The Ethereum Foundation Implements Strict Budget Management, Shifting its Focus Towards DeFi
Quarterly reports on cash flow and investments will be released to address criticisms of lack of transparency.
By allocating 45,000 ETH to protocols like Aave and Spark, the foundation is actively engaging in DeFi, breaking away from its neutral stance.
Financials: Ethereum Foundation Declares Next 18 Months to Be Decisive
Facing what is deemed a critical period for the network’s future, the Ethereum Foundation revamps its treasury policy. The goal is to more effectively align its resources with operational priorities and support for the DeFi ecosystem while enhancing transparency.
A New Budget Discipline
The Ethereum Foundation introduces a stricter policy that indexes its operational expenses and ETH sales to its reserves and actual liquidity needs. One of the Foundation’s directors, Hsiao-Wei Wang, acknowledged that the current budget provides barely 2.5 years of visibility. This realization necessitates careful resource management over the next 18 months, deemed “pivotal” for Ethereum.
This new approach addresses the skepticism stemming from recent discreet ETH sales by the Foundation, which some community members deemed opaque. To restore trust, quarterly and annual reports detailing portfolio composition, investment performance, and major developments will now be published.
As of October 31, the treasury stood at $970.2 million, with 81% in Ethereum. Since then, the value of ETH has declined by approximately 1.8%.
Towards an Assertive Involvement in DeFi
Breaking away from a long-standing neutrality, the Ethereum Foundation now actively engages with DeFi protocols. In February, it allocated 45,000 ETH (equivalent to $120 million at the time) to projects like Aave, Spark, and Compound.
The aim is to achieve reasonable returns through permissionless, immutable, and audited protocols, embodying the “Defipunk principles” cherished by the ecosystem. The Foundation has notably loaned out ETH and borrowed $2 million in GHO on Aave, according to its founder, Stani Kulechov.
This strategic shift follows criticism of the Foundation’s perceived distance from DeFi innovation. Infinex founder Kain Warwick had even accused it of hindering ecosystem evolution by refusing to support key players.
Internal Restructuring Amid ETH’s Loss of Momentum
The refocusing of the Ethereum Foundation extends beyond its financial strategy. On June 2, it announced a restructuring of its development team, with layoffs included, without specifying the extent. A strong signal sent as ETH lags in the current bullish cycle, far behind Bitcoin and Solana, respectively hitting historic highs.
ETH remains 46.5% below its 2021 peak. The time has come for the Foundation to act with methodical, clear, and ambitious steps.
