In a recent blog post, Ethereum co-founder Vitalik Buterin discussed the potential for low-risk decentralized finance (DeFi) protocols to play a pivotal role in the long-term sustainability of the Ethereum network. Buterin emphasized that these protocols could provide a stable revenue source while adhering to the community’s values.
Buterin drew an analogy between low-risk DeFi and Google Search, suggesting that it could serve as a revenue anchor similar to how Google’s ad revenue supports its diverse ventures. He argued that incorporating low-risk DeFi into Ethereum’s ecosystem would enable the network to generate economic strength without sacrificing its ideological principles, with the caveat that the revenue-generating applications should not be “actively unethical or embarrassing.”
He highlighted Aave’s stablecoin lending rates as a practical example, noting that blue-chip stablecoins like USDT and USDC offer returns around 5%, compared to higher-risk assets that yield over 10%. According to Buterin, this could establish a reliable income source that respects the ecosystem’s foundational values.
Long-standing tensions within the Ethereum community have been evident, particularly between speculative ventures such as NFTs and memecoins, which often yield high fees but little ideological satisfaction, versus applications that reflect the network’s original mission but struggle to generate revenue. Buterin believes that low-risk DeFi can bridge this divide, allowing for both financial viability and ethical integrity.
Notably, Ethereum’s DeFi ecosystem has shown signs of recovery, with total value locked (TVL) surpassing $100 billion for the first time since early 2022. This resurgence comes in the wake of improved regulatory clarity and advancements in smart contract safety that have diminished barriers to low-risk DeFi engagement.
Buterin pointed to a recent survey indicating that over 40% of Americans would be likely to consider using DeFi under stronger regulatory frameworks, highlighting the growing willingness for mainstream adoption. He also critiqued Google’s business model, which leans heavily on advertising, arguing that while it has made significant open-source contributions, this reliance undermines user privacy. He asserted that Ethereum’s decentralized structure offers a unique opportunity to align financial success with ethical outcomes, potentially elevating the project’s impact compared to centralized models.
In addition to low-risk lending, Buterin advocated for the creation of basket currencies and flatcoins, which would be pegged to consumer price indices or multiple fiat currencies. He believes these alternatives could enhance the economic solidification of Ethereum without an excessive dependence on the US dollar.
Despite these optimistic views, Ethereum faced challenges in August, with on-chain revenue plummeting 44% from July, falling to $14.1 million even as the price of ETH reached a new all-time high. Analysts flagged this sharp decline in revenue as one of the weakest figures since early 2021, raising concerns about the economic sustainability of the network. As network fees decreased, largely due to recent upgrades aimed at reducing transaction costs, there’s divergence in opinion. Critics worry that decreased fee revenue might undermine ETH’s value proposition, while others view this shift as part of Ethereum’s evolution into a foundational layer for global decentralized finance, suggesting that lower costs could promote broader adoption.
