It all started with a post from Haseeb Qureshi, an investor at Dragonfly Capital, titled ‘How DeFi cannibalizes PoS security.’ Qureshi wrote a piece implying that the more Ether gets locked in DeFi, the less people there will be to stake, resulting in a weaker proof-of-stake system.
Since posted, the article has received harsh criticism from people like Vlad Zamfir and founder of EthHub, Eric Conner.
Maybe @hosseeb should look for more qualified opinions before publishing ancient long-adressed bullshit as if it's a new revelation, I don't know
— Vlad Zamfir (@VladZamfir) December 3, 2019
The “unqualified” opinions that Zamfir was referring to comes from Tarun Chitra, CEO of the Gauntlet Network, who Qureshi cited in his article. Gauntlet is a “simulation platform” that increases security of smart contract protocols. They work with projects like Compound, so they don’t seem to have much of incentive to degrade opinion on DeFi.
Qureshi’s Dragonfly Capital is even deeper in to DeFi, being invested in Compound, dYdX, Oasis Labs, Cosmos and more, all built within Ethereum. Certainly an investment group with money thrown around the DeFi ecosystem wouldn’t want to hurt returns in any way.
Zamfir doesn’t deny the potential issues, but says that they have been discussed before and brushes it off as a non-issue. Eric Conner on the other hand offers an in detail perspective on the argument.
“It’s claimed the attacker can gather this ETH by paying high rates on Compound. Besides major jumps in logic around liquidity of the defi market and sourcing of collateral, let’s just assume the attacker is able to borrow all this ETH and find $1.5bn in collateral.” – @econoar
“I’d bet that Compound will integrate staking in ETH2, just like they have DSR for unutilized Dai. So lending in high-yield DeFi won’t be mutually exclusive with staking” – @brendan_dharma