Vitalik Faces Backlash for Downplaying DeFi’s Role in Ethereum Growth
Ethereum co-founder Vitalik Buterin has faced criticism from the cryptocurrency 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 crypto space. He said:
“The continued existence of the DeFi market is downstream of the existence of the ETH market, which means that while DeFi can be great, it is fundamentally limited and will not be _the_ thing that will lead to a 10-100x adoption explosion in crypto.”
Community backlash
Buterin’s comments sparked a strong reaction in the DeFi community, with influential figures like Arthur Cheng, founder of DeFiance Capital, publicly challenging his views.
Cheong noted that DeFi has contributed to driving Ethereum’s value to its current highs, saying:
“(Buterin) doesn’t really understand the use cases and sectors that give value to ETH and make it a $330 billion value.”
Likewise, Sam Kazemian, founder of Frax Finance, suggested that Buterin is ignorant of the current dynamics of DeFi and stablecoins. He said the Ethereum co-founder’s arguments rely on outdated assumptions.
Rhett Shipp, founder of Gravita Protocol, also claimed that DeFi has played a key role in the growth of ETH. According to him, the sector accounts for the majority of Ethereum usage and gas fees, and it is heavily used as collateral in DeFi, which helps drive up the value of ETH.
Ten also countered Buterin’s criticism of unsustainable high yields in DeFi, noting that early subsidies are a valid strategy to drive adoption.
Shipp concluded his statement:
“If you remove DeFi from ETH, its value will drop by 80%.”
Buterin’s Views on DeFi
Despite the backlash, Buterin is a staunch advocate of decentralized cryptocurrency applications.
He acknowledged that many applications, such as those that emerged from the liquidity farming boom in 2021, are temporary and lack sustainability, but he would prefer sustainable and fully decentralized applications.
Buterin highlighted decentralized exchanges, decentralized stablecoins like RAI, and prediction markets like Polymarkets as examples of applications he supports.
Buterin also called for decentralization to expand beyond finance to other areas of technology, noting that centralization poses significant threats to encrypted messaging platforms, social media censorship, and centralized identity systems.
He stressed that the intersection of decentralized finance and other decentralized technologies will be crucial to upholding the core values of the cryptocurrency industry, including privacy.
Buterin concluded:
“I think the intersection between decentralized finance and other decentralized technologies is going to be really important.”
