Vitalik Buterin on the Future of Decentralized Finance
During a recent Dromos Labs event, Vitalik Buterin, one of the minds behind Ethereum, expressed his belief that decentralized finance (DeFi) is at a critical juncture. He remarked that on-chain savings platforms are not just feasible but are beginning to compete with conventional banking options. This evolution in DeFi showcases substantial advancements in security and usability since its inception, indicating a transition from high-risk speculative practices towards a model of stability that could serve as a primary banking solution for various users globally.
Progress and Challenges in DeFi
In his remarks, Buterin offered a cautiously optimistic view of the current state, noting that the progress made since the early days of DeFi around 2019 and 2020 would be like comparing “night and day.” Although he acknowledged recent security incidents, such as the high-profile Balancer hack that occurred earlier this month, he highlighted the impressive strides in smart contract security.
According to the blockchain analysis firm Elliptic, while the losses associated with cryptocurrency in 2025 are significantly higher than those of the previous year, much of these losses can be traced back to the Bybit incident in February rather than flaws in the DeFi framework itself. Buterin emphasized the importance of what he refers to as the “walkaway test,” a measure that ensures users can retrieve their funds autonomously, underscoring the need for developers to stay true to Ethereum’s foundational values of open-source ethos, interoperability, and resistance to censorship. He called upon these innovators to consider both Ethereum’s mainnet and its Layer 2 networks when developing their applications.
Current DeFi Landscape
The DeFi landscape on Ethereum now processes transactions exceeding $1.9 trillion on a quarterly basis, boasting a market cap of $77 billion and serving over 312 million active users by mid-2025. DeFi’s average savings yield stands at approximately 8.2%, which far surpasses the 2.1% offered by traditional banks. However, challenges persist, including the $1.1 billion loss attributed to scams and exploits reported in the first half of this year. In contrast, global banking institutions manage assets totaling around $370 trillion and execute transactions worth $405 trillion quarterly, albeit facing criticism for sluggish processing times and elevated costs, further enhancing the appeal of DeFi for users desiring greater control and efficiency.
Low-Risk DeFi and The Trustless Manifesto
Buterin’s remarks align with his earlier September publication, wherein he advocated for “low-risk DeFi” as a cornerstone for sustainable economic practices within the Ethereum ecosystem. He highlighted the potential for stablecoins and flatcoins linked to indices or currency combinations to inject stability into Ethereum’s economy while upholding its core mission. Buterin noted that prominent DeFi entities, such as Aave, which currently offers stablecoin yields near 5%, could cater to these low-risk financial needs.
Additionally, in a collaborative effort with the Ethereum Foundation, Buterin released “The Trustless Manifesto,” a guidance document aimed at developers to warn against sacrificing decentralization for the sake of expedience. In this manifesto, he cautioned against the proliferation of centralized elements, such as sequencers in Layer 2s and hosted RPC nodes, asserting that compromising on decentralization is dangerous. The manifesto outlines three guiding principles for maintaining trustlessness: the absence of critical secrets, avoiding indispensable intermediaries, and ensuring results are verifiable.
Ethereum’s Growing Influence
As Ethereum continues to bolster its technical capabilities and institutional partnerships, it currently encompasses over 75% of tokenized real-world assets and commands 58% of the total supply worldwide. Major firms, including BlackRock and Securitize, are now implementing tokenized Treasury products directly on the Ethereum blockchain. Furthermore, value secured within Layer 2 networks of Ethereum has surpassed $50 billion, and progress around privacy and scalability measures has gained momentum through the establishment of the Ethereum Foundation’s newly formed 47-member Privacy Cluster.
