Ethereum cofounder Vitalik Buterin has publicly stated that he will be steering clear of Decentalized Finance projects focused on yield farming until the space settles down into a more sustainable space.
Buterin shared his thoughts on Twitter on Tuesday amid a continuous surge in popularity across the DeFi ecosystem with various projects attracting massive amounts of capital investments through staking and yield farming.
Ironically many of these DeFi platforms have been built on the Ethereum blockchain and it seems that Buterin is taking a step back, seemingly concerned by the alarming rate of growth which is being driven by high return on investments made through yield farming.
The Tweet ended in a somewhat tongue-in-cheek, self-deprecating comment from Buterin describing himself as not being a “smart mind in defi”.
As users began interacting with Buterin’s comments, the Ethereum cofounder suggested that the continuous issuing of various tokens powering these DeFi platforms would end ‘in tears’ as people holding those tokens may end up seeing those virtual assets depreciate in value.
Buterin summed up his thoughts in a final Tweet that likened the necessity of some of these protocols having to issue tokens to pay liquidity providers to that of Central Banks having to drive monetary stimulus by issuing more fiat currency:
A cautionary tale
Buterin’s comments offer a cautionary narrative in a space that is reminiscent of the 2017 Initial Coin Offering boom that saw many projects land millions of dollars in investments. While some of these projects have built meaningful platforms that offer real world value, many failed to deliver on the promises of their whitepapers.
While the Ethereum cofounder is taking a precautionary step back from the DeFi space and yield farming in particular, cryptocurrency users and investors are taking a keen interest in the booming DeFi sector.
Over the weekend the total DeFi space saw over $7bln of value locked into the various projects that make up the burgeoning sector. Yearn.finance grabbed headlines as its YFI token surged to an all-time high of over $38000.
It is interesting to note that even yearn.finance’s creator Andre Cronje believes that the hype around the DeFi space has been driven by an inherent greed by investors seeking to capitalize on yield farming and staking rewards.
“I think the reason there is such a massive influx of money right now is because people are making money in insane amounts,” Cronje was quoted by Decrypt speaking at the Smart Contract Summit over the weekend.