Since the second half of last year, DeFi applications such as asset (DAI, USDT stablecoin, etc.), loan (pool lending, leveraged tokens, etc.), and trading (AMM, DEX, derivatives) have been playing a variety of new tricks, and DeFi market enthusiasm has remained high. In particular, the recent launch of the decentralized loan Compound and the implementation of the "loan mining" mechanism greatly stimulated the market's pursuit of DeFi, and the capital attracted by the DeFi market also increased sharply at a visually noticeable speed.

In Vitalik's view, users want to enjoy the benefits of encryption (simplified international payments, removal of traditional centralized financial attributes, prevention of intercepted stores of value...). Add in the financial properties of existing assets and Stablecoins provide.

Vitalik's two tweets have triggered a series of discussions around the value and risk of DeFi applications, which are all from the thinking of first-line practitioners in the blockchain and cryptocurrency field. After sorting and analyzing, the chain News has divided them into two categories:

One is to analyze the core problems existing in the current DeFi market and the huge risks it faces. The other emphasizes the value that DeFi applications bring to crypto and their potential to replace traditional financial institutions.

Point 1: The DeFi revenue mine is a high-stakes, zero-sum game

On the one hand, many people in the comment section agree with Vitalik's statement that the current high yield DeFi products attract a large number of arbitrageurs rather than the real demand of the DeFi market, and such a zero-sum game with high interest rate will eventually be unsustainable, with great investment risks for users.

YOSHIDAKATSURO, a crypto enthusiast and commentator, points out that DeFi is now trending on YouTube, not because of its mass adoption, but because of those who are profiting from rising prices. But he argues that DeFi is worse and riskier than the traditional banking system amid plunging underlying asset prices.

RealityAbsorber, a crypto enthusiast, thinks that throwing millions of dollars into some poorly audited/vulnerable code is a very silly idea. And, most absurdly, you probably won't get anything, since almost all of these DApp applications have masterkeys, kill switches, and/or a central controller. The user is operating in an application that advertises itself as a decentralized system but is in fact a centralized system.

Web developer Enkhmanal also added that Compound and other Ethereum loans, all of these DeFi protocols have SmartKeys that can be used to make changes to the smart contract, and if there is a centralized entity behind the protocol, they are not actually DeFi.

Point 2: DeFi "revenue mines" have value and sustainability

On the other hand, there are many crypto enthusiasts who affirm the need and existence of such "fancy DeFi products" and point out that DeFi applications have many natural advantages over traditional financial systems: For example, cross-border payments are cheaper, fees are lower, users are allowed to enjoy borderless, permissive financial experience, etc. Others point out that the high interest rate is also somewhat natural and reasonable.

Gnosis product and core Ethereum developer Eric. Eth responded to Vitalik by saying that revenue mines allow open source projects to monetize through token incentives. So while he accepts that this should not be the ultimate development goal, he believes it is an important funding experiment.

"But we can't underestimate the incentives created by these types of DeFi applications, which have attracted a new wave of capital, developers and ideas to the entire space," commented LiamHorne, co-founder of ETH Global and L4. Vitalik was quick to respond, "Agreed, but we cannot rely on such projects and must pay attention to the systemic risks that occur."

Blockchain developer SHA256 believes that "society needs DeFi products like this" because large assets like real estate are no longer affordable for people in the lower and middle classes. With prices high and inflation rising, people want things that add value and are affordable.

Conclusion

Bitcoin is appropriate, but the wait is too long. Defi just shortened the wait time and allowed people the chance to get rich quickly in one month. DeFi products are a suitable "parallel economy" against assets and equities and are in huge demand.