DENVER, CO - FEBRUARY 18: Ethereum co-founder Vitalik Buterin speaks at ETHDenver on February 18, 2022 in Denver, Colorado. ETHDenver is the largest and longest running Ethereum Blockchain event in the world with more than 15,000 cryptocurrency devotees attending the weeklong meetup. (Photo by Michael Ciaglo/Getty Images)

Vitalik Buterin sounds warning over risks of DeFi

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Ethereum cofounder Vitalik Buterin has sounded a warning against the pitfalls of decentralized finance (DeFi) and self-custody, namely of bugs in smart contract code, in a post from his verified Twitter account.

See related article: Who is exposed to FTX? A running compilation on a rapidly moving target

Fast facts

  • “The ‘centralized anything is evil by default, use DeFi and self-custody’ ethos did very well this week,” wrote Buterin, referring to the loss of trust in centralized exchanges that led to record exchange outflows, following FTX’s collapse. 
  • “But remember that it too has risks: bugs in smart contract code,” continued Buterin, adding that developers should “keep code simple,” and perform “audits” and “formal verification,” to prevent smart contract exploits.
  • “The one I worry about most is if we have $10B in a ZK-rollup 2y from now and it gets hacked because of a bug in the circuit constraint code or the EVM wrapper around it,” wrote Buterin, attaching his blog post titled “Hardening rollups with multi-proofs.”
  • ETH shed 4.7% of its value in the last 24 hours, changing hands at US$1,205 at 11 p.m. in Hong Kong on Wednesday, according to CoinGecko data.

See related article: FTX is crypto’s Lehman Bros. moment. What happens now?

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