Vitalik Buterin views low-risk DeFi as a stable source of income in Ethereum, much like Google Search in the Google ecosystem funding.
Decentralized finance (DeFi) involves low-risk strategies that may be the solution to the sustainability of Ethereum in the future.
Ethereum co-founder Vitalik Buterin likens it to the search engine at Google that has predictable income but lets other businesses flourish.
This could create a balance between the requirements of Ethereum to be economically powerful and the cultural values that it originally possessed.
Ether has been in tension. On the one hand, there are apps that make sufficient money to sustain the ecosystem. On the other hand, applications that reflect more on the values of Ethereum as a community.
Buterin points out that, in the past, such revenue drivers as NFTs and memecoins were not always consistent with these values.
Low-Risk DeFi of Ethereum: Search Analogy.
Buterin describes that low-risk DeFi protocols, such as payment, savings, fully collateralized lending, and synthetic assets, deliver the most beneficial value.
They are useful financial instruments that are not as risky as previous speculative DeFi. He also compares low-risk DeFi to the Google search engine.
Which funds the business activities of Google but does not advertise, with the mission being fulfilled by the non-advertising products.
Low-risk DeFi applications keep and pledge massive quantities of ETH as collateral, and earn transaction fees at the same time.
This is building a sustainable source of revenue in line with the objective of the community. Buterin is of the opinion that this kind of synergy is uncommon and strong, which enables Ethereum to perform well economically yet be good culturally.
Why Low-Risk DeFi Matters Now
DeFi protocols have matured. The vulnerabilities, such as protocol bugs and oracle failures, have reduced significantly.
Buterin highlights that in numerous regions of the world, the risks in conventional finance are higher than in DeFi.
Deposits on platforms like Aave have deposit rates of about 5% on stablecoins like USDT and USDC, which represent actual economic utility without too much in terms of excessive speculation.
He also cautions that the past waves of DeFi have been overreliant on unsustainable incentives and substantial speculation.
The modern low-risk DeFi is not like that. It offers universal unrestricted access to payments and savings, which allow wealth-building globally, particularly in underserved areas.
Low-risk DeFi is not as dishonest to the decentralized mission of Ethereum as the use of political memecoins or hype cycles to drive revenues.
It will seek to provide practical financial access and help Ethereum to be long-term healthy.
Buterin also talks about the development of low-risk DeFi. This may be used in the future, in the form of reputation-based lending without onerous collateral.
Efficient hedging with prediction markets, and new stable currencies such as basket currencies or inflation-indexed flatcoins. These are based on the premise that low-risk DeFi is putting forth today.
