Vitalik Buterin Criticizes Unsustainable DeFi Practices

According to PANews, Ethereum co-founder Vitalik Buterin has recently voiced his concerns about the sustainability and value of decentralized finance (DeFi) applications. Buterin expressed his views on Twitter, emphasizing the need for applications that are both useful in a sustainable manner and do not compromise on principles such as permissionlessness and decentralization. Buterin praised decentralized exchanges, stablecoins, and platforms like Polymarket as positive examples but criticized the unsustainable products that emerged during the 2021 liquidity mining craze. His comments come in response to growing frustration within the Ethereum community, which feels that Buterin, as one of the ecosystem's most influential voices, has only reluctantly tolerated DeFi while advocating for other niche use cases that have yet to achieve the same market fit. Synthetix founder Kain Warwick recently criticized Buterin on a podcast, accusing him of underestimating DeFi's importance over the past five years and engaging in moral preaching to other industry leaders to stop focusing on DeFi. Warwick argued that Buterin has been trying to push non-DeFi projects, while the market has shown a clear preference for DeFi. Following the podcast, many were disappointed to learn that Buterin has not been supportive of DeFi on Ethereum, except for a few exceptions he mentioned. Conversely, some staunch Bitcoin supporters found common ground with Buterin's criticism of DeFi yield schemes. Buterin later clarified that his criticism extends to DeFi protocols that provide yields to token holders through borrower and trading fees rather than token inflation or 'Ponzi economics.' He described this as a self-consuming cycle where the value of crypto tokens is derived from the ability to earn yields, which are paid by people trading those tokens. Even over-collateralized lending markets using ETH as collateral, such as Aave, are seen as limited by Buterin because their value and existence ultimately depend on the downstream results of the ETH market. He expressed a desire to see a narrative where the source of yields is rooted in something external, mentioning that he has heard of some potential candidates and is open to hearing more ideas.