March 6, 2021

Buterin Sounded Alarm Over Excessive DeFi Inflation

Buterin Sounded Alarm Over Excessive DeFi Inflation

Ethereum co-founder Vitalik Buterin has compared the economics of most DeFi protocols to a money machine that continuously prints new tokens for liquidity providers.

He believes that an aggressive strategyAllocating digital assets of many projects (Yield farming) to ensure an annual return of 50-100% is irresponsible, as oversupply increases inflation and puts significant pressure on the price.

Buterin also warns against the naive optimism of investors looking for a long-term perspective. He points to the inability of many startups to generate cash flow without paid applications, which will ultimately lead to the inability to maintain the cost of the project and pay commissions.

Expressing his pessimistic attitude towards such a strategy, he compared it with the monetary policy of central banks, which print money without stopping.

Buterin Sounded Alarm Over Excessive DeFi Inflation

The rise in popularity of DeFi has also led to higher Ethereum network utilization and transaction fees, which has increased the profitability of miners.

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