Vitalik's speech was refuted by many people and was questioned as "not understanding DeFi"

Original title: "Does Vitalik really understand DeFi?"

Original author: Alex Liu, Foresight News

Accusations against Vitalik

Vitalik Buterin’s controversial views on DeFi came from a reply to a post accusing him of miscommunication on the topic of DeFi. The content of the post was:

"Vitalik, I think one of the reasons people are confused or frustrated about your views on DeFi is - miscommunication:

It seems that in your view, "DeFi" is the mining craze and Ponzi scheme in 2021; but for many others (I would say most people), "DeFi" means saving and borrowing money on Money Market such as Aave, CDP such as RAI (which you also mentioned!), Synthetics, etc. These are all healthy decentralized financial applications - income comes from borrowers, transaction fees, etc. (Editor's note: CDP, collateralized debt position, a decentralized stablecoin mechanism, representative projects also include Maker, and its decentralized stablecoin is DAI.)

This may be why people are confused, why Vitalik seems to be against DeFi, but supports gambling/prediction markets like Polymarket and centralized stablecoins like USDC.

I agree that many of the "Ponzi economics" integrated into the DeFi ecosystem can only mean a temporary increase in certain indicators, but this is not all of DeFi. ”

Vitalik’s Response

“The yield comes from borrowers, transaction fees, etc.

Yeah, so this worries me.Because it feels like an Ouroboros: the value of crypto tokens is that you can use them to earn yield, and the yield is paid by the people trading crypto tokens.

The answer is clear, for example: the yield for those who earn 8% APY on USD is paid by those who pay 8% APY to go long ETH with 2x leverage, but this means thatthe DeFi market exists downstream of the ETH market, so while DeFi may be great, it is fundamentally limited and cannot be the explosive innovation that drives crypto technology to another 10-100x adoption.

That's why I'd like to see a story about where the gains are coming from or could come from, that's rooted in something external. I've heard of some plausible candidates! For example: cryptocurrencies are permanently more efficient at international currency transactions for fundamental structural reasons. I'd like to hear more. ”

Ouroboros, Ouroboros

Vitalik’s remarks sparked a lively discussion, with many influential figures rebutting them:

Many rebuttals

Ken Deeter, Partner at Electric Capital

My knee-jerk reaction to Vitalik Buterin’s comments was: “Doesn’t this describe all of finance?”

Most finance is about “people expressing their views on the future through various tools, and then using a lot of mechanisms to change that view and create markets for those who want to take the opposite view.”

In terms of structural advantages, I think DeFi through blockchain There is one major advantage: Trustlessness enables more of the world’s capital to participate in financial opportunities that have been unavailable to them to date.

The passive capital you see in DeFi is a testament to market liquidity or lending liquidity - I bet this type of opportunity is hard to get outside of blockchain for many DeFi users, and automated markets make it almost trivial. As more and more RWAs join, these opportunities will overlap more and more with today’s tradfi.

Yes, in 2020, “Food Tokens” were not super efficient, but there were a ton of secondary effects - testing spot markets, testing clearing systems, testing what happens when chains get congested, validating the need for it in advance for the blockspace explosion we see today, and other positive effects.

New platforms often become mainstream through use cases that many people initially view as toys.These platforms gain enough traction to de-risk new technologies, thus paving the way for mainstream adoption. It is difficult for DeFi today not to go through the same process.

PaperImperium, KOL

“Vitalik’s statement shows a misunderstanding of human economic history.

You could also say that all human markets are downstream of a few agricultural markets.However, barley is not necessarily a larger foundation than all “downstream” markets. 」

Cryptohuntz, Alphaverse Capital CEO

"A failed point of view from Vitalik.

The value of any asset in the world, in addition to holding or enjoying it, lies in the fact that you can financialize them and earn returns.

Decentralized financialization enables users to obtain and compete with large companies and middlemen to obtain their returns."

Vitalik's joking response

In response to the opposition Vitalik received, someone defended him: "You may be unhappy with Vitalik's comments on DeFi, but he is standing on a business standpoint." Vitalik In the reply, he responded humorously: "In fact, I was sitting on the recent flight, and I was sitting in economy class."

Conclusion

The editor also clearly opposes Vitalik's point of view. Does Vitalik understand DeFi? The answer may be "understand, but not necessarily right".

Vitalik is the philosophical source behind Ethereum as a technical platform; but his understanding of finance and DeFi may not be correct. We don't have to over-mythologize him. In fact: "Without DeFi, the price of Ethereum may still be 400".

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