Ethereum co-founder Vitalik Buterin has often voiced his concerns regarding decentralized finance (DeFi). However, a look at his on-chain activity paints a different picture of his relationship with this growing ecosystem. Despite his critiques, Buterin is an active participant in DeFi protocols, revealing a more nuanced stance.

Buterin's $9.2 Million in DeFi Engagement

Although Buterin has been critical of certain aspects of DeFi, his interactions suggest a substantial involvement in major DeFi platforms. As of September 2023, Buterin has spread $9.2 million across popular DeFi platforms like Aave and MakerDAO. His significant use of these protocols points to a pragmatic approach, where he leverages the benefits of DeFi, despite his philosophical reservations.

On September 12, Buterin made headlines by depositing 2,851 ETH, valued at around $6.7 million, into Aave. In addition, he moved 2.27 million USDC to the same protocol. These USDC funds were the result of selling 950 ETH in previous weeks. This is not the first time Buterin has utilized Aave, as he moved $4.8 million into the platform in late August.

Aave, with $11.5 billion in total value locked (TVL), is the largest DeFi money market. It allows users to lend their digital assets and earn yield, a core feature that seems to appeal to Buterin. However, despite his frequent usage, Buterin has expressed concerns about unsustainable practices in DeFi, particularly yield farming.

Buterin's Criticism of DeFi Practices

While Buterin actively engages with platforms like Aave and MakerDAO, he has been vocal about his skepticism regarding yield farming and liquidity mining, popular mechanisms in DeFi to incentivize participation.

In an August post, Buterin compared these yield strategies to an ouroboros — a snake eating its own tail. He pointed out the unsustainable nature of many DeFi yield schemes and emphasized the importance of identifying sustainable sources of yield. "I would love to see a story for where the yield is coming from that's rooted in something external," Buterin remarked.

His criticism isn't limited to yield farming; he has also been wary of the "2021-era liquidity farming craze," which he believes has led to unsustainable growth in DeFi. Despite his criticisms, Buterin has made exceptions for certain DeFi products, particularly decentralized exchanges (DEXs) and stablecoins, which he views as offering more sustainable use cases.

A History of DeFi Transactions

An analysis of Buterin’s publicly known Ethereum wallets shows extensive involvement in DeFi platforms. Since 2015, Buterin has conducted 213 decentralized exchange (DEX) transactions, totaling $71 million in value. The data from Arkham Intelligence reveals that Buterin frequently uses Uniswap, a leading DEX by trading volume. Out of his 213 transactions, 126 took place on Uniswap.

His most notable trade on Uniswap occurred on May 13, 2021, when he sold $10 million worth of HUSKY, a memecoin. Beyond major trades, Buterin's DEX activity often involves selling memecoins such as SHIB, SDOG, and AKITA — coins frequently sent to his public wallet by developers for promotion.

In addition to Uniswap, Buterin has used CoW Protocol, a decentralized exchange aggregator, for 46 transactions worth $14.8 million. Other platforms he’s interacted with include Balancer, Synthetix, Loopring, Kyber Network, and PancakeSwap.

Vitalik Buterin and MakerDAO: A Long-Term Relationship

Buterin's involvement with MakerDAO is long-standing. He has been using the platform for over seven years and currently has approximately $300,000 deposited in the protocol. MakerDAO, which has $3.91 billion in TVL, allows users to borrow the DAI stablecoin by posting crypto as collateral.

This long-term usage suggests that Buterin values the platform's stability and functionality. However, his criticisms of the broader DeFi ecosystem remain intact, as he continues to call for DeFi protocols to evolve toward more sustainable models.

DeFi's Future: Vitalik's Vision Beyond Finance

Igor Barinov, the founder of Blockscout, suggests that Buterin's criticisms of DeFi reflect a broader vision for Ethereum. "Vitalik sees Ethereum as more than just financial infrastructure," Barinov explains. "He wants Ethereum to change society at every level, from government to education and beyond."

Buterin's frustration with DeFi, according to Barinov, likely stems from seeing a transformative technology like Ethereum being used primarily for financial gains. Josh Benaron, founder of Irys, echoed similar sentiments, noting that Buterin's concerns over liquidity farming come from doubts about its sustainability. "Vitalik may not find short-term trends interesting," Benaron stated.

Preetam Rao, CEO of QuillAudits, believes Buterin’s relationship with DeFi is complicated. "Vitalik’s not saying DeFi is garbage. He just thinks most of it hasn’t evolved enough to meet his high standards of decentralization and sustainability," Rao commented.

A Complex Relationship

Buterin’s on-chain activity, including over $71 million in DeFi transactions and significant involvement in major protocols, indicates that he sees value in decentralized finance. However, his criticisms reveal a desire for a more sustainable and decentralized future for DeFi — one that moves beyond short-term profit schemes and towards real-world utility. While Buterin remains a prominent DeFi user, his vision for Ethereum extends far beyond its current financial focus.