COMP Overhyped? Ethereum Founder: If Long-Term Arbitrage Opportunities Exist, There Must Be Risks

As decentralized lending platform Compound launched its governance token (COMP) issuance plan in the early hours of the 16th, major mainstream exchanges have successively listed it. The price of COMP has not only surged more than tenfold, but its token market value has also surpassed the long-standing DeFi leader Maker (MKR), making it the project with the highest total locked assets in the DeFi protocol.

Call for Attention to Systemic Risks

As of now, the total locked value in DeFi has reached a historic high of over $1.5 billion. Concerned about the market's frenzy over the COMP token, Ethereum founder Vitalik Buterin seems unable to overlook the speculative situation and has posted several tweets on his personal Twitter account expressing his views on the systemic risks in DeFi. He stated:

Honestly, I think we have placed too much emphasis on these high-yield DeFi projects, with rates far exceeding what traditional finance can offer. If it's not just a temporary arbitrage opportunity, then there are undisclosed risks.

In response, Liam Horne, co-founder of the Ethereum scalability solution "Safety Channel" development team L4, presented a different perspective below Vitalik's tweet: "I believe you cannot underestimate their motivation for creating this incentive mechanism, which has attracted a new wave of capital, developers, and ideas to the overall theme (DeFi). Liam replied.

Vitalik also agreed, stating that he concurs with Liam's views, but one should not solely rely on these projects and must pay attention to the systemic risks in operation.

Stablecoins Contribute to DeFi

An hour later, Vitalik tweeted again:

DeFi should not just be about optimizing yields, but should also strengthen and improve some key core mechanisms, including: synthetic assets combined with fiat or other major assets (stablecoins), oracles (used for market predictions), decentralized exchanges, privacy, and more.

In a rare move, Vitalik also shared his views on stablecoins, pointing out:

Users hope to benefit from cryptographic assets by obtaining some advantages (simple cross-border payments, freedom from cumbersome mechanisms of traditional centralized finance, value storage resistant to confiscation), and these stablecoins possess financial attributes of current assets, all of which stablecoins can achieve.

Galaxy Digital CEO Praises V God

Vitalik's long-term view on DeFi has also been praised by Mike Novogratz, CEO of Galaxy Digital, who stated in a tweet:

Vitalik always impresses, as he looks at DeFi with a long-term perspective and tries to create highly valuable products in DeFi.

In fact, Vitalik is not intentionally downplaying the DeFi space, but perhaps trying to reduce the overall "FOMO" sentiment. At the 2020 Ethereal Virtual Summit, during a time when DeFi was being repeatedly attacked by hackers, Vitalik defended the situation in DeFi:

Many responsible DeFi projects have been around for quite a while and have not been attacked. The "hacker invasion" is definitely not an inherent attribute of DeFi itself, but rather centralized entities that cannot avoid being attacked.

Vitalik pointed out the regularity of attacks on centralized entities and stated that centralized finance will undoubtedly continue to be attacked.

After issuing a series of tweets calling attention to potential systemic risks in DeFi, Vitalik also did not forget to promote Ethereum once again, stating that Ethereum is a platform with many stablecoins, great applications, and its native cryptocurrency ETH.