Vitalik Buterin sounds warning over risks of DeFi
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.
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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.”
Following the FTX saga, industry leaders like Binance’s Changpeng Zhao have started advocating self-custody solutions as crypto exchanges saw a record-high week of BTC outflows.
FTX filed for Chapter 11 bankruptcy in the U.S. on Friday with Sam-Bankman Fried stepping down as the company’s CEO, sparking concern across investors worried about a potential crypto contagion.
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.
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