Bankless - Vitalik Declares DeFi Ethereum’s Killer App | Ryan & David

Episode Date: September 24, 2025

Vitalik Buterin just declared DeFi as Ethereum’s “killer app.” In his new post, he compares it to Google Search, the dependable core business that powers everything else. Ryan and David break down why Vitalik believes DeFi has finally earned this title, how it survived the volatility of the last cycle, and what it means for ETH as collateral, culture, and revenue. They cover the Google analogy, the risks DeFi has outgrown, and why this moment could define Ethereum’s future. ------ 📣0G | CRYPTO X AI https://bankless.cc/OGAI ------ BANKLESS SPONSOR TOOLS: 🪙FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🎩DEGEN | JOIN THE COMMUNITY https://bankless.cc/degen 🌳KGEN | REQUEST A DEMO https://bankless.cc/KGEN-podcast 🏄SURF | UPGRADE YOUR CRYPTO RESEARCH https://bankless.cc/surf ------ TIMESTAMPS 0:09 DeFi: Ethereum's Core Business 3:50 The Significance of Vitalik's Article 5:27 Vitalik's Perspective on DeFi Maturity 9:27 The Stability of DeFi vs. TradFi 12:20 Core Low-Risk DeFi Activities 14:47 DeFi's Global Accessibility 15:37 DeFi and Ethereum's Cultural Goals 17:56 Economic Contributions of DeFi 21:24 ETH as a Store of Value 26:05 The Noble Purpose of DeFi 30:48 Alignment of DeFi with Ethereum 34:45 Google Analogy: DeFi's Backbone 39:27 Vitalik's Pride in DeFi 41:49 Marketing Messages and Ethereum 1:04:37 Closing & Disclaimers ------ RESOURCES Vitalik’s Post https://vitalik.eth.limo/general/2025/09/21/low_risk_defi.html ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

In a brand new blog post, Vitalik Beteran positions Defi as the main quest line of the Ethereum project. He thinks Defy can and should be Ethereum's core business that provides the economic backbone to the rest of the Ethereum project. He makes this comparison between Ethereum's DeFi and Google's Search, where Google's search was this boring business, but it was a stable, dependable revenue engine, massively profitable revenue engine that sustains the Google network. and enables Google to have more experimental values-driven moonshots. At Bankless, we think this article is significant. Yes, we do. Historic, even? Because of what it represents for Ethereum

and also Vitalik's attitude towards what Ethereum is good for. So in this episode, we're going to break down the article. We're going to highlight the main points, provide some commentary, and then give our takes about what we think was perhaps left unsaid or left up to the imagination of the reader. Right. What do you think? I love this article, and I got to say, you and I, David, we have a big imagination.

So there's lots of embellishment we could do. And there's lots of interpretation we can bring into this episode. And of course, we're going to do that because this is a bankless takes episode. So it's not just Vitalik's take. It's mostly my take. It's our take about Vitalik's takes. Just content upon content here. David, before we get in, we got some friends and sponsors.

We got a shout out. Tell them about ZeroG, the AI. blockchain. ZeroG, brand new AI layer one chain that exists to be an end-to-end decentralized, truly verifiable AI operating system. It's massively scalable so you can actually put AI on the blockchain, which in previous generations of blockchains, that made, that sentence made no sense. But with zero-g, you can actually put AI on the blockchain. Think of like it's a modular chain with compute, storage, data availability, and also agent frameworks that are all part of the ecosystem. A subset, a second to find out. with like a thousand X lower gas fees than any leading L-O-1 because of course AI is very resource intensive, so you need that scalability. There's a link in the show notes, so you can go find out more information about zero gravity right now. All right, David, let's get to the article. Here's the title, low-risk defyc can be for Ethereum what search was for Google. This is a Vitalik Beatern post.

He posts his thoughts on Vitalik.eith. This is, I guess, a decentralized link that you can access from anywhere. Yep. Okay. And we don't always go over Vitalik blog posts. I read every single one. I think you do the same. You and I talk about every single one. Most of the time we talk about them. Because most of the time, there's some insight, there's something really interesting. I think he is the best writer in crypto as far as I'm concerned and has been for as long as I've been here. Anyway, the reason we're doing an entire episode on this is because it's significant, because it's important, because this is Vitalik saying, defy is good and defy is

Ethereum's killer app and this is kind of a milestone moment in some ways. Not to say he hasn't in the past been I guess encouraging of defy but this is the first time he's come out and said hey we found a killer app for Ethereum. Let's call it what it is

it's defy. Now the first impression some people might have is well isn't this kind of late? What do you think of about that. Is this late? Why is Vitalik waiting so long to call it now? Yeah, that was my initial reaction where there was, if you were, you know, closely paying attention to Ethereum and the arc of Ethereum and like providing commentary to Ethereum like we have been, it's, it's, if you're paying attention, it's like, okay, none of this is inherently new. It's obvious, right? Bankless,

what does that mean? It's kind of, at least to us, our opinionated version of what a blockchain should be, what a blockchains do. Defi has always been the main, the main arc. It's, it's, it's, It leverages the core tenets of what makes a good blockchain and blockchain to their fullest extent. And we stumbled into it in like 2017 and Defi has been growing ever since. And so in my DMs with you, I was like, yeah, man, like, he could have, like, we knew this was the case post-2020 when all of C-Fi broke and all of D-Fi was working. We had the validation back then.

And it's 2025. So what's the deal? Yeah, I've got to take on that later in the episode. I think it's less about Vitalik, you know, coming out and saying, hey, Ethereum is for Defi. I feel like he's done that in the past. What he's more saying in this article is that low-risk defy is now ready for the rest of the world, and it's kind of proven. So I think that is a higher bar.

You know, Vitalik has always been a fan of Defy from my perspective, right? If you go back to the original Ethereum white paper, the use cases in the white paper were large, there were all Defy. It was like minting. It was stable coins. It was all defy applications. So he's always been fully on board with defy, at least from my perspective. He was just waiting for it to be low risk enough to be able to recommend it to global societies around the world.

And I think that's what this post is. It's kind of a coming out post for that. I think to put an emphasis on that point, this is not Vitalik saying I think defy is neat. This is Vitalik saying defy is ready. Yes, exactly. Which is a core difference. So there's three main sections in this article. The main argument is defy's mature.

