Ethereum co-founder Vitalik Buterin is urging the Ethereum ecosystem to prioritize Oracle design and decentralization as a security priority, warning that key parts of the DeFi stack continue to hide inconvenient weaknesses behind the industry’s recent growth.

In post Describing how the Ethereum Foundation thinks about DeFi, Buterin described decentralized finance as “a central part of the value Ethereum delivers” and argued that its next phase must combine renewed innovation with a tougher approach to security and centralization threats.

“DeFi is a central part of the value Ethereum provides. Financial empowerment is a central part of what it means to have agency and freedom in our current world. Finance is not the only thing Ethereum is good for, but it is an important thing,” Buterin wrote, positioning DeFi not as a side hustle but as one of Ethereum’s flagship products.

DeFi crackdown by the Ethereum Foundation: No centralized hashes

Buterin’s thesis has two edges. The first is aspirational: DeFi should return to the desire to invent fresh primitives from the early era, rather than repeating the same product shapes. He pointed to AMM as an example of the paradigm shift he wants developers to pursue again, arguing that teams should “dig deeper into the layer” than surface-level improvements like “create a better stablecoin” and instead attack core financial problems: managing risk and securing future expenses with fresh mechanisms.

The second edge is the filter. Buterin said the Ethereum Foundation does not intend to uncritically support “onchain finance” or “defi,” but is pursuing a narrower vision: “permissionless, open-source, private, security-first global finance that maximizes people’s control over their own assets, minimizes centralized bottlenecks and trusted third parties, and democratizes risk management and wealth building… as well as payments.”

A key standard in this vision is operational resilience. Buterin said the ecosystem should favor protocols that “pass the dead-end test”: systems that work even if the founding team disappears overnight or, worse yet, “become hostile/compromised without warning.” That’s a stark measure in a sector where governance keys, update mechanisms and off-chain dependencies often concentrate power long after a protocol appears “decentralized” in marketing.

The loudest alarm bells are oracles: the bridge between onchain logic and offchain reality. On his list of priority areas, Buterin singled out “oracle security and decentralization,” adding a blunt aside: “there are a LOT of skeletons in the closet, we as an ecosystem really need to put Sauron’s big eye on this for a while.” The point is telling: it implies risks that are known, tolerated or under-discussed, despite oracles being on the critical path across credit, stablecoins, derivatives and liquidations.

Buterin described DeFi as a “complex toolchain” that connects onchain components with user-side components and other offchain components – wallets, local agents and more. His roadmap-like list reflects this scope: classic security work such as audits, standards and portfolio-side security; newer approaches such as “AI-powered formal verification” and “user-side agents as security”; privacy for both payments and more sophisticated positions, including what a “most privacy-preserving CDP” would look like; and a renewed emphasis on open source licensing and the possibility of forking.

The final message is permissive but not passive. Ethereum will always allow people to implement “insecure protocols” or systems that embed “ultimately unnecessary centralized trust in the name of convenience,” Buterin wrote, as well as what he called “dopamine-maximizing gambling.”

However, he signaled the Foundation’s intention to actively work with developers who aim to minimize intermediaries and maximize user agency, with the goal of making this version of DeFi not only Ethereum’s best option, but “a globally attractive way to manage funds” for anyone who values ​​these properties.

At the time of publication, the price of ETH was $1,912.

Featured image created with DALL.E, chart from TradingView.com