While analyzing the implosion of the Terra blockchain, Vitalik Buterin, the co-founder of the Ethereum blockchain, stated that there is no genuine investment that can get anywhere close to 20% returns per year.
According to a report published by Bloomberg, Buterin said this because one of the blockchain’s main attractions for investors had been its promised interest rate set as high as 20% for UST deposits in the Terra blockchain-based lending project Anchor.
Bloomberg wrote, “Ethereum founder Vitalik Buterin said there is no genuine investment that can get anywhere close to 20% returns per year.”
It can be recalled that the collapse of the Terra blockchain crashed the prices of its two native tokens TerraUSD (UST) stablecoin and Terra (LUNA). In the process, over $50 billion in value were wiped out in just a few days, leaving helpless investors in dilemma.
Ethereum co-founder also stated that he supports the criticism and scrutiny of the decentralized finance (DeFi) mechanism, especially for the crypto projects that are striving to optimize for capital efficiency.
Vitalik Buterin noted:
“The greater level of scrutiny on defi financial mechanisms, especially those that try very hard to optimize for ‘capital efficiency’, is highly welcome. The greater acknowledgment that present performance is no guarantee of future returns (or even future lack-of-total-collapse) is even more welcome.”
Buterin also spoke about viable mechanisms to maintain automated pure-crypto stablecoins’ pegs. He defines automated stablecoins as a completely decentralized targeting mechanism that tracks a price index. Describing it further, he stated that it doesn’t depend on any asset custodians, unlike Tether (USDT and USD Coin (USDC).
Ethereum co-founder said people should consider thorough evaluation to know how safe systems are by looking at their steady state and their pessimistic state to see their performance level under extreme conditions.