Vitalik points out the three major issues of stablecoins: why is the path to decentralization so difficult?

Vitalik recently published an article directly addressing the current stablecoin dilemma in the crypto industry, highlighting three specific issues that reveal the industry’s true pain points. This is not a technical critique but a deep reflection on the direction of the entire ecosystem infrastructure development. Stablecoins should be the cornerstone of crypto finance, but current design solutions are still far from ideal.

The Three Fundamental Problems of Stablecoins

The three issues listed by Vitalik each hit the core of decentralized stablecoins:

Problem 1: Tracking indices rely on the US dollar

Currently, almost all mainstream stablecoins (USDC, USDT, etc.) are anchored to the US dollar, which seems reasonable but conceals a strategic dilemma.

According to Vitalik, national resistance should be one of the ultimate goals of decentralized systems—that is, not relying on any single national currency. While the US dollar is stable, if US policies change or the dollar itself experiences inflation, the entire crypto stablecoin system will passively follow suit. This is systemic risk, not an isolated issue.

An ideal solution would be to track an index that transcends a single country—for example, a basket of commodities, an algorithmic index, or a fully decentralized pricing mechanism. But the difficulty lies in ensuring that this index itself is sufficiently stable, fair, and recognized by the market.

Problem 2: Oracles controlled by large capital

This is the most covert risk in stablecoin design. Decentralized stablecoins require oracles to obtain real price information, but if oracles can be bought off by large capital, the entire system loses its decentralization.

Vitalik’s logical chain is clear: if oracles are not secure enough, the protocol must extract high value to defend against attacks, ultimately making the attack cost exceed the protocol’s market cap. This means the protocol either charges users continuously or faces the risk of being attacked. It’s a dilemma.

In other words, the security of oracles directly determines the cost structure of stablecoins. Currently, there is no oracle solution that is both decentralized, sufficiently secure, and cost-effective.

Problem 3: Yield competition dilemma

This is the most straightforward issue and also the easiest to overlook. To attract funds, stablecoins must offer competitive yields. But currently, the yields on stablecoins generally lag behind staking returns by a few percentage points.

Simply put: why hold stablecoins earning 2% when you could stake ETH for 5%? From a capital profit perspective, the rational choice is the latter. In the long run, this makes it difficult for stablecoins to attract enough liquidity.

Moreover, this problem has no simple technical solution. Increasing yields requires more protocol value support, which in turn increases systemic risk. This is a fundamental contradiction in stablecoin design.

Industry Status and Future Directions

From recent news, the stablecoin sector is still actively exploring. Stablecoin company Rain recently completed a $250 million funding round at a valuation of $1.95 billion, indicating that capital still has confidence in this direction. But whether these new projects can solve the three issues Vitalik pointed out remains uncertain.

Vitalik’s associated address depositing 330 ETH into Paxos also hints at the Ethereum ecosystem’s emphasis on stablecoin infrastructure. Paxos is one of the major stablecoin issuers, which may reflect a certain attitude towards existing stablecoin solutions.

Summary

The three issues raised by Vitalik fundamentally reflect a core dilemma: Stablecoins either choose centralization for efficiency or stick to decentralization but must bear complexity and costs.

Currently, the mainstream market choice is the former—USDC, USDT, despite centralization risks, are stable and user-friendly enough. Truly decentralized stablecoin solutions are still in exploration, needing breakthroughs in tracking indices, oracle security, and yield competition.

This problem will not be solved in the short term, but it is indeed the most important direction to focus on in the development of crypto financial infrastructure.