- Ethereum co-founder and lead developer Vitalik Buterin is championing developments beyond DeFi.
- Buterin warns of an impending “financial instability” of decentralized financial applications as Ethereum upgrades beyond layer 1 and layer 2.
Ethereum co-founder Vitalik Buterin has urged innovation beyond decentralized finance. Speaking at the three-day annual Ethereum Community Conference (EthCC), the lead developer lamented financial applications are dominating the Ethereum space. He pointed out non-financial utilities as “the most interesting part of the vision of general-purpose blockchains.” Such applications include decentralized social media, identity verification, and attestation, and retroactive public goods funding.
“Being defined by DeFi is better than being defined by nothing. But it needs to go further,” he said. He went on to add that, “Moving beyond DeFi is not about being against DeFi. I think […] the most interesting Ethereum applications are going to combine elements of finance and non-finance.”
“Maybe a few years from now we’ll have a lot of really exciting things […] that are just providing all kind of very diverse and real value to all kinds of people, not just within the Ethereum ecosystem, but also going far beyond it as well,” he added.
Already, Buterin has initiated efforts toward public goods funding as shown in a July 21 blog post that he co-authored. Optimism, a Layer 2 scaling solution has agreed to fund an open-source development with all the proceeds of sequencing.
Vitalik Buterin on Ethereum community and DeFi
Buterin has attributed Ethereum’s community narrowed focus on financial applications to two factors. First, he asserted that “finance is just the area where centralized technology sucks the most.” Finance, as he says, has provided a larger domain for decentralization in comparison to other centralized industries.
I can send you a centralized email and you will get it within one second. And sure, maybe various intelligence agencies will read it, but at least you could read it and at least you can read it one second from now. International bank wires do not work that way.
The second factor is the high fees associated with the network. On this, he noted:
The degens can pay for it, the apes can pay for it, the orangutans can pay for it. But if we start talking about decentralized social media, where every tweet becomes an NFT, then that can’t work if you have $5.22 transaction fees.
Nonetheless, he emphasized that the issue of Ethereum’s high transaction fees is “now being resolved” as the ecosystem takes up layer-two networks. As this initiative goes on, Buterin advocated for the ecosystem “to expand beyond just making tokens that help with trading other tokens.”
More than just DeFi
Despite financial derivatives benefits, Buterin warned of their impending systemic risks with an increased upgrade of the Ethereum network.
These things are valuable up to a layer-one and layer-two, […] but once you get to layer-six, you’re increasing the financial instability and the risk this whole thing is going to collapse.
He concluded by saying, “Let’s not just do DeFi.”