The Ethereum Foundation has recently announced a bold initiative to allocate 50,000 ETH (approximately $165 million) towards supporting the decentralized finance (DeFi) ecosystem built on the Ethereum network. This strategic move comes after significant criticism regarding the foundation’s perceived lack of support and engagement within the DeFi sector.
Ethereum co-founder Vitalik Buterin stated on January 20 that the foundation would be undergoing critical organizational changes to provide more visibility and assistance to app builders in the Ethereum community. He emphasized the need for improved transparency to rebuild trust and invigorate interest in the DeFi applications.
Interestingly, the foundation plans to secure these funds in a 3-of-5 multisig wallet on the Safe platform, which has already demonstrated its functionality through a test transaction on the lending protocol, Aave. However, it may take a few days to finalize the wallet setup, as noted by Hsiao-Wei Wang from the Ethereum Foundation.
The allocation of 50,000 ETH represents a significant portion (about 18.5%) of the foundation’s total holdings, which have seen a drastic decline from 617,000 ETH in January 2020 to only 269,000 ETH today—this drop reflects a 56% decrease in their treasury, according to data from Arkham Intelligence. Such substantial changes in the treasury could pave the way for a more robust engagement in the DeFi space.
The Ethereum community has expressed mixed sentiments following this announcement. Notably, Kain Warwick, founder of Infinix, has been vocally critical, citing a noticeable lack of interest from the foundation in the DeFi landscape. Additionally, the pressure of Ethereum sales to fund operational needs has caused apprehension among community members who worry about long-term price stability for Ether.
On a positive note, Eric Conner, a core developer within the Ethereum ecosystem, asserted that the foundation’s staking rewards could potentially cover most of its internal budget. This could alleviate some of the Ether sell pressure, which has drawn the ire of community advocates.
As the foundation seeks to refocus its priorities, some members of the Ethereum community have speculated that the foundation’s prior disengagement may be linked to Ether’s relative underperformance against Bitcoin and Solana in recent months. In contrast, advocates for those competing networks have been more active in engaging regulators, affecting their communities positively.
Despite the criticisms, Buterin iterated that the foundation will not pivot towards lobbying or pursuing any “ideological” changes to appease critics, highlighting the foundation’s enduring commitment to create value over simply driving profits, especially in a landscape where quick gains are often prioritized.