In brief

  • Stani Kulechov, founder of DeFi lending protocol Aave, thinks that the distribution model of DeFi platforms is unfair.
  • Those with capital get tokens for little additional effort, then sell them to those without access to that capital.
  • But the technology is solid, he says.

Yesterday, Ethereum co-founder Vitalik Buterin tweeted that the profligacy of central banks has nothing on decentralized finance, where protocols must constantly pluck value out of thin air to pay the people who’ve lodged their funds in their smart contracts. 

“So that sounds like a Ponzi scheme,” pointed out Decrypt podcaster Matthew Aaron while talking with Stani Kulechov, co-founder of DeFi lending protocol Aave. “Is that the correct term to use here?” 

“I think the correct term is [an economy] where the big people basically get things for free,” said Kulechov. Kulechov’s protocol, like so many others these days, pays out governance tokens as a reward for people who have deposited lots of money in its smart contract.


Aave's LEND token (like COMP, YFI, CRV, and even SUSHI) was designed as a governance token that devolves power from people like Kulechov to the people who use the protocol. But in practice, LEND and other DeFi protocols have become fresh stores of value themselves and can serve as lucrative carrots dangled in front of investors. The insatiable market requires more of these tokens all the time. Hence the DeFi brrr.

That’s what led Buterin to tweet the following yesterday: “Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul.”

(For the uninitiated, as a US congressman, Ron Paul proposed bills trying to do away with the Federal Reserve.) 

For his part, Kulechov admitted that these tokens serve the rich, since those who’ve deposited more money than everyone else receive the most tokens. “The problematic part here is that people who have a lot of funds are basically whales,” said Kulechov. They get the tokens as rewards for putting money in smart contracts, then sell them on secondary markets. 


“The smaller [people] are paying for the bigger people,” he said. “It’s a weird, unfair model that we have now." 

But Kulechov thinks that the underlying tech is the breakthrough here, and that the market will adjust in time. His latest project, RealT, for example, wants to harness the power of DeFi for mortgages. 

“It's important to focus on those projects that are sustainable and are building the future of finance,” he said. 

Sure, but with the current issues with DeFi, what cost will the little people pay?

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