Vitalik Buterin: DeFi users "are underestimating the risks of smart contracts"

In an interview celebrating the 5th anniversary of the Ethereum launch on Laura Shin's Unchained Podcast, co-founder Vitalik Buterin warned of the "risk of smart contracts" in DeFi protocols.

I think one of the biggest problems with DeFi is that a lot of people are underestimating the risk of smart contracts right now.

Buterin said that the exponentially higher interest rates compared to traditional banking services show that DeFi products carry higher risks and have a much higher potential.

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Buterin said he is not confident to assert that even fully audited platforms and protocols can guarantee that they will not "go bankrupt" in the future.

DeFi is fine, but don't act as though it's a safe place to bet all your savings.

There have been a number of accidents in smart contracts under DeFi segment this year. For example, the bZx case in February with nearly 1 million USD of cryptocurrency disappeared, or the Bancor smart contract failure in June caused the network to stop working.

Besides, the "father" of Ethereum is also concerned about the unsustainability of interest rates in the current lending protocol. He said:

That (high interest rates) exist only in the short term. And once this market is no longer “hot”, you will see the interest rates on many platforms drop very close to 0%.