Original author: KarenZ, Foresight News
For a long time, the Ethereum Foundation has been mired in criticism for being opaque, ignoring community voices, and burning money like water, and its leadership structure and staffing have been controversial. Coupled with the frequent small-amount selling of ETH and inaction in the face of community needs, a series of FUDs have continuously eroded the markets confidence in it. Recently, many Ethereum community users and developers have turned to Solana, and the Ethereum ecosystem is facing an unprecedented dilemma. It seems that there is not much time left for Ethereum.
However, under the reverse urging and criticism of the community, the Ethereum Foundation and Vitalik Buterin seem to have finally realized the urgency of change. In recent days, they announced two major decisions: one is to allocate 50,000 ETH (about 150 million US dollars) to participate in the Ethereum DeFi ecosystem, and the other is to make major changes to the leadership structure for nearly a year. This article will deeply analyze the impact of the Ethereum Foundations participation in DeFi from three aspects: background, significance and future prospects.
Why did the Ethereum Foundation choose to substantially participate in DeFi?
The vortex of money management
The Ethereum Foundations fund management methods have long been controversial. According to a report released in November 2024 ( Quick Reading of the Ethereum Foundation Report: Total Treasury of US$970 Million, 99.45% of Crypto Holdings are ETH ), the total amount of the Foundations treasury has dropped from US$1.6 billion on March 31, 2022 to US$970 million on October 31, 2024, a reduction of nearly 40%.
During this period, the Foundations expenditures continued to grow, from $48 million in 2021 to $134.9 million in 2023. More than 99.45% of the assets in the treasury are ETH, so the reduction in treasury funds is mainly due to small-scale high-frequency selling activities by the Ethereum Foundation, in addition to the impact of expenditures and changes in asset prices. Frequent small-scale selling activities have further exacerbated market concerns.
Questions have arisen about why the foundation chose to sell rather than stake ETH (and use DeFi to make up for the budget), to which Vitalik responded that he had been concerned about regulatory factors and hard fork positions in the past, but now the regulatory environment has improved and he is actively exploring new ways to manage funds.
The controversy of “not really participating in DeFi”
Another controversial complaint is that the Ethereum Foundation does not use Ethereum for the sake of so-called neutrality.
In this regard, Josh Stark, an employee of the Ethereum Foundation, said, The Ethereum Foundation has been using Ethereum, for example, exchanging ETH for stablecoins (usually through CoWSwap), paying recipients and team members with stablecoins and ETH on the mainnet and L2, and Devcon and Devconnect events support on-chain payments and use on-chain IDs to obtain tickets. However, Eric Conner even complained that the foundations first major use case for using Ethereum was actually selling.
Community dissatisfaction
The Ethereum Foundation’s leadership structure, huge spending, and communication gaps with the community have led some users and developers to turn to competitors such as Solana.
Although Vitalik said that he would personally decide on the new leadership team and was carrying out reforms to establish a suitable board of directors, this not only failed to quell the communitys dissatisfaction, but instead exacerbated the conflict. However, this also indirectly reflects Vitaliks current high attention to community response and Ethereums development.
Competitive pressure
In a 2023 interview with Aya Miyaguchi, executive director of the Ethereum Foundation, by Wired magazine, Aya Miyaguchi said that the core of the Ethereum community is usually a group of researchers and developers who are purely pursuing their core vision and are not particularly interested in making money. She believes that this vision and attitude resonates and drives the rapid development of the community. Although there is nothing wrong with making money in itself, she specifically pointed out that the narrative of blockchain is often simplified to a money-making scheme, which undermines the potential of the technology. The Ethereum Foundation is committed to managing community values, resisting competitive sentiments with other chains, and refusing to be swept up in the culture of compete and win.
However, this insistence on a pure technical vision also brings some side effects. Startup DeFi projects on Ethereum are still in a state of wild growth. In contrast, the Solana Foundation and its official Twitter account promote and support startup projects far better than Ethereum, providing developers with more resources and exposure opportunities. Coupled with Solanas high performance, low fees, and smooth experience, Ethereum faces severe competitive challenges. The Ethereum Foundations move to allocate 50,000 ETH to participate in the DeFi ecosystem may be a response to this challenge.
What is the significance of EF allocating 50,000 ETH to participate in DeFi?
Support the development of Ethereum DeFi ecosystem
The grant of 50,000 ETH will provide strong support for the Ethereum DeFi ecosystem. The Ethereum Foundation plans to participate in the DeFi ecosystem through a 3/5 multi-signature wallet and has completed test transactions on Aave.
The injection of this capital will not only provide liquidity support for existing DeFi projects, but will also stimulate the birth of more innovative projects and further consolidate Ethereum’s leading position in the DeFi field.
In addition, by participating in DeFi, the Foundation can more directly understand the needs and challenges of the ecosystem, thereby formulating more precise support strategies.
Explore new models of fund management
By participating in DeFi, the Ethereum Foundation is trying a more open and sustainable fund management model, rather than simply selling, selling, selling. Staking rewards and DeFi income are expected to cover part of the foundations internal budget. This new attempt will not only help alleviate market concerns about the foundations selling behavior, but also inject more vitality and confidence into the ecosystem.
Boosting community confidence
This move by the Foundation is widely interpreted by the community as a positive signal, which is expected to rebuild community trust. By regularly disclosing financial information, optimizing the use of funds, and maintaining transparent communication with the community, the Foundation is expected to regain support.
This increase in transparency and participation will not only enhance the community’s sense of trust, but also attract more developers and users to build on the Ethereum ecosystem in the long term, promoting the long-term prosperity of Ethereum.
Challenges and risks
As Vitalik has previously emphasized, the Foundation will not lobby regulators or change its trusted neutrality position, but how to balance regulatory pressure and ecosystem participation in DeFi remains a difficult problem. In addition, the high volatility of the DeFi ecosystem may affect the Foundations revenue expectations. Although staking rewards and DeFi revenue are expected to cover part of the Foundations budget, market volatility and protocol risks still need to be handled with caution, but in the short and medium term, the Ethereum Foundation will definitely give priority to relatively stable and low-risk opportunities to ensure the security of funds and the predictability of returns.
summary
The Ethereum Foundation has allocated 50,000 ETH to participate in the DeFi ecosystem, marking a major adjustment in its fund management and strategic direction. This move not only injects new vitality into the Ethereum ecosystem, but also provides new possibilities for the future development of the Foundation.
As Joseph Lubin, founder of Consensys, said: “The Ethereum Foundation, the Enterprise Ethereum Alliance (EEA), and Consensys are working on a number of things that will reshape the way Ethereum is marketed in the short term. Soon, a series of high-value initiatives will be made public that will be dizzying and even dizzying.”
The author believes that in addition to DeFi, Ethereum should follow the general trend of the industry and actively promote the development of the community in potential areas such as AI agents and RWA. In addition, the foundation not only needs to provide more support and guidance for start-up projects, but also should help these projects achieve the transformation from wild growth to high-quality development through resource integration and ecological collaboration. Only in this way can Ethereum maintain its leading position in the fierce competition.
