Vitalik Buterin, co-founder of Ethereum, has long expressed reservations about certain types of DeFi on his platform. In a recent discussion, Kain Warwick, founder of Synthetix and Infinex, expressed the view that Vitalik and a group of Ethereum users are discouraging the development of DeFi on Ethereum. This sparked a heated debate on X (formerly Twitter).
Vitalik clarified his position, emphasizing that his displeasure is not a complete rejection of DeFi, but only towards DeFi projects whose profits depend on temporary sources of sustainability. These profits do not originate from real external value but mainly come from trading crypto tokens or from market-dependent activities $ETH .
For example, many current DeFi protocols such as Ethena, Pendle, Aave, and Lido all profit from such mechanisms. Ethena profits from the difference between CEX and DEX perpetual funding rates, while Pendle enables users to perform leveraged yield farming trades on various programs. Aave profits from lending crypto assets, while Lido generates 3-4% returns from stETH based on DeFi activity on Ethereum.
Meanwhile, other protocols like tokenized real assets and DePIN rely on real sources of value, like real estate or products and services that enhance quality of life.
Vitalik argues that if one wants to incentivize DeFi projects with “realistic” returns, they need to thoroughly test the real value that the project brings. This means that Ethereum will become a large laboratory where many projects will create real social value, but there will also be projects that go against ethics.
Perhaps we need to accept that this is the nature of building on a permissionless, neutral protocol layer. Ethereum is an archipelago of experimentation, and that is inevitable.
