Ethereum Co-founder Vitalik Buterin Lays down Concerns as DeFi Mirrors ICO Phase

The rise of Decentralized Finance (DeFi) applications is not going unnoticed among crypto veterans. However, not everyone is impressed. Vitalik Buterin, the co-founder of Ethereum, recently tweeted on the topic of how “yield farming” was taking precedence over technology.

The Rise of DeFi

Anything involving money and quick returns is tricky business, be it traditional stocks, ICOs, leveraged bitcoin options, or hyped-up DeFi tokens.

Even though DeFi has been around since 2018, the rise of Compound has, in the last month, reinvigorated interest in the sector – contributing to the previously unheard term “yield farming.”

For the uninitiated, yield farming means pooling one’s crypto holdings on lending-centric DeFi protocols to capitalize – or “farm” – the yields offered. Compound pools offer anything from 10-50 percent, while some other DeFi platforms even offered 125 percent yields on some days.

However, the above brings about risks for the consumers and an ICO-like situation for the industry. COMP, Compound’s native token, has risen over 600 percent from its listing price of $61 to over $350 on June 21, eventually falling to the current $195 at press time.

This lays the ground for other projects, or enterprising individuals, to develop their own loosely put protocol and shilling a DeFi token as the next moonshot.

Posts on 4chan already show forum users searching for small-cap DeFi markets that are “waiting to explode.” Names like ThorChain, and Flama spring up – with some suggesting the Chinese and Korean market is yet to plunge into DeFi investing.

The above has left industry veterans like Ethereum’s Vitalik Buterin and ex-Messari product head Qiao Wang concerned. In separate tweets on separate days, they have voiced opinions against how DeFi closely mirrors the ICO space – in terms of promising “flashy” returns and platform ahead of the fundamental technology.

Buterin: DeFi is Boring

On June 2, Buterin tweeted on how the industry is segregated between two groups, as far as DeFi circles are concerned:

Some people: let's create easy-to-use global-access financial infrastructure and use mechanism design and smart contracts to create new forms of social organization!
Other people: YAY yield farming 135%!!!1!

There's a tension here that we should be talking about more.

— vitalik.eth (@VitalikButerin) July 1, 2020

He notes that “a lot of the flashy stuff is very exciting, but it’s short term; the reality is that there’s no way that DeFi will have interest rates more than a percentage point above the best of traditional finance in the long run.”

Buterin adds DeFi is likely to be boring for most. At its core, the framework stands for unadulterated access to liquidity worldwide, which already exists but needs to be improved upon.

While he does not speak negatively about lending platforms as such, Buterin hopes for better smart contract wallets, privacy tech, better stablecoins, improved public goods funding, and other “really valuable goodies.”