The second argument is that DeFi is culturally congruent with Ethereum's goals. And then the third argument is the Google analogy is that defy is the backbone that can support a variety of different moonshot investments. Many won't work, but some will change the world. It pays for all the nice things that we want on Ethereum, right? It's the core business model, basically. All right. Let's break it down then. The main argument, the defy is mature argument.

What does he say about that? Yeah, let me read a quote that I think kind of expresses this best. Straight from the article, he says, defy hacks and losses continue to exist, but they are increasingly being pushed out to further edges of the ecosystem. What he means by this is like newer defy protocols, new more experimental and speculative defy apps. A stable core of applications is forming that is proving remarkably robust,

tail risks that cannot be ruled out continue to exist, but such tail risks exist in TradFi 2, and given increasing global political instability for many people worldwide, the tail risks of Tradfai are now greater than the tail risks of Defi. In the long run, one could expect the transparency

and automated execution in a mature DeFi ecosystem to make it much more stable than TradFi. Now, that's the quote. I think we got the first wind of this, the first like market-based proven outcome of this in 2022, when there were multi-billion dollar losses by centralized lending platforms,

Galaxy, Gemini, Celsius, FTC, even all the way up to DCG. That was effectively crypto-tradfai, right? Crypto-Tradfi, crypto-tratfi, crypto-tratfi, crypto-centralized exchange, centralized platforms, yeah, and it was a contagion of risk that was not unlike what we saw in 2008, honestly. It was like a microcosm of 2008. And it happened because of the nature of Tradfi. There was human trust involved, and there was, you know, a black box accounting. There was Alex Michinsky.

Screw us over. Yeah. Uh-huh. To say nothing about SBF. Yeah. And so meanwhile, while TradFi was blowing up, defyy was orderly and efficient. AVE liquidations happened orderly and efficient. You know, Uniswap kept on working.

Everything about DeFi just worked. And so, like, you and I, who have, we have our money in Defi. That's where I play my games. I was fine. And anyone who was in Defi was totally fine. And that was the first big crisis moment where we had market-based validation where this works.

And I think Vatalic has definitely noticed that but then it's like, okay, and I'm going to let it steep for two more years. Yeah, I'm going to let it steep. Well, he's got this graph. I think you are pointing out one type of risk that occurs with traditional finance that doesn't occur with DFI,

which is kind of this custody risk, this lack of transparency risk, this black box risk, which is like, well, what is SBF doing behind the scenes, right? Well, he's actually taking customer deposit money and you're putting that somewhere else, vesting in other things. That risk, that type of risk, doesn't inherently exist in D5 because it's all open, transparent, you know, you can see all the operations, everything's going on. That's not to say there aren't risks, though, David. There are risks in defy and those risks have been substantial over time right so one of those key risks is of course hacking type of risks smart contract exploits exploits economic attacks oracle attacks all of these

different attacks and so this is a chart vitalic includes in his post which is you know it's got years and the percent of l1 defy losses as a fraction of l1 total value lock and we just say the context of this entire post is mostly about Ethereum L1. It's not about L2s. It's not about some of the more experimental posts. He's talking about low-risk defy on Ethereum's layer one. And this is a chart showing that the risk and the losses as a percentage of the total are actually going down. Up until 2025, like we haven't really had any big defy smart contract risk events, like hacks, anything like that.

And this is because our smart contracts are getting better, right? They have more lindy. The more value you deposit, the more years that go by without a hack, the safer everything becomes. And it's getting to the point, the reason Vitalik, I think, was letting some of this steep is now we're at the point where it's like less risky than a lot of trad-fi options, right? That's what this graph is showing. You can see exactly why Vitalik wrote this article here and now in this graph right here.

So for the listeners, the top of the graph is 2%. And so if you're at 2%, that means 2% of the layer 1 TVL was lost as a result to exploits, hacks, some sort of reason. That was in 2019, right? That was in 2019. Well, actually, 2019, I think it's labeled 5.5%. So very, very high. It's off the charts, yeah. Yeah.

It was a little bit over 1% in 2022. Maybe it was at 1% in 2023. And then in 2024, you can see it above the baseline, above 0% of 0%. And then at 2025, it goes down even lower than 2024. And again, if it's close to the bottom line where the top of the graph is at 2%, the bottom is zero. 2024 and 2025 is you round down to effectively zero. And so Vitalik is saying, okay, 2024, we were at what, 0.08% losses.

And at 2025, we're even lower than that. I now feel good and safe about promoting defy because we have two years in a row where losses are so incredibly marginal that I feel good about promoting this. Yeah. And that's why he titles the post, low risk defy, because he's talking about a specific subset of defy. And maybe we should, he doesn't mention specific projects, I think, but he does mention some like types of activity.

And the way I would boil this down is basically, you know, you know how a bankless used to have a thing, which is like the money verbs, right? What are the verbs? What are the things that you want to do with your money in defy? Spend, save, send, lend. Exactly. Okay. So the basic money verbs, the first is hold.

Okay, so you can do that within defy right now. The next is spend. You could do that very well in defy right now. And the next is lend, borrow, and trade. You could also say like maybe mint or issue assets. These are the core low risk defy types of activity. that are happening on chain, the core money verbs, I think, that are sort of fit the bill of low risk.

What sort of projects, David, come to mind when I say those things? Avey. And while Vitalik did not say or write Avey in the article, he did cite, he linked out to a tweet that he wrote on Twitter, congratulating Avey for basically getting losses down to zero. Yeah. And so it wasn't named in the article, but it was named by proxy.

And AVE is where I keep my money. Like I've had like plenty of deposits into AVE over the years. And globally across the world, you can get 5% APY on your on your US dollar fiat coins in Avey. And most of the world is on a fiat standard that is worse than a dollar. And so not only can Americans get a better savings rate than any bank account inside of America, but foreigners can access the dollar and also get a better savings rate. And so part of what our interpretation of why Vitalik's writing this article is not just because defy losses have basically approached zero, but also that accessing Ethereum and accessing

money, currency on Ethereum, mainly stable coins, is now just globally possible. On ramps are all around the world. People know about Ethereum. U.X is approaching like something that is globally ready. And so it's, defy is safe and it is globally accessible. It's not really benefiting, you know, first world, upper middle class and higher people. It's also fair and democratized. Exactly.

