Ethereum, long celebrated for its pioneering role in decentralized finance (DeFi), now faces scrutiny from one of its own—the network’s founder, Vitalik Buterin. For years, DeFi has been a cornerstone of Ethereum’s appeal, but Buterin’s recent comments suggest a shift in his perspective.
On Sunday, Buterin expressed a nuanced view on DeFi through social media, emphasizing the need for applications that are both “useful in a sustainable way” and uphold core principles like permissionlessness and decentralization. While he acknowledged the value of decentralized exchanges, stablecoins, and Polymarket, Buterin criticized the unsustainable aspects of the “2021-era liquidity farming craze.”
This critique comes amid mounting frustration within the Ethereum community. Critics argue that Buterin’s approach has seemed dismissive of DeFi, with some believing he’s focusing on niche applications that haven’t gained significant traction.
Kain Warwick, founder of Synthetix, voiced his concerns on a recent podcast, accusing Buterin of undermining DeFi’s importance and advocating for alternatives that haven’t resonated with the market.
Warwick’s comments highlight a growing divide. While Buterin’s critique has disappointed some within the Ethereum ecosystem, it has also resonated with certain Bitcoin proponents who share his skepticism about DeFi yield schemes.
Buterin’s skepticism extends beyond mere yield generation. He argues that the value of many crypto tokens, including those used in DeFi protocols, often stems from a cycle where token value is driven by trading activities rather than genuine utility. He described this dynamic as an “ouroboros,” where the yield comes from other traders rather than substantial external value creation.
Moreover, Buterin questions the long-term sustainability of overcollateralized lending markets that use Ethereum as collateral, suggesting these markets are heavily dependent on the ETH market itself. He called for new models of value generation that are rooted in external factors, expressing a desire to explore more viable candidates.
It is worth noting that the Ethereum Foundation, dedicated to advancing Ethereum and its technologies, recently faced criticism over the timing and communication of a significant financial transfer.
Some community members expressed frustration, demanding more transparency and questioning the rationale behind such a major transaction without prior notice.
In response, Aya Miyaguchi, the foundation’s executive director, clarified that the transfer was part of routine “treasury management activities.” She explained that the foundation operates with an annual budget of around $100 million, which is mainly allocated to grants and salaries, and that some recipients require payment in fiat currency.
