During his keynote address at the EthCC conference in Paris, Ethereum co-founder and lead developer Vitalik Buterin exhorted the Ethereum community to innovate beyond the limits of decentralized finance.
Describing non-financial utilities as “the most interesting part of the general-purpose blockchain vision”, Buterin lamented that financial applications currently “dominate the Ethereum space.”
“Being defined by DeFi is better than being defined by nothing. But it needs to go further.”
Buterin outlines a number of non-financial applications for Ethereum, including decentralized social media, identity verification and verification, and retrospective public goods financing.
“Moving Over DeFi Isn’t About Being Against DeFi. I Really Think […] The most interesting Ethereum applications are going to mix elements of finance and non-finance,” Buterin said.
“Maybe a few years from now we’ll have a lot of exciting stuff […] Which are providing all kinds of very diverse and real value to all kinds of people, not only within the Ethereum ecosystem, but going far beyond that,” he said.
Buterin has already started work on public goods funding. In a July 21 blog post co-authored by Buterin, optimism, a layer-two scaling solution, pledged to fund open source development through a retroactive rewards protocol, with all profits generated through a sequence of optimism initiatives. commits to.
Buterin attributes the engagement of the Ethereum community with DeFi to two main factors.
First, Vitalik stressed that “finance is simply the area where centralized technology is most useless,” concluding that finance provides a larger domain for decentralization than other centralized industries:
“I can send you a centralized email and you can get it within a second. And sure, different intelligence agencies might read it, but at least you can read it and less At least you can read it in a second from now. International bank wires don’t work that way.”
Buterin also emphasized the prevalence of high fees in pushing the sector toward financial applications, noting:
“Descendants can pay for it, apes can pay for it, orangutans can pay for it. But if we start talking about a decentralized social media, where every tweet becomes an NFT, So that may not work if you have a $5.22 transaction fee.
However, Buterin offered that the challenge of high transaction fees “is now being resolved” by the growing ecosystem of Ethereum’s layer-two network.
Connected: Bitcoin ranks sixth in terms of daily revenue, accounting for just 12% of Ethereum’s fees
With work to reduce transaction costs on Ethereum currently underway, Buterin said it is now time to explore how Ethereum can be used to tackle other issues, adding that Is: “Expanding the Ethereum ecosystem beyond just creating tokens that help trade other tokens.”
“If you take this narrow thing that is DeFi, and you keep pushing it to infinity […] You are the only one receiving tokens that give you profit from yield farming and other currencies which are financial derivatives among other yield farming tokens,” he said.
Noting that financial derivatives offer some value to the sector, Buterin warned of the systemic risks associated with complex derivatives products, concluding: “Let’s not just do DeFi.”
“These things are valuable up to layer-one and layer-two, […] But once you get to layer-six, you’re really increasing the financial instability and that risk is going to collapse.”