Vitalik may not have realized that transitioning Ethereum to PoS actually planted a financial "landmine"

After shifting consensus from PoW to PoS, $ETH now has staking yields, creating an “maturity mismatch” arbitrage space between one’s LST liquid staking tokens and LRT liquidity re-mortgage tokens.

As a result, leveraging, cyclic lending, and maturity arbitrage of ETH staking yields have become the largest application scenarios for lending protocols like Aave, and also form one of the foundations of current on-chain DeFi.

That’s right, the biggest application scenario of DeFi today is “arbitrage.”

But don’t panic, and don’t be discouraged—traditional finance is the same.

The issue is, ETH’s maturity mismatch hasn’t brought additional liquidity or other value to the blockchain industry, or even to the Ethereum ecosystem itself; it only brings ongoing selling pressure, since institutions will eventually cash out their ETH staking rewards.

This selling pressure forms a delicate offensive and defensive relationship with ETH buy orders and deflation. Although Vitalik dislikes excessive financialization of blockchain, he himself opened this Pandora’s box.

We can compare ETH and its liquidity tokens to traditional bank deposit and loan maturity mismatches.

The most common maturity mismatch is banks accepting short-term deposits to issue long-term loans. This process solves a fundamental contradiction in economic activity: the dislocation of liquidity preference.

A credit-based monetary system creates broad money through loans, “liquidating” future productivity in advance. Despite cyclical bubbles, the core purpose is indeed to serve real economic growth.

Without banks acting as intermediaries for maturity transformation, social investment capacity would be strictly limited to the existing long-term savings stock.

Maturity mismatch allows banks to bear liquidity risk, pooling idle funds and transforming them into productive capital.

The risk lies in a bank run. Therefore, central banks act as lenders of last resort, and deposit insurance systems counteract risks. But in reality, this is “socializing” maturity risk—that is, shifting it to society at large.

In DeFi, maturity arbitrage is pure leverage arbitrage, not value creation.

Institutions stake ETH in Lido to receive stETH, then collateralize stETH in lending protocols like Aave to borrow ETH, and repeat the cycle.

This method amplifies ETH PoS staking yields, as long as borrowing costs are lower than Ethereum staking rewards, making it profitable.

The borrowed ETH isn’t used for developing dApps or purchasing assets; it immediately flows back into the staking contract.

Although Ethereum’s PoS mechanism becomes safer as the total staked funds increase, the “cyclic staking” conducted via Lido and Aave is essentially an arbitrage on the network security budget.

With the Dencun upgrade, mainnet gas consumption drops, ETH returns to an inflationary state, and institutions’ selling of staking rewards creates a structural price suppression.

Ethereum Foundation researcher Justin Drake proposed the concept of “Minimum Viable Issuance” (MVI). If 15 million ETH staked is enough to resist state-level attacks, then the current 34 million ETH staked is actually an overcapacity in security.

In this context of “excess security,” the new ETH inflation is no longer a necessary security expenditure but becomes an inflation tax on holders.

This is the current situation. On-chain stablecoins are at an all-time high, ETH continues to be issued, but the main scenario is cyclic arbitrage in lending protocols, not adding liquidity to the market.

Therefore, Vitalik may not realize that Ethereum’s transition to PoS is actually a “big gamble.” A gamble on what?

First, ETH staking yields versus U.S. Treasury yields.

Since shifting from PoW to PoS, ETH has staking yields, effectively turning ETH into a perpetual bond. Currently, stETH APY is 2.5%, lower than U.S. Treasuries. That is, ETH staking yields are in a “negative spread” compared to U.S. Treasury yields.

For institutions, buying ETH is less attractive than buying U.S. Treasuries or tokenized U.S. Treasuries. In other words, the current ETH price is effectively discounted, reflecting its disadvantage relative to U.S. Treasury yields.

Second, RWA (Real-World Assets) bring externalities. The total value of staked tokens determines attack costs and directly influences network security. Therefore, there may be a resonant upward relationship between the total value of on-chain RWAs and ETH’s total market cap.

Finally, whether one is optimistic about Ethereum is a matter of stance, but of course, one can also choose a stance of neutrality—just look at the present.