It's exporting the same, like the best banking system in the world to anybody with an internet connection. Here's a take I liked on Twitter. Defy is far from perfect, not really that decentralized, not really that safe. From the perspective of a wealthy first world citizen safe, defy can be unattractive. But for the other 90% of the world that doesn't have the privilege of using trustworthy financial institutions under the purview of a reliable government, local banks are shady,

regulation is unreliable, and confiscation is always just one bureaucrat's signature away. Defi fixes this. All right, so we are exporting the best banking system of the world to everybody with an internet connection. So if somebody is looking at maybe 5% tether, you know,

versus maybe you can get, a money market fund in your brokerage account. I get it. If you have access to that money market in your brokerage account that's giving you 4%, then why would you subject yourself to additional defy risk by depositing it into AVE? Okay, I get that. But that's not what most of the world has access to. Yeah. Okay. And so I think part of the reason he's excited is because low risk defy has gotten to the point where it's less risky than tradfi on a lot of dimensions for a lot of people who wouldn't have access to it. And now they instantly with a click of the button, they have access to that.

So it's democratizing. I think maybe that gets to Vitalik's second point here, David, which is that this is, DFI is culturally congruent with the Ethereum community's goals. So this is like a values-based argument. Can you make this point? Yeah, so there's three different subpoints here. He makes the argument that DFI contributes to Ethereum and ETH economically. second, that it serves a clearly valuable and honorable purpose.

We're going to talk about that honorable word. And then also, lastly, it does not give the Ethereum Layer 1 any perverse incentives. So it's kind of, it's incentive compatible with the goals of the Ethereum layer 1. So let's talk about these one by one by one. It contributes to Ethereum and ETH economically by both using a large volume of ETH as a collateral asset and by paying high volumes of transaction fees. So if you go to Ultrasound.com money, there is a burn leader. board and you can go down and you can check out what applications have burnt the most amount

of eth and common in at a whopping number one is uniswap the place where people go to exchange tokens exchanging assets is probably the application the on chain application of any blockchain's app layer swap exchange these are the money verbs here right yeah it's like swap your stables for eth swap your terrible local fiat currency for dollars stuff like this yep uh followed up by basic eth transfers, followed up by tether payments, followed up by metamath swaps. There's other Uniswad V1, V2, yeah, yeah, yeah. And then if there's also Circle, it gets in there. And then if you go to like more recent timeframes, it's like some of the newer apps, like World Waddy Financial got in there somehow. But like primarily it's stable coin sends. So you can,

you can send money around. You can use Ethereum as payment rails, which I mean, defy adjacent. And then swapping. Yeah. Which anyone who is deposit. into a long-term, like DeFi app, like Avey, like a slow DeFi app. Like Ave-A-R-Maker, that has to swap. And then also Avey and Maker do spit out some, like, amount of M-E-V, which goes to pay for layer-1 gas fees due to liquidations and things like this. And so, David, what he's saying is these core low-risk defy apps, they're actually burning the most Eth on the layer one.

And this is far more than NFTs. This is far more than layer two's at this point. The core defy apps are burning the most ETH, and thereby, through virtue of that burn, providing economic value back to ether the asset itself. So it's good for the business model, right? Well, there's two prongs here. There's that one. And then there's the first one that he said, which is that it uses a large volume of ETH as a collateral asset.

So one is a revenue-based conversation, as in people need to buy Ethereum block space to do DFI, and that is what sustains the security of the network that promotes long-term longevity. And it throws off fees and those fees are burnt, right? That's like a revenue. Encourges staking, provides like a basic foundation evaluation to ETH. And then also it just uses, it sucks up a lot of ether to be put into DFI. Every single DFI app, every single significant DFI app has ether in its vaults.

And so people are buying and holding ether inside of DFI. And that's a very high margin business. where, okay, there's revenue, where it's like, okay, there's a $100 transaction, and Ethereum will get 10 cents of that. There's beryllions of those, and that's how we accumulate some notion of revenue for Ethereum. Low margins, high volume. Sure. Buying ether and putting it into a defy up is extremely high margins. In fact, it's only positive margins.

Yes. Because if you were just directly buying what is the first product of Ethereum, which is ETH, That's just straight capital allocation into Ethereum. And so these two different prongs both sustain Ethereum economically. I think it's important to mention those two different prongs because when I saw some of the pushback against this article, it was kind of the force within crypto Twitter that is very much excited about revenue as the primary model for every layer one except for the special snowflake, which is Bitcoin. And they interpreted this or they wanted to interpret this to say, well, Vatalibati, is saying revenue is incredibly important. And I want to point out that Vitalik is not saying that.

Or at least he's not just saying that. He's also saying ETH as collateral is part of the value of ETH. He's saying the value of ETH is important. Some portion of that comes from revenue or fees. And another portion of that comes from ETH being used as a collateral asset and attracting value that way. He's talking about both as value contributors. So I think it's like a misreading to basically look at this and say,

oh, Vitalik is saying that revenue is important. And so- Which he is. He is saying that. He's saying it's an attribute to increasing the value of ETH, but it's not the only one. Also, ETH as a collateral asset is. And importantly, I don't think he's like weighing, you know, how much each contributes, right?

He's just saying it does both and both are good. Fair, fair. Yeah. Okay, so this is the only part. Let's put on the armchair. I'm the psychologist of Vitalik here. This is the only place in the article where he actually talks about ETH as a collateral asset

and therefore implies... Well, he actually knows. He explicitly states that, yes, ETH has a collateral asset inside of DFI, economically recycles value back to Ethereum, the Ethereum project, and that's good. Yes. So there's some arguments that are baked in there.

ETH as a collateral asset provides value to ETH. So the fact that you can deposit ETH in AVE, MakerDAO, Uniswap, and use that as a collateral asset, imbues ETH with value. I mean, we know this because if you have to buy Ether, that contributes value. If you have DFI apps that incent the purchasing and saving and hoarding of Ether, that's good for ETH. This is the first time that I've ever seen Vitalik fundamentally link the value of a collateral asset inside of DFI to the value of EF. It's definitely a plus one for the ETH as a store of value asset. type of thing that we've been saying.

