Ethereum co-founder Vitalik Buterin and cryptocurrency analyst c-node have reignited the debate over the true purpose of decentralized finance (DeFi).
Two industry experts join forces to challenge a fast-growing industry to rethink its priorities.
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Experts clash over what counts as “real” DeFi
The underlying problem, experts say, is that much of today’s DeFi hype is superficial and serves speculative profits rather than true DeFi infrastructure advancements.
“There is no reason to use DeFi unless you are long on cryptocurrencies and want to access financial services while maintaining self-control,” c-node wrote.
They dismissed common yield-generating strategies such as depositing USDC into lending protocols as “cargo cults” and suggested they were copying DeFi’s success without embodying its original spirit.
The analyst further noted that early ETH participants were ideologically committed to self-control, and stressed that non-Ethereum chains may struggle to replicate Ethereum’s DeFi boom. Meanwhile, the new ecosystem is dominated by venture capital funds that use institutional custodians.
Buterin’s response provided both a counterargument and a broader framework for what is considered “real” DeFi. The Russian-Canadian innovator argued that algorithmic stablecoins qualify as truly decentralized, especially if they are overcollateralized or structured to spread counterparty risk.
“Even if 99% of the liquidity is backed by CDP holders holding a negative algo dollar and another positive dollar, the fact that counterparty risk can be punted to market makers is still a major feature,” Buterin wrote.
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DeFi’s ideological divide and the push for decentralized risk
The Ethereum co-founder also criticized common USDC-based strategies, pointing out that simply depositing a centralized stablecoin into a lending protocol does not meet DeFi standards.
Beyond technical definitions, he articulated a long-term vision of moving from a dollar-denominated system to a diversified unit of account supported by a decentralized collateral structure.
This debate highlights deeper ideological rifts within cryptocurrencies.
On the one hand, DeFi is seen as a speculative capital efficiency tool, a tool that leverages positions to generate yield without giving up custody. On the one hand, it is seen as a fundamental financial system that can reshape the global financial sector through decentralization and risk spreading.
Subsequent replies in the thread further intensified this tension. Some argue that using DeFi with centralized assets can still reduce intermediaries and lower systemic risk.
However, others supported a purist view of c-nodes, predicting that market forces would favor self-custody-driven protocols over hybrid or fiat-backed systems.
This discussion could shape the next phase of cryptocurrency innovation. Ethereum’s dominance in DeFi, backed by ideological early adopters, stands in sharp contrast to other chains where venture-backed investors prioritize convenience over decentralization.
Meanwhile, Buterin’s push for stablecoins and diverse indexes through his overcollateralization algorithm suggests a potential evolution beyond the current dollar-pegged structure.
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As DeFi approaches its 20th year, these discussions show that the sector is no longer just about yield and liquidity.
Instead, the conversation is geared toward the very principles that define it: control, diversification, and risk distribution.
This raises the question whether DeFi can truly provide an alternative to TradFi systems or will it continue to be a sophisticated tool for crypto speculators.
