The saying “It’s not what you say, it’s how you say it” is intended to underscore the idea that tone and confidence can (at least sometimes) take you further than the words you use. Although that may be true in certain instances, that is not true when speaking about concepts relating to decentralized finance, or “DeFi.” Words matter. A lot.
The words we use for DeFi must demonstrate the fundamental differences between the DeFi system and the traditional financial system (TradFi). This is particularly critical now as lawmakers around the world train their focus on DeFi – a relatively nascent innovation – seeking to understand it and regulate it (in some way, shape or form).
Rebecca Rettig is the general counsel of the Aave Companies, a group of software development companies that build blockchain-based software for Web3.
Having given significant consideration to many aspects of the DeFi ecosystem, I have some pet peeves on language used in DeFi. The examples provided here are not comprehensive, but ones that arise consistently, can confuse things and may make the legal and regulatory landscape more challenging.
I have to say it – this is not legal advice (and I am not your lawyer!). The concepts below highlight practical, common-sense approaches to talking about DeFi – ensuring there is no confusion about decentralization. What it means to be decentralized has been the topic of countless articles/posts, podcasts, tweet storms and, while not explicitly addressed here, do form the background for my thoughts.
See also: How DeFi 'Degens' Are Funding the Next Wave of Open Source Development | Opinion
Can we stop using the word 'platform?'
What is a platform? The DeFi protocol plus the front end? The protocol plus the front end plus the DAO [decentralized autonomous organization]? The protocol and the DAO? Just the protocol? Something else entirely?
To add insult to injury, the CeFi [centralized finance] companies also use the term “platform” to refer to their products. “Platform” doesn’t have real meaning in DeFi (or CeFi, I’d argue). If you’re talking about an operational DeFi system – a set of smart contracts setting forth pre-programmed rules for economic transactions – then it’s a “protocol.”
Let’s properly refer to where and how people work in DeFi
If you’re paid by a company or other formal organizational entity to build DeFi software, you work for a software development company. Say that – “I work for X Labs.” If you made a governance proposal, which was accepted by X DAO and now you’re paid by that DAO, only then you “do work for or on a protocol.”
There aren’t any instances where you should say you “work for a protocol”; you can’t work for an autonomous piece of software. If you confuse where and for whom you work, you are mixing up the decentralization part. In other words, if you say you work for X protocol that is now run by X DAO but you really work for X Labs, then you’re conflating what the DevCo [development company] does for the protocol, or what it does not do in the case of decentralization.
There are no 'customers' in DeFi
Those who engage in transactions on a DeFi protocol are “users,” not “customers,” of the protocol or of the DevCo. By definition, customers are entities that buy goods or services from a business. Intermediaries have customers, so there aren’t any customers in a fully decentralized system.
Users of a DeFi protocol are initiating economic transactions on their own via their own wallet – their interactions are peer-to-protocol, without any intermediary.
The protocol is not 'yours,' it’s everyone’s
The protocol isn’t “yours” at X Labs. If X Labs created a decentralized protocol, governed by some form of a DAO, the protocol belongs to the community. If X Labs continues to say, “our protocol” or “our customers” (for shame!) or even “our users,” that is language of an intermediary, an owner or operator.
In a fully decentralized system, there isn’t a centralized owner/operator (and it’s definitely not the DevCo) – just users executing transactions through a smart contract-based protocol.
See also: A Dictionary for Degens | Opinion
DeFi doesn’t 'walk like a duck'
There’s the saying, “If it looks like a duck, walks like a duck and quacks like a duck, then it is a duck.” Although certain features or protocols appear to have similarities to the TradFi system, using the same language in DeFi as in TradFi suggests the same system – a system beset by intermediaries.
If we want to impress upon people that “DeFi is different,” then we must use different language. And if we talk about DeFi in the exact same way as TradFi, it will be nearly impossible to make the notable distinctions between DeFi and TradFi clear and will be even more challenging to get different treatment in the legal/regulatory arena. Let’s make sure DeFi is not treated like a (TradFi) duck.
We can do better with our words, and this nascent, flourishing technology deserves it. As Erik Voorhees wrote, “If [DeFi] does not swell your heart with joy, hope and inspiration, you are missing something.” Changing the way we talk about DeFi – whether you’re a developer, a user, a DAO participant or otherwise – is a very small step on the path to recognizing the hope that DeFi brings for a better system.