The transparency of the Ethereum Foundation's expenditures is being questioned, as its held ETH is only enough for 8 years of spending
If you want to provide longer-term funding support for operations, either the price of ETH needs to rise, or you should start staking to earn returns.Author: Ignas, Crypto KOL
Compiled by: Felix, PANews
On August 24, news broke that the Ethereum Foundation deposited 35,000 ETH (approximately $94.07 million) into Kraken. The last transfer of ETH to Kraken occurred on May 6 of last year, when 15,000 ETH (approximately $30.1 million) was moved to Kraken, and ETH subsequently fell by 13% over the following six days.
This transfer operation has raised concerns within the crypto community. In response, Aya Miyaguchi, the Executive Director of the Ethereum Foundation, stated: "This is part of the Ethereum Foundation's fund management activities. The Ethereum Foundation's annual budget is about $100 million, primarily consisting of grants and salaries, with some beneficiaries only able to accept fiat currency. For a long time this year, the Ethereum Foundation has been advised not to engage in any funding activities due to complex regulations, and we are currently unable to share plans in advance. However, this ETH transfer transaction does not equate to a sale, and there may be a planned gradual sale in the future."
In light of this event, crypto KOL Ignas analyzed how the Ethereum Foundation uses ETH, pointing out the lack of comprehensive and transparent reporting regarding the Foundation's expenditures. Here are the details:
The Ethereum Foundation holds ETH worth $845 million, accounting for 0.25% of the total ETH supply.
According to the Ethereum Foundation's latest report, in the fourth quarter of 2023, the Foundation allocated $30 million. In the third quarter of 2023, the Foundation allocated $8.9 million.
Here are some examples of expenditure items:
- Conferences around the world aimed at "attracting new Ethereum users through foundational lectures and training developers through technical meetings and workshops."
- Online courses on the core concepts and components of zero-knowledge (ZK) systems.
- "Email wallets" that allow users to send cryptocurrency via email without requiring action from the recipient.
- "Daimo" ERC-4337 smart contract wallet: limited to stablecoins, non-custodial, no seed phrase required.
The Ethereum Foundation seems to allocate grants for education and niche (but cool) products that may not receive substantial venture capital support.
This could explain their reluctance to fund DeFi protocols, as they would receive external funding from venture capital firms anyway.
However, there is a lack of comprehensive and transparent total expenditure reporting. Who is auditing the Ethereum Foundation?
The latest report is from 2021, showing internal expenditures and external grants and bonuses totaling $48 million.
The largest expenditures are:
- $21 million for L1 R&D
- $9.7 million for community development, including grants and education
- $5.1 million for internal operations (salaries, legal fees, etc.)
Thus, 10% of the total expenditure in 2021 was used to pay developers' salaries and support the maintenance of the Ethereum Foundation.
It must be noted that while Polkadot faces controversy due to its extravagant spending, at least its reports are transparent and accessible. Moreover, if the Ethereum Foundation continues to spend at the current rate of $100 million per year, it will exhaust its ETH in 8 years. To provide longer-term funding for operations, either the price of ETH must rise, or staking must begin to generate returns.
In conclusion, there is hope for more transparency in the operations and reporting of the Ethereum Foundation.
