Home News Vitalik Buterin warns of DeFi risks

Vitalik Buterin warns of DeFi risks

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Ethereum co-founder Vitalik Buterin has issued a warning against the pitfalls of decentralized finance (DeFi). According to Buterin, self-custody is not without problems due to bugs in smart contracts, among other problems.

According to him, self-custody is better than sending your cryptocurrencies to an exchange. However, it is not risk free and it is not 100% safe either.

“The ‘anything centralized is bad by default, use DeFi and self-custody’ ethos worked really well this week,” he said.

Buterin referred to the loss of confidence in centralized exchanges that led to record exchange outflows following the FTX collapse.

“But remember that there are also risks in self-custody. These risks may involve, for example, bugs in the smart contract code,” continued Buterin.

Self-custody also has risks

Furthermore, he added that developers should “keep the code simple” and perform “audits” and “formal verification” to avoid these problems.

“What worries me the most is if we have $10 billion in a ZK-rollup 2 years from now and it gets hacked. Imagine if this hack happens because of a bug in the circuit restriction code or the EVM wrapper around it. This will be a disaster,” wrote Buterin.

After the FTX collapse, industry leaders like Binance’s Changpeng Zhao began championing self-custodial solutions. According to them, the most sensible catchphrase on the market is “Not your keys, not your Bitcoins”.

FTX has filed for Chapter 11 bankruptcy in the US. At the same time, its CEO and founder Sam-Bankman Fried stepped down as president of the company. This has raised concern among investors who fear they may not be able to get their funds back.

Both Ethereum and Bitcoin have lost over 20% in value over the past 7 days. After the company’s bankruptcy, problems begin to arise in other companies, such as Crypto.com and Gemini.,

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