For years, Ethereum has faced criticism regarding the real-world utility of its flagship use case—decentralized finance (DeFi). Surprisingly, one of the latest critics is none other than Ethereum’s own founder, Vitalik Buterin.
In a recent tweet, Buterin shared his thoughts on the current state of DeFi, saying, “The kinds of applications that I want to see are applications that are (i) useful in a sustainable way, and (ii) don’t sacrifice on the principles (permissionlessness, decentralization, etc.).” While he praised decentralized exchanges, stablecoins, and Polymarket as strong examples, he was critical of products born from the “2021-era liquidity farming craze,” which he deemed unsustainable.
Buterin’s Perspective on DeFi and the Pushback
Buterin’s remarks have reignited conversations within the Ethereum community. Many feel that the network’s most influential voice is only “begrudgingly tolerating” DeFi, even though the sector has gained significant traction. Instead, Buterin appears to be focusing on niche use cases that have yet to see widespread adoption.
Kain Warwick, the founder of Synthetix, expressed his frustration on a podcast, stating that Buterin has “gotten wrong” the importance of DeFi over the past five years. Warwick also accused Buterin of “moralizing” to industry leaders, urging them to “stop doing DeFi.” According to Warwick, Buterin’s efforts to promote non-DeFi projects go against market demand: “The reality is that the market’s right—you’re not right,” he emphasized.
Community Reactions: Divided Opinions on DeFi’s Role
Buterin’s stance has led to mixed reactions within the broader crypto community. Many Ethereum enthusiasts were disappointed to discover that their network’s founder hasn’t been as supportive of DeFi as they had hoped. However, several hardcore Bitcoin supporters found common ground with Buterin’s opposition to certain DeFi yield schemes, which they also view skeptically.
Despite the division, it’s clear that Buterin’s thoughts on DeFi have sparked an important debate about the future of Ethereum and its most prominent use case. Will DeFi continue to dominate the Ethereum ecosystem, or will Buterin’s vision of more sustainable and principle-driven applications take center stage?
As Buterin later clarified, his criticism even extends to DeFi protocols that provide token holders with yield from borrowers and trading fees, rather than token inflation or “ponzinomics.”
“It feels like an ouroboros: the value of crypto tokens is that you can use them to earn yield which is paid for by… people trading crypto tokens,” he wrote.
Even overcollateralized lending markets that use ETH as collateral—such as Aave—are limited in Buterin’s view, since the value and existence of those markets are ultimately downstream of the ETH market.
“I would love to see a story for where the yield is coming from, or could come from, that’s rooted in something external,” he said. “I have heard plausible candidates… I would love to hear more.”
