The comments underline Ethereum’s growing divergence from VC-led crypto focused on custodial and yield-driven models.
Ethereum co-founder Vitalik Buterin has said the crypto industry still hasn’t figured out how to build decentralized stablecoins that can actually hold up over time. In a long reply on X, Buterin laid out why, despite years of experiments, the core problems remain unresolved.
The comments were made in response to Cyberpunk Lawyer, who argued that Ethereum has increasingly become a contrarian bet in crypto.
“It’s increasingly obvious that Ethereum is a contrarian bet against most of what crypto VCs are betting on,” Cyberpunk Lawyer Gabriel wrote, listing gambling apps, CeDeFi, custodial stablecoins, and “neo-banks” as dominant VC narratives.
“Ethereum is tripling down on disrupting power to enable sovereign individuals.”
According to him, most venture capital money is flowing into gambling products, CeDeFi, custodial stablecoins, and crypto “neo-banks,” while Ethereum continues to focus on decentralization and individual sovereignty.
Buterin didn’t disagree with that framing. Instead, he used the moment to explain why decentralized stablecoins — one of Ethereum’s most important use cases – are still unfinished.
Buterin’s first issue was with the reference point most stablecoins use: the U.S. dollar.
He said tracking the dollar works for now, but relying on it long term goes against the idea of building systems that can survive independently of nation-states. If the goal is resilience, tying decentralized money to a single government-issued currency creates an obvious dependency.
Over a long enough time frame, even moderate inflation or policy changes could weaken the stability these coins claim to offer. In that sense, dollar-pegged stablecoins solve today’s problem but ignore tomorrow’s risks. Buterin made it clear this isn’t about rejecting USD-based stablecoins immediately, but about admitting they are not a final solution.
The second issue Buterin pointed out is oracle design.
For stablecoins to work, they need reliable price data. But if those oracles can be influenced or captured by large pools of capital, the system stops being meaningfully decentralized. When that happens, protocols are forced to raise the cost of attack by increasing fees, emissions, or other forms of value extraction.
Vitalik highlighted, “Oracle design that’s decentralized and is not capturable with a large pool of money.”
Buterin argued that this setup hurts users and explains why so many governance-heavy DeFi systems end up over-financialized. If defending a protocol requires constant extraction, then decentralization becomes expensive for the people using it.
This is also why he remains critical of purely financialized governance models. According to Buterin, they don’t offer strong defensive advantages and often collapse into rent-seeking structures just to stay secure.
The third problem is staking yield. “Solve the problem that staking yield is competition,” says Vitalik.
As long as Ethereum staking offers a few percent in returns, decentralized stablecoins are competing against a safer and simpler option. Locking collateral into a stablecoin system that earns less doesn’t make economic sense for many users.
Buterin outlined a few possible directions the ecosystem could explore. These included drastically lowering staking yields, creating new forms of staking with reduced slashing risk, or finding ways to make slashable staking usable as stablecoin collateral. None of these options are easy, and all of them introduce new risks.
He also pointed out that slashing risk is often misunderstood. It’s not just about validators behaving badly, but also about inactivity leaks and scenarios where a majority tries to censor the network. Stablecoin designs need to account for those situations, not just normal market conditions.
What stood out in Buterin’s comments is how clearly they separate Ethereum’s priorities from the rest of the crypto market.
While many VC-backed projects focus on yield, custody, and financial products that resemble traditional systems, Ethereum continues to focus on decentralization even when it slows things down. That difference explains why Ethereum often looks conservative or unfinished compared to newer chains.
For Buterin, decentralized stablecoins are not just another product. They are a test of whether crypto can actually reduce reliance on centralized power. Until the problems around reference currencies, oracle security, and staking competition are solved, he believes pretending the issue is fixed does more harm than good.
Ethereum, at least for now, seems willing to live with that discomfort.