Which we would say, ETH is money. It's like, this is our train of thought to how you get to Ethes money. Exactly. I don't think Vidalek will ever go all the way, but this is the furthest step that we have ever gotten Vitalik to say that, yes, Eth is money. I think it's the same thing. I agree. Yeah, he talks about even in the beginning, he said it's important for Ethereum to bring

in applications that bring in enough revenue. So the rev people will point to that and be like, oh, he said revenue to economically sustain the ecosystem, whether that means sustaining the value of ETH, okay, all right? So he's talking about clearly the value of ETH, whether it comes from revenue or whether it comes from ETH being used as a store of value asset in the ecosystem. Anyway, okay, that's his second point, or that's his first point. The second point is he says it serves a clearly valuable and honorable purpose. Can you sharpen that argument a little bit?

Yeah, I think it goes back to Defi is a unique product that is uniquely enabled by a smart contract blockchain. It is globally accessible at its maturity, like when a robust mature DeFi ecosystem, where blockchain itself is also mature, as in there are on ramps, there's ways to access this, UX isn't completely dog shit,

meaning that like people around the world, grandmas can figure out how to get savings out of DeFi. That is now possible. and since it's democratized and globally accessible, it uses Ethereum as the grand coordination layer, the financial layer of the internet, for everyone in the world to be able to access. And that's part of, I think, like,

what Vitalik is going after when he says the word honorable or noble. Like, this is a normal thing to do. We are democratizing finance. We are putting everyone on the same playing field. And that is capital G good. That is a good thing for the world. Some people don't like this, I would say. Don't, some people don't like, yeah, okay, so some people don't like the take that some use cases of blockchains can be more honorable than other use cases of blockchains, right?

It's a, I think that that says more about that person than what that statement is. But it's a value, if it's a values driven take. And he actually, he kind of takes a shot against meme coins a little bit here, right? Yeah, he says, it needs to be something. The use cases, you know, or to be honorable or good, capital. G, good for the world. It does seem to be something that is at least not actively unethical or not embarrassing. It's just not possible to say

with a straight face, you're excited about the ecosystem because it's positively changing the world if the single largest application is political meme coins. So all of the meme coin lovers, all the pumped-out fun people, maybe people in the kind of other communities,

alternative layer one communities that have built their revenue model off of casinos and meme coins are like, come on, stop being so, I don't know, holier than thou Yeah, stop being so judgmental

indignant, holier than now What's your take? Yeah, righteous. What's your take about that? I think like things like pump dot fun meme coins like this where I'll put it into the category of like financial entertainment.

Sure. I think that is going to change the world. Sure. Like I think that will be the future in a sense. And like I'm okay with that. It's going to be kind of a in terms of like, is it good or bad? It's just the future. And I don't have a problem with that.

It's not positively like lifting up the global tide of equitability and financial access. The way accessing a stable coin if you're in Argentina and you don't have a good local currency and you don't have a bank that will service you and accessing a stable coin that gives you the ability to earn like 5% in a currency that like is useful for something, be able to pay with low fees, be able to not to be unbanked by your local banks, right? That is better for the society of Argentina than Pump.com, fun, creators. Yeah. Like, can we just say that.

Yes. I think we can say that. I think I can say that. So let me be on the defense of Pump Fund creators. Sure. No, please, I'll go to the infotainment platforms where, like, Pump Fun, live streaming and content creation. Maybe that's like YouTube.

Yeah. In a sense, like, YouTube actually did an incredible amount of wealth generation and democratizing access to, like, long-tail content creators and really uplifted the world of content creation. And that was good. That was good. There are some costs to YouTube. There are, there's an algorithm that kind of shoehorns people into echo chambers. It can get, it can get weird down there. And it's a double-edged sword. On net, very good, but like double-edged sword. I don't think there's a double-edge to defy. To low-risk defy. I think it is. strictly only good, and that's why Vitalik is comfortable promoting. Unless you're an authoritarian and you try to control your population, right? This is a good thing. And I think that this goes back to maybe the high bar that Fatalic has for putting the V stamp of approval on something. It has to be, I think, for him to come out and be like, I'm bullish. This is a use case that's good for the world.

It has to be unequivocal and good in the broadest sense, which is like the collective general population of that society says, hey, this has helped our, like society, this has helped our community. I think that's what he's looking for, right? And these low-risk defy use cases hit those marks and hit that box. Okay. Yes. Ethereum's layer two universe is exploding with choices. But if you're looking for the best place to park and move your tokens, make your next stop unichane. First, liquidity. Unichane hosts the most liquid uniswap v4 deployment on any layer two, giving you deeper pools for flagship pairs like ETHUSDC. More liquidity. More liquidity. It means better prices, less slippage, and smoother swaps, exactly what traders crave.

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DGEN. The third point here. It does not give Ethereum L1 perverse incentives. Okay, this is a bit more nuanced and it requires a bit more subtlety, I think, in understanding blockchain designs. What is he saying on this score? He's saying that low-risk defy aligns with the properties of the Ethereum Layer 1.

What has the Ethereum Layer 1? optimized for. Security above all, because the Ethereum layer one has a multi-client architecture. So if one client breaks, the system keeps on running, meaning that if you have money in Defi, an entire Ethereum client can break, like a shard, a version, an interpretation of what Ethereum is because every single client is a version of Ethereum, one can just totally vanish. And all of a sudden, nothing happens. Ethereum just keeps on chugging your assets in Defi are fine. slower block times. So Ethereum has 12 second block times.

Why does it have such slow block times? Because it doesn't ever want to go down ever. So preserves users' property rights. So things like this. There are architecture decisions that Ethereum has made because of its values. It strongly aligns with what slow defi wants, low risk defy wants. Slow defy never wants to lose users' money. It always wants to work.

