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Decentralized finance (DeFi) has been THE flagship subject of the Ethereum ecosystem since the beginning of 2020. The number of projects is increasing and more and more users are attracted by the yields offered. Vitalik Buterin, however, sounded the alarm about the risks, which he said is lacking in transparency.
Vitalik warns against DeFi
In a thread posted on Twitter, the co-founder of the Ethereum network expressed his thoughts on the DeFi projects. So according to Buterin, the community tends to focus on maximizing interest rather than focusing on the underlying risks.
Despite the rather mixed reactions in the comments, Vitalik Buterin points to a major problem. Indeed, the DeFi protocols have already been the cause of large losses, whether from hacks or more "systemic" problems such as:
The flaw in the bZx protocol that resulted in the theft of a million dollars in Ethereum tokens.
- Abusive liquidations on MakerDAO following the failure of the oracles.
- Thus, according to Vitalik, the model touting high returns without educating users about the risks is not sustainable.
"Decentralized finance shouldn't be about maximizing returns. We should rather consolidate and improve a few important basic elements: synthetic tokens for fiats and some other major assets (aka stablecoins), oracles (for prediction markets, etc.), DEX, confidentiality… ”a he said about it.
A subject already debated
Obviously, Vitalik Buterin is not the first to warn against this lack of education around the risks underlying DeFi. So Dan Matthew, CTO of PieDAO agrees and said at the time of the dForce hack:
"My opinion is that as an industry we cannot expect users to fully understand the risks associated with the platforms in which they place their funds. We need to better warn them of these risks and proactively identify cases where they ignore these warnings. ”
Education seems to be a key point, especially given the evolution of DeFi and the similarities with the growth of ICOs in 2017. In both cases, a lot of promise, but very little awareness of the risks. Hopefully we don't have to live with TheDAO v2 and the protocol vendors are taking proactive steps to protect the ecosystem.
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