Ethereum’s co-founder has taken aim at coins designed to incentivise yield farming, comparing their underlying economics to irresponsible monetary policies
Vitalik Buterin, the co-founder of Ethereum (ETH), has again taken to Twitter to warn against naive bullishness in the decentralized finance (DeFi) sector, comparing the economics of yield farming tokens to the Federal Reserve’s money printing.
Yield farming - providing liquidity to earn interest in the form of tokens - has taken the crypto community by storm and sparked the DeFi boom.
However, Buterin highlighted the aggressive supply inflation of many governance tokens, saying this puts downward pressure on the prices of “coins that are getting printed nonstop to pay the liquidity providers.”
Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul.
Buterin is not alone in his assessment of these inflationary aspects of the DeFi sector, with Twitter user ‘Larrypc’ likening yield farming to “a giant Ponzi scheme.”
Yield farming at this point is just a giant Ponzi schemeSomeone forks a well-established project, makes minimal changes, gives it a funny nameSome insiders farm a large amount of coins, shill it on social media, and dump it on naive investors at massively inflated prices— Larry | larrypc.eth (@Larrypcdotcom) August 31, 2020
Not everyone is a skeptic, with investor David Lach responding: “If you see those printed coins as new cryptocurrencies (like BTC, ETH etc.) then yes, it's insane.