By Andrew Throuvalas
Translation: Blockchain in Vernacular
For years, Ethereum has been subject to waves of skepticism about whether its flagship use case, decentralized finance (DeFi), has real value. Suddenly, one of the main drivers of these criticisms is the network’s founder, Vitalik Buterin.
Discussing his thoughts on DeFi on Sunday, Vitalik wrote on Twitter: The applications I want to see are those that are (i) useful in a sustainable way, and (ii) do not sacrifice principles (permissionlessness, decentralization, etc.).
He praised decentralized exchanges, stablecoins, and Polymarket as examples, but criticized the unsustainable products that emerged from the "2021 liquidity mining frenzy."
Vitalik’s latest comments come in response to growing frustration within the Ethereum community that he, as the most influential voice in the ecosystem, is only “barely tolerating” DeFi while trying to advocate for other niche use cases that have yet to find the same product-market fit.
“One of the biggest mistakes he made in the last five years was underestimating the importance of DeFi,” Synthetix founder Kain Warwick said on a podcast Friday, accusing Buterin of “moralizing” other industry leaders and asking them to “stop doing DeFi.”
“He’s been trying to make non-DeFi things happen,” Warwick continued. “The reality is, the market is right — and you’re wrong.”
After the show aired, many people were disappointed to learn that Vitalik did not welcome or encourage DeFi on Ethereum, except for the exceptions he mentioned. On the other hand, some staunch Bitcoin supporters were unexpectedly delighted by Vitalik’s remarks, as they unexpectedly found common ground with him in opposing DeFi yield schemes.
As Vitalik later clarified, his criticism even extended to DeFi protocols that provided yield to token holders through borrowers and transaction fees, rather than through token inflation or “Ponzi economics.”
“This feels like a self-eating snake: the value of crypto tokens is that you can use them to earn yield, and those yields are paid by … people trading crypto tokens,” he wrote.
Even overcollateralized lending markets that use ETH as collateral — like Aave — are limited in Vitalik’s view because their value and existence ultimately rely on downstream outcomes from the ETH market.
“I’d love to see a story where the source of the revenue is rooted in something external,” he said. “I’ve heard of some possible candidates… I’d love to hear more of those ideas.”
