The Ethereum Foundation is narrowing its focus on what “real DeFi” is. This is because DeFi, or Decentralized Finance, is at the core of the value that Ethereum provides.
In a post on X on February 24, Ethereum co-founder Vitalik Buterin explained that DeFi gives users complete control over their money. This financial empowerment is an important part of agency and freedom in the modern world.
Also Read: Ethereum vs Bitcoin: Which is the Better Investment?
Buterin explained The Ethereum Foundation's mission to move away from financial applications that rely on centralized control or applications that are too similar to traditional finance.
Therefore, Ethereum not only supports DeFi broadly, but narrows down the definition of DeFi.
“We have a specific vision of what we want to see out of defi: permissionless, open-source, private, security-first global finance that maximizes people's control over their own assets, minimizes centralized chokepoints and trusted third parties, and democratizes risk management and wealth building as well as payments,” wrote Buterin.
Many DeFi platforms still rely on admin keys, multi-signature wallets, or centralized infrastructure that allows developers to modify or pause systems. These features are forms of risk management, but on the other hand, they create a dependency on trust.
Therefore, Ethereum wants DeFi protocols that can pass a test that Buterin calls the “walkaway test.” This means that the DeFi system can still operate even if the original developers disappear or lose control of the system.
In other words, there should be no dependence on a person or company to run the system.
In conclusion, the Ethereum network wants its financial ecosystem to remain independent and user-controlled. So, Ethereum will not only allow finance to run on the blockchain. The network aims to rebuild the concept of finance so it can operate without any trusted third parties at all.
What is Decentralized Finance as described by Buterin? Learn about DeFi in the article Decentralized Finance (DeFi): Definition & How It Works.
