Vitalik Buterin, the Ethereum founder says that if you don’t understand DeFi, maybe it’s a better idea to sit it out, as the decentralized finance space has become Ethereum’s killer use case as we reported in the Ethereum news previously.
Nothing shows this as well as Uniswap which is an Ethereum-based decentralized exchange that processes more than 100,000 transactions each day and there are only seven entire blockchain networks that process over 100,000 transactions each day. The $10 billion value of the DeFi coins based on ETH shows that the importance of the market in this network segment. Even still, Ethereum founder says that it’s smart not to be hasty when using Defi.
Reminder: you do NOT have to participate in "the latest hot defi thing" to be in ethereum. In fact, unless you *really* understand what's going on, it's likely best to sit out or participate only with very small amounts.
There are many other kinds of ETH dapps, explore them!
— vitalik.eth (@VitalikButerin) August 14, 2020
The number of users interacting with Defi contracts on Ethereum went exponential in recent months as it can be seen by the on-chain analysis. This is a good one because by issuing new tokens, The DeFi protocols managed to create schemes where traders can make thousands of percent per year on their investments. Despite the gains, Vitalik Buterin doesn’t advise his followers and ETH users to rush into using the protocol:
“Reminder: you do NOT have to participate in ‘the latest hot defi thing’ to be in ethereum. In fact, unless you *really* understand what’s going on, it’s likely best to sit out or participate only with very small amounts.”
Buterin added that there are a lot of other ETH dapps out there and many other use cases for Ethereum that are not necessarily in a financial nature. The point he made that DeFi is especially risky for those with little technical or economic knowledge that was accentuated by the debacle that happened a few days ago. Two days after the launch, the Yam Finance protocol whose native token is YAM, suffered a bug in one of its contracts which resulted in the loss of $500,000 worth of users’ assets. While $750 million worth of crypto deposited in the protocol was not at risk, the hundreds of thousands of coins lost belonged to a lot of investors.
— Laura Shin (@laurashin) July 29, 2020
The issue is that many don’t understand the risks associated with investing the capital in a manner they did suffering a huge loss as a result. Along with the warning of the followers, Buterin said that his segment is inherently unsustainable. Speaking with the crypto-journalist Laura Shin, he said that the DeFi growth is being subsidized by crypto issues by protocols that will someday run out of coins.
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