being welcoming to DeFi on Ethereum.
Ethereum has spent years under a barrage of criticism questioning whether its primary use case — decentralized finance (DeFi) — has any real merit. Suddenly, one of the people leading that criticism is the network’s founder, Vitalik Buterin.
“The types of applications I want to see are applications that are (1) sustainably useful, and (2) don’t sacrifice principles (permissiveness, decentralization, etc),” Buterin tweeted on Sunday while discussing his views on DeFi.
He praised decentralized exchanges, stablecoins and Polymarket as examples, but criticized the unsustainable products of the “2021-era liquidity farming craze.”
Buterin’s latest comments are a response to growing frustrations within the Ethereum community that the ecosystem’s most influential voice is only “grudgingly tolerating” DeFi while attempting to promote other niche use cases that haven’t found the same product-market fit.
“One of the most critical things he’s been doing wrong over the last five years is (speaking out on) the importance of DeFi,” Synthetix founder Kain Warwick said in a podcast appearance on Friday, accusing Buterin of “moralizing” other industry leaders to “stop doing DeFi.”
“He keeps trying to meme things that aren’t actually DeFi,” Warwick continued. “The reality is the market is right, you’re wrong.”
Following the episode, many were disappointed to learn that Buterin has not been welcoming or encouraging of DeFi on Ethereum, except for the few use cases he mentioned. On the other hand, several Bitcoin enthusiasts were pleasantly surprised by Buterin’s comments, finding unexpected common ground with him in his opposition to DeFi yield schemes.
As Buterin later clarified, his criticism extends even to DeFi protocols that provide token holders with borrower yields and trading fees, rather than token inflation or “ponzinomics.”
“It feels like an ouroboros: the value of crypto tokens is that you can use them to earn yield that is paid by… people who trade crypto tokens,” wrote.
Even overcollateralized lending markets that use ETH as collateral, such as Aave, are limited in Buterin’s view, as the value and existence of those markets ultimately depends on the ETH market.
“I would love to see a story about where performance is coming from, or could come from, that is rooted in something external,” he said. “I’ve heard plausible candidates… I’d love to hear more.”
Edited by Ryan Ozawa.
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