My attitude towards DeFi: cautious at present, bright future ahead

In the comments section of the article from the day before yesterday, a reader wrote the following message:

"AAVE has caused such an incident, the entire DeFi and ETH will be re-priced and re-evaluated. DeFi is now something no one dares to touch, earning a bit of interest feels like dealing with selling drugs."

I can fully understand this reader's concerns and disappointment regarding DeFi.

Regarding this reader's worries, I would like to offer my perspective from another angle, for reference.

My viewpoint is not entirely related to technology and the crypto ecosystem, but rather has a more direct connection to broader social phenomena.

What social phenomena does it relate to?

It relates to how I view open systems versus closed systems.

I remember in a previous online Q&A, I gave an example in response to a reader's question. I said something like this (in essence):

As long as a system allows everyone to publicly criticize, publicly accuse, or even publicly insult and deliberately slander it, then that system, no matter how bad, cannot be too terrible. Moreover, once a standout example emerges from such a system, that example may become a peak that all systems find hard to surpass.

Conversely, if a system is one that the vast majority cannot see how it operates, and cannot publicly criticize or publicly accuse, then even if that system is good, it has a visible ceiling.

This viewpoint directly influences my perspective on the entire crypto ecosystem, including DeFi.

Therefore, for DeFi systems where the code is open, the rules are public, and even vulnerabilities are disclosed, I believe it cannot be too bad, and the future will certainly be bright. Because I believe there will definitely be standout projects that emerge, becoming the pinnacle of the ecosystem and the backbone of the crypto world.

Although the future is bright, the road will be exceptionally difficult and even tortuous.

The reason is simple:

Because it is open, because it is transparent, and moreover, it is a treasure trove filled with wealth, everyone will scrutinize it with a magnifying glass, will nitpick, and even wantonly slander it. Even if not for the sake of finding faults, purely for profit, countless people are constantly watching it, hoping for it to have vulnerabilities so they can take advantage.

Faced with such "difficulties" and thorough scrutiny, few can withstand it, and even fewer projects can endure. Thus, the vast majority of projects in the DeFi ecosystem will ultimately become cannon fodder in the historical evolution process, mercilessly swept into the trash heap by history.

But the good thing about DeFi is that the platform it is built on, Ethereum, is an open and permissionless platform. As long as this platform exists, the seeds of innovation will continuously be sown, and there will be a few exceptional individuals and teams that will soar through the annals of history, creating some extraordinarily powerful projects that will be recorded in history.

This is akin to human history—miracles throughout human history have always been created by a few geniuses and elites.

However, in this process, even genius projects must undergo rounds of brutal cleansing and relentless blows, surviving numerous life-and-death trials.

"The sharpness of the sword comes from being honed, the fragrance of the plum blossom comes from the bitter cold" speaks to this truth.

The DeFi ecosystem is a new ecosystem, still in its early stages of development, and has yet to experience the tribulations it must face. Therefore, I have always been wary of the various disasters it may encounter, and I have always been quite cautious in my use of DeFi.

I have not used CEX for a long time in the crypto ecosystem, relying almost entirely on DeFi.

But I take a rather conservative approach to DeFi operations:

In my daily operations, I use DEX the most, but only for asset exchanges, and I participate very little in providing trading pairs/liquidity, as I am concerned that issues may arise.

For lending applications, a few years ago, I left a batch of assets in AAVE and MakerDAO, but the amounts were not large. In the past two years, I have not put a single cent into lending applications. I operate this way out of concern that problems may arise.

In an online Q&A session a year or two ago, when Ethereum collateralization was very popular, a reader asked me if I had done Ethereum collateralization. My answer was yes, but the amount was not large; I would not, like some people, put all my Ethereum into collateral. The reason for this is also due to concerns that collateral applications (like Lido) may have issues.

When will I feel at ease?

I think it will take at least another 10 years, waiting for the vast majority of these applications to either die off or decline, and for the remaining ones to have endured enough disasters and developed strong defenses. Only then might I consider using them with a sense of security.

Even the monk Tang Seng had to endure 81 trials to achieve his goal; how much more so for these mixed-quality applications that have just emerged in a new world?

So the AAVE incident we see today, like every incident we have experienced in the past, is a necessary path for this ecosystem to grow robustly and to become a towering tree, a required course.

As for whether DeFi will be re-priced after this incident, I believe some projects may die off and be ruthlessly eliminated, but those that survive will definitely be stronger and healthier. As a whole, DeFi will experience a period of downturn, but as winter gives way to spring, it will still shine brightly.

As for Ethereum, I am even less worried. Decentralization and security have always been the bottom line that Vitalik and the core Ethereum team have steadfastly defended. This incident once again confirms that Ethereum's path and persistence are correct.