Will borrowing in Ethereum DeFi reduce PoS security? Vitalik Buterin: It doesn't exist!

Ethereum is a leading blockchain with complex smart contract functions, and it is currently used by many large global companies. The world's second-largest cryptocurrency is working hard to achieve its original intention, however, the blockchain is also facing some urgent problems.


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The first problem facing Ethereum is that it cannot maintain a balance between decentralization, security, and scalability. Vitalik Buterin defines blockchain as the "trilemma of blockchain" (trilemma of blockchain). Almost all blockchains are striving to achieve these three performances, but most blockchains can only achieve at least one of them at the same time. Two. Although Ethereum is planning to develop from PoW consensus mechanism to PoS mechanism Ethereum 2.0, and is preparing for this upgrade through the update, but the debate is still triggered.

Pledge vs. Borrow

A debate about borrowing that could endanger pledges is heating up. People have always believed that borrowing may exceed pledges. The reason for this may be that borrowing is inversely proportional to the price of ETH.

When the price of Ethereum fell, the amount of ETH locked in DeFi Finance (DeFi) began to rise, and this relationship was also established in reverse. People worry that if borrowing exceeds pledge, Ethereum will be attacked due to centralization. A Twitter user posted:

"The competition between the DeFi service and the POS protocol itself (DeFi stack vs. POS stack) will lead to the centralization of the network, thereby making the network vulnerable and vulnerable."

The user also added that if the block reward of the Ethereum PoS chain decreases over time, especially under the deflation model adopted by ETH, the long-term balance of asset lending and pledge will be inclined to the former. In response, Vitalik Buterin stated:

"Yes, I do n’t believe this. Even today, the compound interest of ETH is only 0.01%. Many people think that the interest rates on loans between different currencies should be the same. This is wrong, because fiat currency is a kind of interest-bearing. Assets, and cryptocurrencies are not, so the interest rate of fiat currency is of course higher. "

Buterin also explained that so far, users' borrowing demand for Ethereum has not been very high. In addition, he also pointed out that there is a "self-correcting negative feedback mechanism" in Ethereum, which can prevent the pledged Ethereum from becoming extreme.