Stimulated by U.S. Federal Reserve (Fed) Chairman Powell’s interest rate cut remarks last week , the cryptocurrency market experienced a surge. At that time, the Ethereum Foundation (EF), known as the “master of escape from the top”, On the 24th, another 35,000 ETH (worth nearly $100 million) was deposited into the exchange.
This time the sale of such a large amount of ETH has triggered heated discussions in the community. On the one hand, they are worried that this fund will bring downward pressure on ETH; on the other hand, some people also question whether the Ethereum Foundation really wants to spend so much money. If you spend a lot of money on development, what is the specific flow of the funds?
In this regard, Aya Miyaguchi, executive director of the Ethereum Foundation, claimed:
This is part of the fund management activities of the Ethereum Foundation. The Ethereum Foundation has an annual budget of approximately US$100 million, which is mainly composed of grants and salaries. Some recipients can only accept fiat currencies and will be sold gradually in a planned manner.
Analysis of Ethereum Foundation’s Fund Expenditure
Against this background, @DefiIgnas, a crypto KOL with more than 100,000 followers on Twitter, published an article on August 24 analyzing how the Ethereum Foundation uses its ETH:
The Ethereum Foundation holds $845 million worth of ETH, accounting for 0.25% of the total ETH supply.
According to the latest report of the Ethereum Foundation, in the fourth quarter of 2023, the Ethereum Foundation allocated US$30 million. In the third quarter of 2023, the Ethereum Foundation allocated $8.9 million.
Its fund uses include:
. Conferences around the world aim to "attract new Ethereum users through basic lectures and train developers through technical conferences and workshops."
. An online course on the core concepts and components of zero-knowledge (ZK) systems.
. "Email Wallet" allows users to send cryptocurrency via email without any action from the recipient.
. "Daimo" ERC-4337 smart contract wallet: stablecoin only, non-custodial, no seed phrase required.
The Ethereum Foundation appears to allocate grants for educational and niche (but cool) products that may not receive significant venture capital backing.
This could explain their reluctance to fund DeFi protocols, which would receive external funding from venture capital firms anyway.
Ethereum spending reporting is opaque
Although the Ethereum Foundation’s report disclosed several uses of its funds, DefiIgnas still expressed doubts about the transparency of its report, saying that no one seemed to audit the Ethereum Foundation:
However, they still lack comprehensive and transparent reporting of total expenditures. Who is auditing the Ethereum Foundation?
In addition, @DefiIgnas also pointed out that in 2021 alone, 10% of the Ethereum Foundation’s total expenditure was spent on developer salaries and the daily operations of the Ethereum Foundation:
According to the 2021 report, EF's internal expenditures and external grants and bonuses totaled $48 million. Specifically include:
. $21 million for Layer1 research and development;
. $9.7 million for community development, including grants and education;
. $5.1 million for internal operations (salaries, legal fees, etc.).
It has to be said that although Polkadot has faced controversy for its crazy spending, at least its reporting is transparent and open.
The Ethereum Foundation may run out of ETH within 8 years
Finally, DefiIgnas pointed out that if we look at the current rate of money burning by the Ethereum Foundation, the ETH in its hands may be exhausted within 8 years:
At the current spending rate of $100 million per year, the Ethereum Foundation will run out of ETH in 8 years.
If you want to provide longer-term financial support for operations, either the price of ETH will rise, or you will start staking to obtain income.