Property rights needs to be maximum. presumably preserved. And so the properties of what low risk defy, what it wants aligns with what Ethereum wants to itself be. So there is congruency here. There's harmony here between these use cases. And so a very large defy ecosystem doesn't push Ethereum to the high frequency trading end of blockchain design, where he thinks that's where you quote unquote lose your soul. We talked about that when we had Vitalik on the podcast most recently. It aligns. with what Ethereum wants to be. Yeah, this goes back to what I think Vatelic,

this is maybe a more opinionated sort of Vitalik take in design, but Vatelic genuinely does believe that high-frequency trading types of use case, incredibly fast defy type use cases. He uses the term low-risk defy in this entire article, but I would also swap that with, you know, the term slow defy versus fast defy. So the fast-D-Fi use cases, He thinks those are better off left to layer twos, where there can be some centralization,

like sequencer centralization, but you get to put like the dictator in a box. So the dictator in a box is it's centralized, but it's on this layer two, and users still get their property right guarantees because the L1 enforces that, right? And if you think about like Vitalik's whole take on the world, I think if Vitalik is sort of a maxi on anything,

and I think he's more of a balanced type of person. But he'd probably be like a property rights maxi, right? That's the thing he thinks in blockchains are most important. And so he thinks high frequency type fast defy type use cases will lead to underlying centralization. And he doesn't want that in the layer one. Okay. Now, that doesn't mean not scaling the layer one to its limits and sufficiency. But it does mean that you create a space for the high,

frequency fast defy use cases where you aren't architecturally you don't have to compromise on some of the decentralization features that make Ethereum so important. So of course, there's some pushback on that from other people in different crypto communities, but that's his underlying take. So summarizing everything, the three main points. One, low risk defy naturally recycles value back into Ethereum. Two, low risk defy is good for the world. and three, it leaned into Ethereum's unique strengths.

I'll let me get into a different spin on each of these things. One, low-risk defy is aligned with Ethereum. It naturally recycles back to Ethereum. It's aligned with Ethereum. Two, low-risk defy is aligned with the world. It's aligned with what the world wants. And then three, it leans into Ethereum's unique strengths. It doesn't massively change Ethereum's trajectory.

So we get to keep on the same path. And so the whole article, It fits the roadmap. The whole article is about this is low risk defy, Ethereum and the world can all have strong resonance with each other, strong product market fit with each other. And I think this gets to actually part of the title of this article, which is, okay, where does Google fit in? How is this like search for Google? Okay. So can you talk about that?

Okay. So Google's search ads is the foundation of Google. It's the economic backbone of Google. It makes. billion dollars from ads and it has for a long time. Google first indexed the internet, then made an algorithm for how to search the internet, and

then that was its main product and everything downstream of Google. Of search, yeah, YouTube, Gmail, of suge. Yeah, it all came from Google's ad revenue. Ad revenue is reliable, massive, low risk, and it creates the economic foundation that

funds everything else Google does. So Google, on the back of this, has built things like Android. Gmail, Chrome, Waymo, more recently, Gemini. And so Google's just famous for this model of this one business model. Pays the bills for everything. Pays the bills for everything. And they can afford to invest in speculative bets.

Yeah. Things like AI now is the most recent one. Like Google is a major player in AI. Why was it able to do that? Because it was making hella ad revenue for the last 30 years. I think 30 years. Yeah. So he's extrapolating the same equivalent to Ethereum.

So low-risk defy apps, things like stable savings, payments, fully collateralized lending, stable coins can provide Ethereum with a steady values-aligned fee base. It's not the sexiest part of crypto. It's actually supposed to be boring, but it's a durable backbone that ensures Ethereum has consistent economic viability moving forward. And so there it affords Ethereum moonshots. It gives Ethereum the flexibility to invest in things that are speculative. What are some speculative things? Maybe I'll ask Ryan this. Here are three for me.

On-chain sovereign identity. Super valuable. If we can, I have a United States citizenship. You have a United States citizenship. But the whole idea of like crypto is like we're not just citizens of the respective nation state that we are born in. We are individuals in our own right. How do we come up with an identity system that aligns with that? Right.

On-change sovereign identity. decentralized governance to scale. How do we upgrade democracy? How do we upgrade our human coordination system? Stuff like that. Alternative non-fiat currencies, well, all of the fiat currencies are slowly decaying versus the dollar. The dollar is also decaying.

How do we fix this? How do we have flat coins that work at a global scale? So things like this. I don't know if you have any more to add to that list. Yeah, no, I think that's exactly right, right? And so some of those things you mentioned like on-chain sovereign identity, it's not necessarily clear that that's going to be a powerful value accretion mechanism for ether the asset, right? If you just have your on-chain identity and, you know, it can be verified.

That's not necessarily spending gas. It's not necessarily requiring ETH as collateral in order to verify your identity. So it might be a very important use case for the world, but it might not be core to kind of the value driver for ether the asset. So that's a distinction. I agree with all of that. I would also add that this low-risk defy provides like a foundation for higher-level financial use cases as well. So one example is maybe credit. So if you had identity going on chain and then you have kind of low risk defy collateral-backed lending and borrowing type of mechanisms, then you can combine that with some other data set, maybe somebody's identity on-chain history plus some of their off-chain history, and you get a new money Lego, Defi primitive, which is like you get credit on-chain. But what you require before that is you require, you know, stable coins.

You need lending and borrowing, money protocols. And then you can eventually work your way to credit, right? So this also provides a nice foundation for future finance primitives. Important to view that like foundation is a bottom of a funnel. So the way that Google works, Android, Gmail, Chrome, Waymo, Gemini. These are all like top of funnel financial services. And especially when they were building out like Google Maps, for instance, made no money for years. But now there's ad revenue inside of Google Maps because they figured out that like, oh, people are using this on a massive scale.

It's providing a ton of utility. We can stick ads in there. And so Google Maps is just a top of funnel adoption for Google. And Ethereum, like on-change sovereign identity, if the whole world's like Internet citizenship standard is on Ethereum, that's just a massive top of funnel. magnet to the entire world. And at the bottom of that funnel is Defy's like, well, my identities on Ethereum, maybe I should also put my savings on Ethereum too. And so all of these moonshots are ultimately just like trying to penetrate the world's

tam and try to make the Tam even larger. So I think this article is basically Vitalik saying that Defy is Ethereum's killer use case. This is how he concludes it. For all these reasons, I would argue that a stronger focus on low-risk defy puts us, by us he means Ethereum, in a position much better for economically sustaining the ecosystem while maintaining cultural and values

more congruent than search in ads ever could for Google. There's another point he makes it's just like whereas for Google ads were kind of toxic, right? Because what's the incentive for anybody selling you ads? It's to get you dopamine addicted to a screen. Collect your data. Collect your data, yeah, mine your data

and dopamine addict you, okay? Yeah. Defi, low-risk defy does not have those clear kind of like, you know, it doesn't have a clear toxic side. Perverse incentive, right?

