Vitalik Buterin Stresses Importance of Low-Risk DeFi for Ethereum
Ethereum co-founder Vitalik Buterin has called on the Ethereum community to prioritize the development and adoption of low-risk decentralized finance (DeFi) protocols. In a blog post published this Sunday, Buterin argued that these protocols are crucial for supporting less profitable, yet valuable, applications within the Ethereum ecosystem.
Low-Risk DeFi as a Foundation
Buterin compared low-risk DeFisuch as payments, savings, and fully collateralized lendingto Google's advertising business, which provided the majority of the company's revenue in 2024. He highlighted the ability of core revenue-generating activities to economically sustain innovative, albeit less profitable, product lines.
- Low-risk DeFi protocols include well-understood financial use cases like simple lending and stablecoin transactions.
- Buterin noted these protocols can help fund and sustain more experimental or non-financial applications on Ethereum.
He stressed that while more experimental projects remain critical for Ethereum's culture and purpose, they should not be expected to serve as the ecosystem's main revenue sources.
Shifting Perceptions of DeFi Risk
Reflecting on his earlier skepticism, Buterin said he previously viewed DeFi as too risky, dominated by speculative trading and yield farming. He cited events like Yuga Labs' 2022 NFT drop, which caused excessive gas fees on Ethereum, as evidence of the network's risk exposure during speculative activity.
According to Buterin, regulatory evolution and improved DeFi protocols have reduced mainstream risks. He observed that hacks and losses now primarily affect experimental or highly speculative sectors rather than the core user base. Buterin stated, "for many people worldwide the tail risks of tradfi are now greater than the tail risks of defi."
Role of DeFi in Ethereum's Evolution
Buterin did not mention other blockchain networks by name, but implicitly contrasted Ethereum with ecosystems where speculative tokens and memecoins dominate activity. He asserted that sustainable, reliable DeFi is more important for the network's positive impact than seeking the next high-risk trend.
Looking ahead, Buterin suggested that low-risk DeFi could develop into advanced applications, including undercollateralized lending and integrated prediction markets. He also advocated for diversifying stable value options beyond US dollar-pegged assets.
Recent Developments and Context
Buterin's comments follow several strategic updates from the Ethereum Foundation in 2024, reflecting ongoing efforts to balance growth, security, and operational efficiency in the ecosystem.
In conclusion, Buterin described low-risk DeFi as essential to Ethereum's future, capable of both supporting innovation and improving the broader financial landscape.
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