A clear overview of the Ethereum Foundation's public expenditures: $170 million in project grants has become the main part of the budget

Author: Nancy, PANews

The transparency issues of the Ethereum Foundation (EF) have once again come to the forefront. Recently, the Ethereum Foundation sparked community concerns after a large sale of ETH, to which the official response stated it was part of financial management activities and revealed an annual budget of approximately $100 million, primarily composed of grants and salaries. However, in recent years, the Ethereum Foundation has not publicly disclosed the specific expenditure details of all its costs, leading to community criticism over its lack of transparency.

Meanwhile, former Ethereum Foundation employee Hudson Jameson revealed details about EF's funding budget, stating that these funds are mainly used to support various projects and activities globally, and mentioned that the foundation distributes a significant amount of grants each year, which constitutes a large part of the budget.

Over $170 million allocated to date, once accounting for 60% of the annual budget

Looking at the history of project funding by the Ethereum Foundation, it can be traced back to the DEVgrants program launched in April 2015, which aimed to provide funding for Ethereum ecosystem projects. This program could offer between $1,000 and $10,000 for each project, but in its initial phase, it only donated about $2.565 million to 15 projects/individuals, with no updates thereafter. Starting in March 2018, the Ethereum Foundation launched multiple rounds of Ethereum Foundation Grants, donating over $19 million to more than 70 projects.

The ESP is currently the main funding program of the Ethereum Foundation, launched in 2019, specifically designed to provide financial donations and other non-financial support for the Ethereum ecosystem, primarily focusing on financial support. According to announcements from the ESP team, over the past five years, ESP has funded 917 projects with over $148 million, averaging nearly $162,000 per project/community, with an annual donation of approximately $27.446 million.

Moreover, in terms of funding intensity, the funding from ESP has shown a year-on-year growth trend, especially in 2022 and 2023, which saw the most funded projects. In 2023, $61.091 million was provided to 285 projects, accounting for 60% of the annual budget, with each project receiving an average of $214,000, several times more than in other quarters; in 2022, $30.043 million was allocated to 220 projects, with an average grant amount of $137,000. In terms of project funding types, ESP prefers to support community and educational projects, as well as cryptography and zero-knowledge proof types. For example, last year, the Ethereum Foundation donated to 97 community and educational projects and 87 projects in the cryptography and zero-knowledge proof track, while also focusing on developer experience and tools, consensus layer, execution layer, protocol growth and support, and Layer 2.

Additionally, the Ethereum Foundation has launched other grant programs, such as the "Next Billion Fellowship" award program, which provides applicants with guidance from relevant experts, resources from the Ethereum Foundation and the Ethereum community, and financial support; the Ethereum Foundation has also participated in the Gitcoin Grants platform for secondary fundraising. According to disclosures on the Gitcoin Grants official website, since its launch in 2019, Gitcoin Grants has established 170 secondary fundraising pools and donated over $60 million to 3,715 projects. In terms of annual fundraising amounts, Gitcoin Grants has seen rapid growth, with the amount raised in 2022 ($21.4 million) being 30.5 times that of 2019's $700,000. For instance, in June of this year, the Ethereum Foundation collaborated with several ZK projects to launch a $900,000 prize pool to promote the development of zero-knowledge proof technology.

Concerns over sale methods and expenditure transparency, EF embroiled in controversy again

As a non-profit organization dedicated to developing Ethereum, the second-largest cryptocurrency by market capitalization, the Ethereum Foundation is currently embroiled in various controversies, particularly due to its frequent large-scale sales of ETH.

In response, Mask Network founder Suji Yan provided an explanation, stating, "Some institutions (like universities and charities) sell ETH immediately after receiving it, often not getting a good price. It’s better to sell it all at a better price collectively. Additionally, some newly registered NGOs lack the capacity to open exchange accounts (non-profit accounts take longer to set up). Furthermore, there are public policy, political science, and international relations research institutions with political connections that mainstream exchanges often refuse to serve, mainly because these institutions often have former government officials or staff who become members of the new government, and PEP individuals are very sensitive and should not be too public."

Regarding this statement, Ethereum Foundation Executive Director Aya Miyaguchi also revealed in a recent response that some beneficiaries can only accept fiat currency. The latest large transfer was due to the foundation being advised not to engage in any financial activities for a long time this year, as the regulations are complex, preventing them from sharing plans in advance.

However, Sundial Mirage co-founder SIGNAL believes that considering the value generated by the Ethereum Foundation, even with an annual operational budget of $100 million, this amount is far below the market average. For example, Netflix is a company with a market capitalization of $295 billion, while Ethereum's market cap is $332 billion, but Netflix paid $80 million in compensation and $72 million in salaries to just two executives in 2024. In reality, managing $100 million in liquidity would not significantly impact assets, but the handling methods might be (slightly, temporarily) affected.

"Currently, people are overestimating the influence of the Ethereum Foundation and Vitalik Buterin; they are merely tools following the roadmap, while the builders belong to the creators of this wonderful era," said crypto KOL Chen Mo.

Former Chain News editor Liu Feng also believes that a $100 million budget per year is not outrageous for an organization like the Ethereum Foundation, given its size and responsibilities, not to mention that the organization is large enough to be "bureaucratic" (this is not a derogatory term but a neutral fact). However, he also pointed out that the EF had previously released an annual report, which was a good attempt, but it was not followed up, and since it is prone to criticism, it should proactively do better.

In fact, the Ethereum Foundation had published its 2021 financial report, showing that expenses reached $48 million that year. However, according to crypto KOL Ignas, the current Ethereum Foundation holds $845 million worth of ETH, accounting for 0.25% of the total ETH supply, and at the current spending rate of $100 million per year, EF can only sustain its expenditures for eight years.

Suji Yan also believes that the lack of transparency in EF's spending is indeed a problem, but many details may only be subject to audit and cannot be fully disclosed. If they could combine ZK to produce verifiable information, it would be ideal. Most government and public-related institutions in the U.S. can request data using FOIA (Freedom of Information Act), but whether they will provide clear information is uncertain, and the requester may even face trouble.

"Only after protests are initiated will any information be disclosed, which is a significant issue. I really don't understand why it is so difficult to publish a quarterly report that includes financial data and basic updates, such as expenditures, expected sales, the use of funds, team size and distribution, etc. The lack of transparency only leads everyone to focus on these negative issues; conversely, the community can focus on how EF spends a large amount of money to promote the development of Ethereum," stated Ethereum core developer eric.eth.

For example, after Polkadot released its treasury financial report, although it faced dissatisfaction due to excessive spending and insufficient income, compared to Ethereum, Polkadot at least deserves praise for its transparency.

Three Arrows Capital founder Zhu Su candidly stated that the problem with the Ethereum Foundation is not the sale of tokens before their value is discovered; they are inherently dumpers. The biggest issue is that they currently cannot provide a coherent roadmap and effective leadership for the ecosystem.

"Today's Ethereum Foundation is becoming a burden on ETH; this organization, which carries a strong ideological color, has become a negative asset for Ethereum and its ecosystem," said Web3 venture capitalist @LordWilliamUK, pointing out the six sins of the Ethereum Foundation, including the foundation's "congressionalization," leading to being preyed upon by various funds and interests, the vast majority of members receiving ETH stipends are engaged in superficial research while ignoring innovative projects applying for grants, the lack of transparency in the annual $100 million expenditure, the Ethereum circle discussing legitimacy rather than application scenarios, and the foundation's failure to adequately support quality potential projects and its slow iteration.