Vitalik Buterin Directly Addresses DeFi Pain Points: Why Does Ethereum Co-Founder Say "Most DeFi Is a Lie"?

Ethereum core developer and community opinion leader c-node recently stated: “Unless you hold long positions in cryptocurrencies and want to access financial services while maintaining self-custody, there’s no reason to use DeFi.” He dismissed most yield strategies based on stablecoins like USDC as “blind worship,” believing they merely imitate the appearance of DeFi’s success but violate its original spirit.

The core of this debate revolves around one question: what is true DeFi?

Current State and Value Doubts of DeFi

The decentralized finance sector of the current cryptocurrency market appears prosperous on the surface, with various yield strategies and liquidity mining projects emerging endlessly. However, in the view of Ethereum co-founder Vitalik Buterin, this prosperity masks deeper issues. He believes that the vast majority of current DeFi applications only serve speculative capital rather than advancing the construction of truly decentralized financial infrastructure.

Similarly critical, c-node pointed out that many DeFi activities are built on centralized assets like stablecoins USDC, which runs counter to DeFi’s core principles—self-custody and decentralization.

Technical flaws are also quite evident. Vitalik’s recent criticisms of Ethereum Layer 2 solutions also apply to the DeFi space. He noted that many L2 solutions only achieve superficial scalability, while core components like cross-chain bridges are still controlled by a few participants, essentially turning into “centralized databases disguised as blockchains.”

Focus of the Debate: What Is True DeFi?

Disagreements have emerged within the crypto community over the definition of “true DeFi.” Vitalik believes that genuine decentralized finance must decentralize counterparty risk, not just optimize yields. He emphasizes the importance of algorithmic stablecoins, especially those that are over-collateralized or designed to disperse counterparty risk.

Vitalik explained, “Even if 99% of liquidity is supported by holders of negative algorithmic dollars and positive dollars elsewhere through CDPs, the ability to transfer counterparty risk to market makers remains a key feature.”

This debate reflects deeper ideological divisions in the crypto space. On one hand, DeFi is seen as a tool to improve capital efficiency, leverage, and generate yields while maintaining asset custody; on the other hand, it is viewed as a foundational financial system that reshapes the global financial sector through decentralization and risk distribution.

Ethereum Technical Upgrades and DeFi Outlook

Despite criticisms of existing DeFi applications, Vitalik and many experts remain optimistic about Ethereum’s development prospects. 2026 will be a pivotal year for Ethereum’s technical upgrades, with the “Glamsterdam” upgrade planned for the second half of the year. This upgrade will introduce two core features: encapsulated proposer-builder separation (ePBS) and block-level access lists (BALs). While these technical details may seem complex to ordinary users, the key point is that these improvements will significantly reduce Gas fees for users and DeFi applications.

Additionally, Glamsterdam will enable Layer 2 blockchains built on Ethereum to settle transactions on Ethereum with higher throughput. If the upgrade proceeds as planned, the entire Ethereum ecosystem will become cheaper and more reliable.

Ethereum’s own scalability improvements also open new possibilities for DeFi. Ethereum core developers plan two major hard fork upgrades in 2026, with Glamsterdam increasing the Gas limit from 60 million to 200 million—more than tripling it. In fact, the Fusaka upgrade completed in December 2025 already demonstrated the power of L1 expansion, with daily transaction volume increasing by about 50% and active addresses rising by approximately 60% after the upgrade.

Market Outlook and Ethereum’s Value Analysis

Against the backdrop of DeFi debates and technological development, professional institutions show cautious optimism about Ethereum’s market prospects. According to Gate data, as of February 9, 2026, Ethereum’s current price is $2,089.37, with a market cap of $252.82 billion, accounting for 10.04% of the cryptocurrency market share.

Technical upgrades and market demand must go hand in hand. Standard Chartered predicts “2026 will be the year of Ethereum,” believing its dominance in stablecoins, tokenized real-world assets, and DeFi will outperform Bitcoin. The institution estimates Ethereum’s long-term price could reach $30,000. However, for Ethereum to achieve significant growth, favorable market conditions are still necessary.

Based on price range analysis, the expected price range for Ethereum in 2026 is $1,320.02 to $2,283.84, with an average projected price of $2,095.27. Looking further ahead, by 2031, Ethereum’s price is expected to fluctuate between $2,863.02 and $4,481.25, with a potential return of +49.00%.

Ethereum’s long-term vision is to shift from a dollar-denominated system to one supported by a diversified accounting unit backed by decentralized collateral structures. This transformation will fundamentally change DeFi infrastructure, making it more aligned with decentralization principles. As technology matures and application scenarios expand, Ethereum and its DeFi ecosystem are expected to achieve more stable and sustainable growth.

The cryptocurrency market is undergoing a fundamental transformation. According to Messari’s 2026 crypto trend report, DeFi is evolving toward modular lending protocols and active AMM architectures. A new trend has also emerged in the stablecoin sector—“interest-bearing stablecoins” are gradually replacing passive stablecoins, becoming the core collateral assets in DeFi.

Meanwhile, Ethereum itself is also experiencing a major transformation. As ForkLog reported, Layer 2 developers are engaged in intense debates with Vitalik about Ethereum’s future expansion. While the Arbitrum team insists that scalability remains the key value of second-layer solutions, Karl Floersch from the Optimism Foundation supports further decentralization.

Jesse Pollak, head of Base, agrees with Vitalik’s view, stating “L2 cannot just be ‘cheaper Ethereum’.” These developments indicate that although Vitalik’s criticisms of the current DeFi state may be controversial, they do highlight fundamental issues that need to be addressed in the crypto ecosystem. As Ethereum’s technology continues to mature and the crypto market gradually evolves, true decentralized finance may be going through its necessary growing pains.