So it's better from that score too. So he says, low-risk defy is already supporting the Ethereum economy. It's making the world a better place today and is synergistic with many of the more experimental applications that people on Ethereum are building.

It is a project that we can be proud of. They go, David, we've been working for Vitalik to be proud of us this entire time. And now he's proud of it. us. The last line is a project that we can all be proud of. I had a moment when I read that. Yeah.

I was like, oh, wow, that was great. Proud tier emoji kind of thing. Yeah, proud tier emoji. Yeah, I get it. All right, so that was the summary of the article. I think I just wanted to like deliberate with Ryan for a little bit. And there's also a bunch of crypto Twitter commentary pushback and countertakes. So we're going to get to all of that end more.

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So Ryan, when I first read this article, I was like, well, none of this is really new. Yeah, actually. And it would have been really nice to have had this, you know, three years ago. I feel like we were ready for this article three years ago after C-Fi blew up and Defi didn't. And I feel like that was actually a lot of people's sake. Like, DeFi has been around for a long time. And I think this is the first time where DeFi itself got a main article feature on Vitalx blocks.

Yeah, that's right. I think that's right. And there had been some pushback in the Ethereum community previously. I mean, I don't know, was this a year ago, year and a half ago? It's balled up at various times, which is just like even defy founders inside of Ethereum just being like, hey, like why can't the EF be more supportive to defy? Like, we're paying the bills around here. We're doing the things.

We're exporting the value. Or keeping the lights off. Yeah, can't you guys say something nice to the founders? Have you said thank you once? Exactly. It's completely that, right? And so, and it felt, I think it felt like a little bit from people building in defy and Ethereum, it felt a little bit like pulling teeth.

Okay, just say one nice thing. Okay, here's my take on that. My take is just that people who haven't watched Vitalik over time don't know how insane highly high a bar it is. Like, for him to say he's genuinely proud of a financial app use case. Okay. And some people might be like, well, that's stupid, right? Like, obviously, Avei was doing great, like a few years ago and Udysweps

been great. And it is true. He's been supportive of these apps over time. But it hasn't gotten to the place where it's low risk enough. And it hits Vitalik's bar of being like a broad, global, societal good if you adopt this thing, right? I don't think Vitalik wants to be in the position of saying, everybody, get on board with Defi, and then having another Dow hack happened. Right. Okay? Yeah. Remember how Vitalik started his time of Ethereum. Like, that happened so early in the Ethereum lifespan,

and I think he was like, scarred from that probably in a good way to just be like, hey, like, there's no rush here. Let things bake. Let's let it bake for a while before I, I think. I say this is safe and let people experiment let the crypto natives and those on the frontier and you know uh this is the west you know you could lose what you put in let those people do that and i'm going to wait until this bakes to a point where i can go to a normie and say hey you know this is good actually this is good yeah you should check out ave in fact your entire government should think about like banking and defy and like you know supporting legislation to do that i think That's the type of bar that it took for Vitalik to write this type of post.

And the reason it's taken like 10 damn years to do it, right? So Vitalik doesn't have just a bar. First you have to get over Vitalik's bar, and then you have to stay over Vitalik's bar for two years. And that's the actual bar that you have to get over there. Yeah, yeah. I do think the analogy is good with the comparing defy to Google. because if you think about Ethereum,

it's sort of like the internet of value. It's kind of a protocol. You can build anything on top of it. And then defy would be Ethereum's Google in this case. So one other dimension of this, right, if we look at my interpretation of this post, okay? And so this is a little bit of like Ryan's take, maybe the bankless take,

is a few things I read into this is not only optimism for defy, but also an optimism for Ethan. the asset? He didn't come out and say, ETH to 10K. It's coded. Yeah, it's coded.

So I'm reading EF to 10K. I'm reading ETH to 100K in this article. But he doesn't say that because that's not his style. And also bullish on Ethereum's L1 scaling roadmap. So this entire post. This was an Ethereum Layer 1 article. Right? It was specified Ethereum layer 1.

It did not say Ethereum. The Low Risk Defi. Low risk defy must be on Ethereum layer 1 as a contingency. Yes. is and it's disproportionately already on the layer one. So if you take these things and you start to define them, okay, so ether as a store of value collateral, he names it as a collateral. That's kind of the World Reserve asset, right? Defi as Ethereum's killer app. That's kind of a world banking layer, not banks. Okay, banks are controlled by individuals, institutions, governments, but banking are the money verbs, the lending and borrowing and trading and swapping and issuing things that you want to do. And that is now, world accessible, everybody with an internet connection, and then Ethereum layer one, that's the ledger for slow defy, or low risk defy, and then Ethereum layer two's, that's the ledger for the fast, high frequency trading, defy, the types of activities that maybe exchanges are going

to do, okay? And if you look at those things across those four dimensions, David, we're actually making tremendous progress from a metric perspective. So let's take a look at our collateral, all right are a store of value collateral that's about 500 billion right now a little bit less than at the time I tweeted this unfortunately markets are down a little bit but about 500 billion okay so half a trillion not too bad the defy and we call that economic bandwidth you know that's more collateral the more that goes up the more defy stuff we can do on the back of this collateral okay defy assets on ethereum 500 billion right now okay so that's all the stable coins all the RC20s, everything, all the non-Eath assets on top of this World Ledger.

And also, defy total value locked. That's kind of the slow defy. We're out about $100 billion. So not too bad. Our collateral is half a trillion. Our defy assets are another half trillion. And then we get total locked in these low-risk defy assets of $100 billion. And then we have some scalability metrics.

So Ethereum Layer 1 is doing about 20 transactional. per second right now, but we have a roadmap to scale that to 10,000 transactions per second. A medium term roadmap. A medium term roadmap, right? Three to five years. Exactly. And where we're three-xing every year, it's not just a one-time, you know, suddenly everything is 10,000 transactions per second.

