Ethereum co-founder Vitalik Buterin and cryptocurrency analyst c-node have reignited the debate about the true purpose of decentralized finance (DeFi).
These two industry experts urge a reassessment of priorities in the rapidly growing sector.
'Real' DeFi Criteria…Experts Clash
According to experts, the current high interest in many DeFi projects is superficial and focuses more on speculative gains rather than on the development of true DeFi infrastructure.
“Unless one holds a long position in cryptocurrency and wishes to maintain direct management of their assets while utilizing financial services, there is no reason to use DeFi.” – a note left by c-node.
They dismissed these profit-generating strategies—such as depositing USDC into lending protocols—as 'cargo cults,' stating that they merely imitate the success of DeFi without embodying its original spirit.
This analyst also emphasized that it would be difficult to replicate Ethereum's DeFi boom on other blockchains. While early Ethereum participants showed ideological beliefs in self-asset management, the recent new ecosystem is dominated by venture capital funds leveraging institutional custody.
In response, Buterin presented a broader perspective along with a counterargument regarding the criteria for 'true DeFi.' As a Russian-Canadian innovator, he argued that algorithm-based stablecoins—particularly those with over-collateralization or a structure with diversified counterparty risk—constitute a true decentralized system.
“Even if 99% of liquidity is based on CDP holders (algorithmic dollars are negative, while dollars are positive), the very fact that one can transfer counterparty risk to market makers remains a significant feature.” – a note left by Vitalik Buterin.
DeFi ideological division…pursuit of risk diversification
Ethereum co-founder Buterin also criticized the popular strategy based on USDC, pointing out that simply depositing centralized stablecoins into lending protocols does not meet the conditions of DeFi.
He expressed a long-term vision of moving beyond technical definitions and towards various account units based on decentralized collateral structures, away from dollar-based systems.
This discussion reveals a deeper ideological divide within the cryptocurrency industry.
On one hand, DeFi is seen as a tool for speculative capital efficiency—a way to hold assets directly while gaining leverage and profits.
On the other hand, DeFi is considered a foundational financial system that can reconstruct the global financial system through decentralization and risk diversification.
Subsequent additional comments further highlighted this tension. Some argued that using DeFi alongside centralized assets could reduce intermediaries and lower systemic risk.
On the other hand, some agreed with the purist view of c-node and predicted that the market would prefer self-managed asset protocols over hybrid or fiat-linked systems.
This debate could influence the direction of future cryptocurrency innovation. While Ethereum's dominance in DeFi stems from the power of ideological early participants, other chains see venture investors prioritizing convenience over decentralization.
Meanwhile, the over-collateralized algorithmic stablecoin and various indices proposed by Buterin suggest an evolution that can surpass the current dollar-pegged structure.
As DeFi enters its second decade, this discussion reflects the industry's shift from merely seeking profits and liquidity.
The discussion is now shifting towards the core principles that define DeFi—asset management, decentralization, and risk diversification.
This raises questions about whether DeFi can truly provide an alternative to traditional financial systems or remain an elaborate tool for cryptocurrency speculators.