Ethereum co-founder Vitalik Buterin warned about the dangers of smart contracts in DeFi protocols in an interview on the ETH’s fifth birthday.
Buterin, while speaking on Laura Shin’s Unchained Podcast, also warned users not to “risk their life savings” by investing in decentralized finance.
The risk of smart contracts
When asked about his main concerns and reasons for criticizing DeFi, Buterin replied;
“I think one of them is that a lot of people don’t see the risk of smart contracts.”
Buterin said interest rates are exponentially higher than traditional bank accounts, meaning DeFi products are much riskier and more likely to collapse. Buterin said he was unsure whether even the audited platforms and protocols could guarantee that they would not break down within the given time frame, by a specified percentage margin.
“DeFi is still okay, but don’t act like this is the place where you should solicit lots of ordinary people to put their life savings.”
This year, DeFi experienced a number of serious smart contract abuses, such as the use of the bZx flash loan in February, which led to a loss of cryptocurrencies worth nearly $ 1 million, and a bug in the Bancor smart contract in June, which caused the network to shut down .
In defense of DeFi
Vitalik Buterin has not always been critical of decentralized finance, and earlier this year, after several major break-ins, he took up the defense of the nascent industry. Speaking at the Ethereal Virtual Summit in May, he stated:
“Many of DeFi’s responsible projects have endured for a long time without being attacked. It is definitely not inherent in DeFi itself, and there is a way to do it responsibly.
Buterin also criticized centralized finance and stock exchanges that “are under constant attack”.
If you are interested in the topic of decentralized finance, we also invite you to read our extensive articles on DeFi: DeFi # 1: Payments, Markets, Loans and Loans and DeFi, or Decentralized Finance. How can you benefit from them?