Ethereum Founder Criticizes DeFi Again: These Protocols are More Centralized than Central Banks, Value Consensus Will Eventually Collapse

Since Compound led the way in June this year by issuing governance token COMP through liquidity mining, the entire DeFi market has entered a frenzy stage. Various projects have followed a similar pattern to issue tokens, with DeFi locked assets reaching $8 billion. While witnessing the "vigorous development" in the Ethereum ecosystem, founder Vitalik Buterin is not particularly happy and even hopes that this wave of hype will end soon.

Vitalik Talks DeFi: Which Project Do You Hate the Most?

Ethereum founder Vitalik Buterin tweeted on August 31st, asking the crypto community which DeFi projects they dislike the most. Some pointed out flaws in the design mechanisms of the decentralized synthetic asset exchange Synthetix (SNX).

Others mentioned elastic supply tokens like "Yam Finance" and automated market maker platform "SushiSwap," both of which issued tokens by copying protocols from early projects, offering incentives to attract users to participate, with the routine of launching liquidity mining, token speculation, and then dumping.

Vitalik: I Still Haven't Touched DeFi at All

Vitalik emphasized that he personally has never touched "liquidity mining" at all, unless it becomes stable and evolves into a more sustainable system. A netizen replied that such a system is simply impossible to be stable unless you mean the price going to zero.

Vitalik replied that such stability would be a collapse:

Users provide liquidity to the protocol to obtain project tokens and hold them, while the project continuously issues tokens to provide to users, and their value consensus will ultimately collapse.

Honestly, in recent years, with interest rates reaching 50-100%, liquidity mining requires continuous issuance of a large number of tokens to liquidity providers. Compared to this, central banks of major countries now seem to be operating under the guidance of Ron Paul (Note: Former U.S. presidential candidate supporting the gold standard).

Former presidential candidate Ron Paul staunchly opposes all government intervention in the market on economic issues, repeatedly criticizing the Federal Reserve's negative interest rate policy, advocating the abolition of Federal Reserve support and a return to the gold standard. He is also one of the few political figures supporting cryptocurrency. Vitalik sarcastically points out that compared to the central banks continuously printing money, these DeFi protocols issuing tokens excessively are playing an even more reckless game.

This is not the first time Vitalik has criticized the excessive enthusiasm in DeFi. He previously mentioned implicit risks, including interest rates far higher than traditional finance, the possibility of vulnerabilities in smart contracts, potential systemic risks, and the difficulty in estimating and predicting them.

He believes that current DeFi protocols based on liquidity mining do not make sense to generate positive cash flow. Interestingly, he recently discovered the sole project that can achieve this, which is the liquidity mining project that absorbs liquidity from other platforms, the Uniswap clone "SushiSwap." Vitalik describes SushiSwap's behavior as a "bizarre network attack" and expresses sorrow over their strategy.