And then we have Ethereum Layer 2 at 3,000 transactions per second with the ability to scale to a million transactions per second, okay? So to me, this is like Vitalik also saying, hey, the roadmap is going well too. And these are some metrics that we can look at that are low-risk defy type metrics that show we're moving in the right direction. Naturally, Ryan, there was some pushback on Twitter. Mainly from like the rev people, which I thought was kind of interesting. These are the people that believe very much in that layer one should be valued based off of the revenue, revenue, revenue. That the block space produces either MEPV revenue or transaction ordering revenue or just inclusion revenue.

Yeah, like revenue is the number one thing. Yeah. And these people also tend to not believe in the blank is money ideas about things. So like Bitcoin is digital gold. Unless it's Bitcoin, right? Then Bitcoin gets kind of the digital gold pass. But other layer ones don't. The Bitcoin gets the can be massively evaluated without revenue.

But everything else is revenue. Yes. So revenue for is the yardstick, the judgment stick for everything other than Bitcoin. And they put revenue first. It's like the most important valuation. Right. John Charbonneau is like one of these people. And he goes, the tough reality once you start looking at revenue is that one meme coin app makes more money than ETH does in all of the low risk defy category and everything else combined.

But ETH is 100x more expensive, which is totally a valid take. if you are putting revenue as the number one valuation metric, that makes total sense if you think revenue is the number one thing. David, isn't he saying basically that like low risk defy is a low margin type business for a layer one that's not going to be a powerful business model the way Google ads were for Google because it's just not off putting enough revenue. Is it that basic? And he's saying that like, okay, look at something like pumped off fund and the amount of revenue that it produces for Solana. And he's saying like over here, that's a high margin business.

Yeah. Like low-res defy. High volume. I don't know high margin, but very high volume. Yeah, high volume, but also just like it's driving a lot of revenue for the layer one, right? And he's saying that, you know, low-risk defy is not this. It's kind of commodity. The transactions are, you know, small.

There's not a lot of MEV type of opportunity. what's your take on that? Yes. Actually, I do kind of aligned with some of that. As it relates to slow defy, when we say slow defy, slow implies you're not doing a lot of transactions. Right. Like my assets in Ave, for example. They're staying put.

They're staying put. I have, I've spent 50 cents total over the last six months because they don't do anything. They put. And so granted, that is true. That's actually a very low profitable business. In the same way that like buying and holding Bitcoin does not. nothing for Bitcoin security. Exactly.

Depositing stables in Ave and just letting them bake there for years does very little for Ethereum security. AVE does spit out plenty of revenue inside of liquidations. Sure. Because some people will like margin up and take leverage. And that's going to AVE, right? And, uh, no. I guess, yeah, there's some fees.

There's FI competition. There's both. There's both. Yeah. But on net, not that much. Uh, actual block space, blockchain, fees, un-swap very large blockchain fees on the Ethereum layer ones. Swapping is very resource intensive. Slow defy, not that much of a revenue driver. But the value is eth as collateral,

basically. The whole use case. This is what John is missing. Okay. John is like revenue, revenue, revenue revenue and why he's comparing the pump fun meme coin platform, which is so much exchanging, so much exchanging. Sure. And he's and he's comparing that. to slow defy, which is you just use your savings and you put your savings there and you forget about it. And that puts a lot of reservation demand on ether the asset. And the same way that the main use case for Bitcoin is you hold a Bitcoin, okay? And that's why people aren't doing anything on the Bitcoin blockchain aside from like

moving some Bitcoin back and forth. There's not a lot of activity. There's not a lot of block space fees generated. But the hold use case is providing like $2 trillion plus to the value of Bitcoin the asset, right? Slow defy, low-risk defy, that's kind of the same as being a store of value type of chain. And that's going to increase the reservation demand for ETH the asset. I think John might retort that like, okay, but ETH is going to get completely eaten by all of the real-world assets like stable coins on Ethereum.

Okay. And so if you're doing that 5% yield, you're probably doing that off of stable coins. What's your retort to that? Yeah, to some degree. like stable coins and ETH are in pushing up against each other's space. So there's only so much like real estate, there's only so much

capital out there and people choosing to allocate capital to that 5, 6% stable coin yield versus the 3% ETH yield. Yeah, you have to make an investment decision there. But more stable coins on Ethereum ultimately is going to be good for ETH. Yes. And who wants to hold their value in stable coins? Yeah.

You know, like some people. Yeah. And then once they have enough, they are going to be like, well, I mean, the dollar is declining in value too. So let me go to an asset that doesn't really do that. And let me look at what my options are. Bitcoin is an option.

Ether is also an option. I think this gets back to one of the core assumptions that Vitalik has probably always made. Again, this maybe is downstream of him being somewhat of a property rights maximalist, let's say, which is like, Vitalik has always operative. under this assumption, I think. This is my reading of him, that the most credibly neutral chain would win the liquidity, would win the defy that matters most for these types of use cases and for

the value of eth, would win the trust of users and institutions, and would win status as world reserve asset. I mean, that last one is something that I'm imputing to Vitalik for ether the asset. But his take, I think, is that the most credibly neutral chain will win all of these use cases. and I got to say, when you look at the numbers, David, it seems like that's exactly what Ethereum is doing. It's going according to plan. Right. And I mean, I think it's hard to argue against that.

To your point, there's a lot of things that Ethereum is getting where it's just undercutting pricing everywhere. We're like it doesn't enshrine any apps. It leaves everything up to the market. It gives away all the value to the layer twos. And so it does it and it charge, it charges the minimum viable fee, the block space fee, to have all of these products and services compete

to be on the credibly neutral block space. Right. So it gives up a lot of the revenue because it doesn't collect, it doesn't like enforce any sort of fee for itself. So a lot of Ethereums like slow defy, very low margin, like ENS identity services, like almost no revenue whatsoever.

