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Ethereum co-founder Vitalik Buterin has identified three key structural challenges facing decentralized stablecoins: the need to find a better benchmark than the U.S. dollar, developing oracles that are not subject to external control, and dealing with the competition associated with collateral returns.

Buterin suggested that the longevity of stablecoins may require complete autonomy from the dollar, noting the likelihood of depreciation over a 20-year horizon.

These remarks came as the dollar-linked stablecoin market is approaching $300 billion, dominated by centralized operators Tether and Circle.

Ethereum co-founder Vitalik Buterin said the crypto community needs more elaborate decentralized stable coins, pointing to three fundamental difficulties that have not yet been resolved.

“We need better decentralized stable assets, Buterin wrote in a post on X on Sunday. “In my opinion, there are three challenges: 1. To develop an ideal peg index that would outperform the US dollar in terms of performance. 2. To create a decentralized oracle that would be impossible to capture by big capital. 3. Resolve the dilemma where interest yields represent a form of competition.

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On the first point, Buterin emphasized that coins tied to the dollar may not be viable in the long run. “Tethering to the dollar is good for the short term, but [in my opinion] part of the long-term vision for the sustainability of any entity should include independence from even that price point, Buterin said.

he noted.

{“Looking ahead 20 years, what if it starts showing hyperinflation, even moderate hyperinflation?”

Regarding oracles, he warned that without architectures protected from hostile takeover, protocols would face an unpleasant trade-off: “the cost of neutralizing an attack must exceed the market capitalization of the protocol token, which in turn implies extracting value from the protocol itself over the required discount rate, which is extremely disadvantageous to users.

This dependency, he added, “is an important reason why I have consistently opposed governance by finance: it inherently lacks the asymmetry of defense and offense, and therefore high issuance rates are the only path to stability.

In the past, decentralized stablecoins such as Terra USD offered high yields (around 20% through the Anchor mechanism in the case of Terra) that proved unviable in the long term. Recently, Terraform Labs founder Do Kwon was sentenced to 15 years in prison for his role in the $40 billion Terra-Luna collapse.

In terms of the interest income problem, Buterin listed possible solutions, such as lowering the yield to a level consistent with 2% , which falls within the “hobby-level” range, or creating a new category of steaking without reducing the level of protection, or tying steaking to collateral. However, he cautioned that these ideas should be taken

only as a list of possible areas for solutions, not as an outright endorsement of them.

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