Vitalik Buterin calls for better decentralized stablecoins to tackle inflation and other issues.
The cryptocurrency market requires more advanced decentralized stablecoins to address long-term issues such as inflation, according to Ethereum co-founder Vitalik Buterin.
The developer identified three main demands of the segment:
“Tracking the US dollar is fine in the short term, but in my view, part of the sustainability concept should be independence even from this price ticker. What if hyperinflation occurs over a 20-year horizon?” Buterin noted.
In the absence of a secure oracle to protect against protocol capture, developers typically “inflate” the token’s value to make an attack prohibitively expensive. However, to maintain a high rate, the project must promise investors super-profits, extracting them through high fees. This makes using the protocol unprofitable.
Buterin described this situation as a “dead end,” as such systems lack “protection asymmetry” — in this case, both attack and defense of the protocol boil down to a “financial race.”
“This is one of the main reasons why I constantly oppose financial governance […]. And, of course, it is one of the main reasons why I do not intend to completely abandon DAOs,” he added.
In the context of staking, the programmer emphasized that even a couple of extra percentage points of APY negatively affect the coin. As possible solutions, he suggested:
The Ethereum co-founder reminded that stablecoins cannot be backed by a fixed amount of ETH, as in the event of a sharp price drop, rebalancing must be possible.
