Ethereum co-founder Vitalik Buterin described algorithmic stablecoins as a form of true DeFi. He argued that a well-designed Ethereum-collateralized algorithmic stablecoin offers a structural advantage by enabling liquidity that largely comes from CDP holders to transfer USD counterparty risk to market makers. Buterin also suggested that real-world asset (RWA) backed stablecoin models are possible.
To reduce single-asset risk, he said over-collateralization and a high degree of asset diversification must be in place, and if these conditions are met, risk characteristics for holders could be materially improved. He placed Ethereum-collateralized models at the top of the design priority, with diversified RWA-backed models expected in later stages.
In the long term, he suggested moving away from a single-dollar-value metric toward a more universal, index-based value framework. He also cautioned that depositing USDC into DeFi protocols does not count as a true DeFi stablecoin.
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