ethereum co-founder Vitalik Buterin has come under fire from the crypto community for his comments on decentralized finance (DeFi).
In an August 25 post on x, Buterin expressed doubts about DeFi’s potential to drive significant growth in the cryptocurrency sector. x.com/VitalikButerin/status/1827642283560144916″>fixed:
“The current existence of the DeFi market is a consequence of the existence of the eth market, meaning that while DeFi may be great, it is fundamentally limited and cannot be _the thing_ that leads crypto to another 10-100x explosion in adoption.”
Community reaction
Buterin’s comments sparked strong reactions in the DeFi community, with influential figures such as DeFiance Capital founder Arthur Cheong openly challenging his views.
Cheong highlighted the contribution of DeFi in helping to boost the value of ethereum to its current height, x.com/Arthur_0x/status/1827904252846707037″>declaring:
“(Buterin) doesn’t really understand the use case and the sector that generates value in eth and makes it worth $330 billion.”
Similarly, Sam Kazemian, the founder of Frax Finance, x.com/samkazemian/status/1827856232671305986″>suggested Buterin was not aware of the current dynamics of DeFi and stablecoins. He said that the ethereum co-founder's arguments were based on outdated assumptions.
Rhett Shipp, founder of the Gravita Protocol, also x.com/RhettShipp/status/1827911788488487047″>discussed that DeFi was instrumental in eth’s growth. According to him, the sector accounts for the majority of ethereum’s gas and usage fees and helps drive the value of eth because it is widely used as collateral in DeFi.
Shipp also responded to Buterin’s criticism of unsustainably high returns in DeFi, noting that early subsidies are a valid strategy to encourage adoption.
Shipp concluded his statement by saying:
“If we remove DeFi from eth, its value would be 80% lower.”
Buterin's opinion on DeFi
Despite the backlash, Buterin remains a staunch advocate of decentralized crypto applications.
He acknowledged that while many applications, such as those in the 2021 liquidity farming boom, were temporary and lacked sustainability, he favors those that are sustainable and completely decentralized.
Buterin highlighted decentralized exchanges, decentralized stablecoins like RAI, and prediction markets like Polymarkets as examples of applications he supports.
In addition, Buterin also x.com/VitalikButerin/status/1827589056068206608?t=LNGWsXtRnbtWBqdWg27UbQ&s=19″>called to expand decentralization beyond finance into other areas of technology. He noted that centralization poses a significant threat, affecting encrypted messaging platforms, social media censorship, and centralized identity systems.
He stressed that the intersection of decentralized finance with other decentralized technologies will be crucial for the cryptocurrency industry to uphold its core values, including privacy.
Buterin concluded:
“I think the intersections between decentralized finance and other decentralized technologies will be very important.”
