 ▲ Vitalik Buterin / Source: X |
Ethereum (ETH) founder Vitalik Buterin expressed strong concerns that abnormal yield structures in the current decentralized finance market and excessive reliance on certain stablecoins are undermining the ecosystem’s overall self-sustainability.
According to cryptocurrency media outlet Cointelegraph on February 10 (local time), Buterin recently criticized the DeFi (decentralized finance) industry through his social media and blog for being mired in unsustainable profit models. He voiced particular concern over the phenomenon in which stablecoins issued by centralized entities, such as USDC, have become the core source of interest income within networks. Buterin assessed that this structure erodes true decentralization values and creates vulnerabilities that make the ecosystem susceptible to external pressures such as regulatory risks.
He pointed out that the DeFi industry is trapped in a closed loop that generates returns internally without creating real value externally. Warning that “simply inflating yields by using other crypto assets as collateral ultimately creates bubbles,” Buterin criticized the lack of efforts to find meaningful points of contact with the real economy. His analysis suggested that if interest income generated through asset transfers and lending is not connected to productive activities outside the ecosystem, long-term sustainability will be difficult.
Sharp criticism was also directed at the increasing centralization of the stablecoin market. Buterin explained that USDC issued by Circle occupies an excessively large share of the Ethereum ecosystem, embedding systemic risks whereby decisions by a centralized issuer or a single government regulatory action could shake the entire network. He added that despite the need to activate algorithmic stablecoins or more decentralized alternatives, the market has settled for centralized assets in pursuit of convenience and liquidity.
Buterin emphasized that for DeFi to move beyond mere speculation and lead genuine financial democratization, fundamental changes to existing models are required. Rather than focusing solely on yields, he proposed the emergence of more creative services that combine Ethereum’s unique capabilities, such as prediction markets or identity verification. Building sustainable economic models while maintaining technical sophistication and the philosophical value of decentralization, he said, is the next challenge for the Ethereum ecosystem.
Meanwhile, the crypto industry is closely watching how Buterin’s remarks will influence the future development direction of Ethereum-based projects and the allocation of investment assets. At the intersection where the convenience of centralized assets collides with the values of decentralization, the DeFi market is once again facing a critical technological inflection point. Buterin repeatedly urged ecosystem participants to resist being swayed by short-term gains and instead focus on strengthening the network’s resilience with a long-term perspective.
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