The co-founder of Ethereum, Vitalik Buterin has pointed out that he has a bit of “love and hate” for the influx of decentralized finance (DeFi) applications that were recently built on Ethereum network. He, however, tagged them as valuable and essential to the blockchain community at large.
He said this while in a conversation with Ryan Sean Adams, the founder of Mythos Capital, a crypto investment company. During the interview, Buterin criticized the yield farmers, stating that the high-interest rates that some liquidity providers receive would become unsustainable in the long-term.
The Ethereum co-founder further claimed that “there’s definitely also a side to DeFi that feels like it sometimes gets more into speculation than value, and more short-term than long-term.”
According to Buterin, the recent yield farming craze is a good example. Additionally, he believes that “the yields that are reached are over 100% annualized for some amount of time”, stating that such projects see people put their liquidity into a platform and start collecting fairly high-interest rates.
Vitalik Buterin noted,
“But the reality is that these interest rates do not reflect on anything that is remotely sustainable. It’s just a temporary promotion that was created by printing a bunch of compound tokens, and you can’t just keep printing compound tokens forever.”
The components that constitute the decentralized finance (DeFi) built on Ethereum blockchain are protocols, digital assets, decentralized applications (dapps), and financial smart contracts.
In favor of stablecoins and decentralized cryptocurrency exchanges, Buterin said:
“I would consider stablecoins, and especially cryptoeconomic stablecoins […] really valuable. I would say decentralized exchanges [like] Uniswap have also been extremely valuable.”
He further said that token issuers should be able to break the hegemony of dollar in the world of stablecoins:
“I hope that we can see synthetic assets representing things other than dollars, major stock indices, a couple of other fiat currencies would be really nice to have. Prediction markets […] in DeFi would be really nice to see.