4 Minutes
Vitalik Buterin: Low-risk DeFi as an economic backbone
Ethereum co-founder Vitalik Buterin argues that low-risk decentralized finance (DeFi) protocols could deliver steady, sustainable revenue for the Ethereum network — in a role similar to how search and advertising finance Google. Buterin suggests this revenue model can coexist with Ethereum’s cultural and ethical values, allowing less commercial, nonfinancial applications to continue operating without compromising the network’s identity.
Addressing a long-standing tension in the ecosystem
Buterin described a persistent tension in the Ethereum community: the apps that generate significant fees and economic activity have often been speculative by nature — nonfungible tokens (NFTs), memecoins, and trading — while projects that embody Ethereum’s original social and cultural goals have struggled to attract comparable fees or adoption. That mismatch, he says, created "a lot of dissonance in the community." Low-risk DeFi could bridge that gap by serving as a primary fee generator while remaining aligned with ethical standards.
Why low-risk DeFi makes sense for Ethereum
Low-risk DeFi typically centers on practical financial services such as stablecoin lending, savings-like products, and conservative yield strategies. Buterin pointed to real-world examples where stablecoin deposit rates on blue-chip lending platforms like Aave remain attractive — roughly 5% for major stablecoins such as Tether (USDT) and USDC, and even higher for some higher-risk stablecoins. These predictable revenue streams could provide the network with economic stability without forcing all innovation toward speculative models.
Parallels with Google’s revenue model — and a key difference
Buterin noted Google performs many useful and interesting functions — from browsers to phones to open-source AI — yet the majority of its revenue still comes from search and advertising. He argued that Ethereum could emulate the economic stability that search provides Google, but do it better because of its decentralized architecture. Unlike centralized ad-driven incentives that can encourage data hoarding, Ethereum’s decentralized governance could help align financial success with ethical outcomes, ensuring the revenue generator is not "actively unethical or embarrassing."
DeFi traction, TVL trends and regulation
Decentralized finance on Ethereum has shown signs of renewed momentum: total value locked (TVL) on Ethereum surpassed $100 billion for the first time since early 2022. TVL fell sharply during the 2022–2023 bear market but has trailed some layer-1 token performance while recovering in this bull cycle. Increasing regulatory clarity — including proposed frameworks like the Digital Asset Market Clarity Act — may further encourage mainstream DeFi adoption. A survey from the DeFi Education Fund found that over 40% of Americans would consider DeFi if stronger legal safeguards were introduced.
New monetary primitives: basket currencies and flatcoins
Beyond low-risk lending and yield products, Buterin also advocated for broader monetary innovations that could support economic resilience on Ethereum. He proposed building cryptoassets that track baskets of currencies and ‘‘flatcoins’’ indexed to consumer price indices, designed to preserve purchasing power in regions with high inflation or limited access to stable outside currencies. Such primitives could expand utility for users in developing markets while contributing to more stable on-chain fee generation.
Balancing economics and ethos
Buterin’s thesis is pragmatic: the applications that generate most revenue need not be the most innovative or culturally defining projects, but they should be ethically uncontroversial. If low-risk DeFi can deliver sustainable fees without compromising decentralization or community values, Ethereum could reconcile its financial viability with the principles that attracted users and builders in the first place.
Source: cointelegraph
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