Ethereum founder blasts DeFi model in Terra critique

livemint.com:

Ethereum founder Vitalik Buterin said there is no genuine investment that can get anywhere close to 20% returns per year while analyzing the implosion of the Terra blockchain which triggered the crypto market selloff. 

The algorithmic stablecoin TerraUSD and Luna have been the major catalysts for the bear market, dropping to nearly zero dollars over the course of a few days and wiping out $60 billion in Terra coins alone. One of the stablecoin’s main attractions for investors had been its promised interest rate.

“The greater level of scrutiny on defi financial mechanisms, especially those that try very hard to optimize for ‘capital efficiency’, is highly welcome," Buterin said in a statement, reported Bloomberg. “The greater acknowledgment that present performance is no guarantee of future returns (or even future lack-of-total-collapse) is even more welcome."

Buterin also suggests more rigorously evaluating how safe systems are by looking at their steady state, as well as their pessimistic state to see how they perform under extreme conditions and whether they can safely wind down. He also warns of other risks associated with automated stablecoins such as technical glitches. 

Vitalik Buterin, the co-founder of the Ethereum blockchain platform had declared last week that he is no longer a billionaire after the dramatic wipeout of crypto fortunes. Crypto billionaires have openly announced the loss they suffered during the steep crash in the crypto market due to selloffs in Terra UST and its sister token Luna.

Investors who once were hot on crypto have also cooled on its prospects, as the Federal Reserve’s rate-hiking regime spurs volatility in the market and dulls previously-hot growth and speculative assets.

Cryptocurren