Buterin: DeFi should shift risk, not rely on USDC yield

Ethereum co-founder Vitalik Buterin drew a clear boundary around what he considers real decentralized finance, pushing back against yield-driven stablecoin strategies that he says do not meaningfully transform risk. He argued DeFi's value comes from changing how risk is allocated and managed, not simply generating yield on centralized assets, and criticized what he described as "USDC yield" products for depending heavily on centralized issuers while offering little reduction in issuer or counterparty risk.

Buterin outlined two paths more aligned with DeFi's original ethos: an Ether-backed algorithmic stablecoin and an overcollateralized algorithmic stablecoin backed by real-world assets. In the ETH-backed model, even if most liquidity comes from users minting tokens by borrowing against crypto collateral, the key innovation is shifting risk to markets rather than a single issuer.

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