But if you get the TAM, you open up the TAM by doing that to the world's largest possible TAM. Now, this is something that Bitcoiners say about Bitcoin or is like money is the largest possible tam. Yeah. If you're an open source permissionless ecosystem that's massively credibly neutral, where you don't pick winners and losers and you just let the free market have a fair

shot. Yeah. That's the world's largest tam. I think so too. You get the largest possible ecosystem on your chain. Yeah. And then we get to the part that I think many of the Rev maximalists totally miss, which is like, okay, look at Pump.

thought fund, it's bidding out one penny per transaction and there's a bagillion transactions and a fraction of that is being burnt to soul. So very low margin but very high volume. When you have slow defy, massive defy where you encourage savings, it's a savings utility, people save their wealth on Ethereum. They use Ethereum to just grow their wealth. And ultimately some percentage of that flows back into, well, I'm going to save it in the need of current. I'm going to save it in ETH. It's the inverse model where a single swap

on Pump Fund or Uniswap is like, okay, say I'm swapping a billion dollars and I'm paying Ethereum 25 cents. And so Ethereum collects 25 cents of revenue for that billion dollar swap. Very low margins, but hopefully very high volumes. If you buy Ether, it's

inverted. Whereas if you buy a billion dollars of ETH and you pay a dollar on chain to to make that swap. Yeah, you lose the dollar. But the ETH collects a billion dollars of economic value.

Yeah, yeah. And so the margin, so when John finishes this tweet and he goes, this one, tough reality when you look at meme coin revenue makes more money than all low risk defy and everything else combined, but ETH is 100x more expensive. He's also saying that ETH is 100x better store of value, isn't he? Yes, that's the missing void in the argument

that he, for some reason, just can't, the Rev Maximilus just don't see is like there's this one extremely high margin business, which is people buying ether. Yeah, exactly. I completely agree. And this should not be a surprise to anybody because this is exactly what Bitcoin is doing too, right? Yes, Bitcoin is the best high margin business. It has no business other than buying Bitcoin. Yeah, exactly.

No, I totally agree. It also, the other thing I think, when you come at this from property rights and credible neutrality, you make different design decisions. So there's been this more recent push that I've seen of people in crypto being like, well, Ethereum should increase revenue by like enshrining a particular stable coin, right? Or how about we nationalize? Avey's so good.

How about Ethereum kind of like nationalizes it and creates its own like defy lending and borrowing protocol and like implements it, okay? You know what happens then? You know what happens when you do those things? If you shrine in a single stable coin, you lose the remaining 30 stable coins that are on your blockchain. If you enshrine Avey,

you kick out morpho, you kick out, you kick out oiler, you kick out all the other people that are competing with that one thing. You're picking winners and losers, right? And then you're no longer a credibly neutral substrate for the rest of the world, right?

And so like that is such a short-sighted type of decision. It's so short-sighted. It's exactly the type of decisions that maybe some L-1s trying to compete for rev against Ethereum should make, but once they make those decisions, they're not the same game. I would enshrine as many valuable products and services as possible. Or in particular, if I was a layer two, like, I really think the mega-eath move to, like, sort of do this deal with Athena for another source of revenue, which is the more assets

and stable coins that we have on mega-eath, the more revenue goes to our validation or tokens. If you're playing the productive asset rev-game, if you're kind of like a corporate company-type Jane with a project. You're not trying to be a credibly neutral infrastructure. You want to boost rev? Play all of those games. If you're Ethereum, you should not be doing that. You're playing a game at a higher dimension where you are letting other people compete

to have market share. Yes. It feels like that should be obvious, that we shouldn't have to say that. It's weird that we're in 2025 and like this point doesn't land. Anyway, I do think a lot of the alternative layer ones will be playing those types of games and ruining their credible neutrality. and probably being much less competitive as a store of value as a result.

So that's a take... Can I make a comparison about this point? Sure. And so if we were, if we're going back to the Google analogy, and if you go back to 1990, and you say like, all right, let me invest in the search engine

that has the most amount of money. Would you buy in like Altivista or Yahoo or something? You would end up buying Yahoo. Yeah, okay. You would buy Yahoo. Yahoo. Yahoo was running storkles around Google in 1990 for ad search revenue. and that's that's the rev maximalist take in my mind

like in 1998 Yahoo reported 20 million dollars of revenue by 2000 across the one billion mark Google had nothing near that amount of revenue for a decade and then Google came on the scene and eat their ate their lunch right? Totally totally and I think that there's interesting

like Google's mechanism was like page rank algorithm which was like sort of more a more credibly neutral way of indexing and listing and prior these websites. And so I think that's what made for better search results and is, you know, kind of a similar path there. There's one last case I want to throw your way, which is the argument that, okay, Ethereum is struggling with marketing messages. And like, actually, that's the contention. I'm not saying that, but that's the contention, right?

You know, world computer, digital oil, you know, internet bond, ultrasound money, app store, crypto, stable coin chain. What is it? What is it? Now, here's Vitalik coming out and saying, Ethereum is for low-risk defy, right? And the point being made that this is a confusion. It can't be everything. Like, Pick a lane, is it low-risk defy now? That's not very marketing, appealing. Like, what are you guys doing over there?

What's your take on this? Well, there's no central coordinating body around Ethereum messaging. Yeah. And so that's a natural byproduct of a platform that is going for the world's largest to Tam. So, yeah, I think kind of intuitively I can see why people would conclude at that, especially if it's their job who the author is their job to pay attention to marketing messages. To marketing messages. Yeah, it's like, oh, there is a lot. It's very noisy.

I can kind of see how that we came to that argument. The answer I always come to, which is something I hold, which is just like, does the internet have one single marketing message, right? There are many different use cases on the internet, of course, and there's no centralized body that's saying, this is the marketing message of the internet, right? And so there's an element of that, I think. And also, I think there's an element of like Loverist Defi, right? Like going bankless. Ethereum as an internet of value

has always been the message. And this is just another manifestation of that. And then it's also the third, you know, message, which is maybe most important. Vitalik is not here to write marketing headlines. I don't think that's what the post was about. It was just saying, hey, we've come 10 years and we've got, I think we've discovered a killer app

that is good for society that aligns with Ethereum values, not just discovered it, but we can conclusively say it's now safe and ready for the rest of the world to onboard, and we have a roadmap that's going to allow that to happen. I don't think his purpose was in writing the perfect marketing slogan or like message. That's not a thing that Vitalik does.

So why interpret it as such? Yeah, I definitely agree with that. Well, shall we close it there, David? Bullish post. I think we both agree with Fatalic that Defi, yes indeed. Defi is the killer app of Ethereum. This whole episode is just secretly a bankless victory. I think you're right.

Got to end it there, though. Guys, none of this has been financial advice. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.