Author: Alex Liu, Foresight News

Accusations Against Vitalik

Vitalik Buterin's controversial views on Decentralized Finance come from a reply to a post accusing him of poor communication on the topic of Decentralized Finance. The content of the post is:

"Vitalik, I think one of the reasons people are confused or frustrated by your views on Decentralized Finance is - poor communication:

It seems that in your eyes, 'Decentralized Finance' is just the mining frenzy and Ponzi Scheme of 2021; but for many others (I would say most people), 'Decentralized Finance' means saving and borrowing on platforms like Aave in the Money Market, CDPs like RAI (which you also mentioned!), and Synthetics. These are all healthy applications of Decentralization in finance — profits come from borrowers, not from Money Laundering. (Editor's note: CDP, Collateralized Debt Position, is a mechanism for decentralized stablecoins like Maker, whose issuance of decentralized stablecoin is DAI.)

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

I agree that many incorporations into the Decentralized Finance ecosystem of 'Ponzi Economics' can only mean temporary improvements in certain indicators, but this is not all of Decentralized Finance.

Vitalik's response

"Profits come from borrowers, Money Laundering, etc.

Yes, so this worries me. Because it feels like a ouroboros: the value of encryptionToken lies in the fact that you can use them to earn profits, and the profits are paid by the people trading encryptionToken.

The answer is clear, for example: the profit of those who earn 8% annual interest with US dollars is paid by those who pay 8% annual interest and go long on ETH with double leverage, but this means that the Decentralized Finance market exists downstream of the ETH market, so although Decentralized Finance may be great, it is fundamentally limited and cannot become a breakthrough innovation that will push encryption technology to another 10-100 times adoption.

That's why I'd like to see a story about where the revenue comes from or could come from, rooted in external things. I've heard of some seemingly plausible candidates! For example: Due to fundamental structural reasons, Crypto Assets can maintain higher efficiency in international currency transactions in the long run. I want to hear more.」

Ouroboros，衔尾蛇

Vitalik's speech has sparked a heated discussion, and many influential figures have refuted it:

Many Refutations

Ken Deeter, Partner at Electric Capital

My instinctive reaction to Vitalik Buterin's comment is, "Doesn't this describe all finance?"

Most finance is about "people expressing their views on the future through various tools, and then using a variety of mechanisms to change these views and create a market for those who want to take the opposite view."

In terms of structural advantages, I believe that Decentralized Finance through blockchain has a major advantage: trustless allows more capital in the world to participate in financial opportunities that were previously inaccessible to them.

The passive capital you see in Decentralized Finance demonstrates market Liquidity or lending Liquidity - I bet, for many Decentralized Finance users, this type of opportunity is hard to come by outside of the blockchain, but automated markets make it almost insignificant. As more and more RWAs join, these opportunities will increasingly overlap with today's tradfi.

Yes, in 2020, 'Food Tokens' are not super efficient, but there are a lot of secondary effects - testing the Spot market, testing the clearing system, testing what happens when the chain is congested, and verifying the demand for it and other positive effects ahead of the Block space explosion we see today.

New platforms typically become mainstream through use cases that many initially see as toys. These platforms gain enough traction to mitigate the risks of new technology, paving the way for mainstream adoption. Today's Decentralized Finance is hard to not go through the same process.

PaperImperium，KOL

"Vitalik's remarks involve misunderstandings of human economic history.

You can also say that all human markets are downstream of the minority agricultural product markets. However, barley is not necessarily a larger basis than all 'downstream' markets.

Cryptohuntz, Alphaverse Capital CEO

"Vitalik's perspective of failure."

The value of any asset in the world, besides holding or enjoying it, also lies in the fact that you can financialize them and earn profits.

Decentralized finance allows users to compete with large companies and intermediaries and reap their benefits.

Vitalik's joking response

In response to the opposition received by Vitalik, someone defended him by saying, “You may be dissatisfied with Vitalik's comments on Decentralized Finance, but he is taking a business standpoint.” Vitalik humorously responded in the reply: “Actually, I was sitting during the recent flight, and it was in the economy class.”

Conclusion

The editor also firmly opposes Vitalik's views. Does Vitalik really understand Decentralized Finance? The answer may be "understands, but not necessarily correct."

Vitalik is the philosophical source behind the ETH platform as a technical platform; but his understanding of finance and Decentralized Finance may not be correct. We don't need to overly mythologize him. In fact: "Without Decentralized Finance, the price of ETH might still be at 400."