TOKEN2049 Feng Xiao's Dialogue with Vitalik: Low-Risk DeFi Maturing, ZKID Could Spur New Financing Models
TechFlow Selected TechFlow Selected
TOKEN2049 Feng Xiao's Dialogue with Vitalik: Low-Risk DeFi Maturing, ZKID Could Spur New Financing Models
The Global On-chain Asset Summit, hosted by HashKey Group, took place today in Singapore. During the event, Ethereum founder Vitalik Buterin joined Dr. Xiao Feng, Chairman and CEO of HashKey Group, for a fireside chat to discuss Ethereum applications and the future direction of blockchain.
Navigating Web3 tides with focused insightsThe following is the conversation:
Xiao Feng: Today we're in Singapore discussing this topic—how Ethereum faces or drives applications on Ethereum. In my view, although there are thousands of blockchains, they can basically be divided into two categories. One category doesn't support other people's applications at all—Bitcoin being an example. It has been very successful, representing a killer application for blockchain, accepted globally after 15 years. The other category, represented by Ethereum, was born specifically to attract and drive developers and users. My first question is: what is your current fundamental view on applications on Ethereum, or on blockchain in general? Do you think the time for applications has arrived? And which direction will it go?
Vitalik Buterin: I think there are roughly two directions for applications now. The first is low-risk DeFi financial applications, which I wrote about in an article two weeks ago. Low-risk DeFi refers to applications that have existed on Ethereum for a long time—we already know they're secure, and people understand what they are. You can hold tokens, conduct trading, lending, and exchanges. These are actually quite simple. They already exist in traditional finance, but the advantage of blockchain lies in being global and open, so they offer value. For example, Morpho and some stablecoins provide users with 3% to 4% interest in USD, EUR, and other fiat currencies. This is important for the majority who don't have access to good banking services. Three years ago, low-risk DeFi didn't exist—back then, vulnerabilities and hacking risks were high. But if you look at 2019, thefts amounted to 5% of DeFi TVL; this year, it's dropped to 0.02%, extremely low. This shows the ecosystem takes time to mature, and we're now at a relatively successful stage.
The second type is more creative applications, such as decentralized prediction markets, ENS, ZKID, etc. We don't yet know which of these will succeed, but one might suddenly take off. For example, last year Polymarket—previously, everyone thought prediction markets were just something economists discussed—but starting in 2024, mainstream media and large numbers of users began sharing its prediction screenshots. This shows that small innovative applications can also grow rapidly. So Ethereum has these two directions, both of which are important.
Xiao Feng: You just mentioned prediction markets—I remember clearly, back in 2015, you introduced this to us, and we even invested. At that time, it was Augur.
Vitalik Buterin: I still have 50,000 of their coins.
Xiao Feng: Since then, I've been closely watching prediction markets, but after 2017, discussions faded. I never expected Polymarket would suddenly become popular in 2024, even accurately predicting Trump’s election win. My immediate reaction was—Vitalik’s vision of prediction markets has finally arrived, finally matured and proven useful. Indeed, the wait has been long; non-financial applications take longer to emerge than imagined. Besides prediction markets, do you see any other non-financial applications that have already shown success, or ones that, like Augur in 2015, have the potential to become the right direction?
Vitalik Buterin: Recently, I often mention ZKID. Why? Because identity and privacy are critical issues in today's society. Centralized databases will inevitably be hacked, and data will leak—we've seen this many times. The value of ZKID is that you can prove certain key information without revealing all your data. For instance, in undercollateralized lending, the hardest part is judging who can repay and who cannot. Combining ZK and AI can provide such proofs, enabling people worldwide to access loan support. This is an example combining finance and non-finance, which I find very interesting. Many future applications will include both financial and non-financial components. Decentralized social platforms are similar—they start as non-financial, but now many platforms are experimenting with financial features. Although 90% may fail within five years, that 10% could be very promising.
Xiao Feng: That reminds me of an economic observation. The British Industrial Revolution relied on banks and bonds; the Information Revolution relied on VC. Every industrial revolution comes with a financial revolution. Now, AI and Crypto are considered the Fourth Industrial Revolution, so it should also bring new models of financial services. Traditional VC hasn't been very successful in the crypto space, so entirely new funding methods may emerge. For example, entrepreneurs might use ZK identity proofs and token mechanisms to raise $100,000 in seed funding globally. Such methods could replace traditional VC, becoming the new financial revolution of the digital age.
Vitalik Buterin: Yes, I also believe the integration of finance and non-finance will drive this wave of innovation.
Xiao Feng: Let me ask another common question developers face. In Web2, people always ask ToB or ToC—do you think this distinction still exists in the blockchain industry? Is Ethereum ToB, ToC, or a third path?
Vitalik Buterin: In blockchain, the boundary between ToB and ToC is much smaller than before. For example, when you issue an ERC-20 token, individual users can hold it, and institutions can too. On-chain, institutions and individuals are equal—the difference is only that institutions have larger capital and higher security needs, so they use multisig wallets. But essentially, they're just addresses. The relationship between L1 and L2 isn't simply defined by ToB/ToC either—it depends more on application suitability.
Xiao Feng: Users encounter another confusion at the application layer: the boundary of decentralization. For example, stablecoins aren't fully decentralized—there's always a centralized issuer like Circle. What's your view?
Vitalik Buterin: This is a complex issue. Many applications indeed require partial centralization and trust. For instance, undercollateralized lending inherently involves trusting certain individuals. But if decentralization is completely ignored at the application layer, problems arise. Email is an example: theoretically, it's a decentralized protocol, but in practice, it's dominated by big platforms. Blockchain differs in that even if an L2 is semi-centralized, users can still autonomously withdraw assets via L1 contracts—that's the safeguard of decentralization.
Xiao Feng: One final question. Google and EF have recently been promoting the Agent-to-Agent Payment standard. What's your take on the trend of AI payments?
Vitalik Buterin: In the next five to ten years, AI will participate in many payments. But high-value payments carry too much risk to be fully entrusted to AI. Small payments are feasible, and AI can also serve as a risk control tool, helping humans assess whether a payment is risky. So we'll gradually find the right balance—this process will involve mistakes, but also successes.
Xiao Feng: Great, thank you very much, Vitalik, for your insights. From the perspective of Ethereum's co-founder, you've clarified many of our confusions today.
Vitalik Buterin: Thank you.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@HashKey_Global
