Ethereum Foundation's Spending Breakdown Amid Market Speculation
Recently, the Ethereum Foundation (EF) came under scrutiny following a significant 35,000 ETH transfer from their wallet to the exchange Kraken, valued at approximately $94 million. This sparked speculation in the cryptocurrency markets about a potential large-scale sell-off. To address these concerns, Josh Stark, an EF contributor, took to social media to disclose detailed information about the foundation's expenditures over the past two years.
Understanding EF's Expenditure Allocation
Stark’s breakdown, shared through pie charts, outlined seven primary areas where EF allocated its funds in 2022 and 2023. These categories include:
- New Institutions
- L2 R&D (Layer 2 Research and Development)
- Applied ZK (Zero-Knowledge Proof Applications)
- Community Development
- Developer Platform
- Internal Operations
- L1 R&D (Layer 1 Research and Development)
The focus on R&D for Layer 1 improvements and supporting new institutions received the highest funding. Stark emphasized, “The graphs capture both internal and external spend. For example, ‘L1 R&D’ includes grants to external client teams and EF researchers. In both years, internal spend was about 38% and external spend was about 62%.”
Internal vs. External Spending
Internal expenditures cover the work of various teams under EF's umbrella, such as Geth’s client, Solidity, Devcon, and the Ethereum Organization's teams. External expenditures relate to grants awarded through the Ecosystem Support Program (ESP). From 2022 to 2023, ESP disbursed approximately $91.1 million in grants to around 895 projects. These grants are detailed in quarterly reports, with the latest available for Q1 2024.
Fostering New Institutions
In the realm of “new institutions”, Stark pointed to efforts aimed at bolstering entities that can enhance and sustain the Ethereum ecosystem. Examples include the Nomic Foundation, Decentralization Research Centre, L2Beat, and other Ethereum-related bodies.
Ethereum co-founder Vitalik Buterin endorsed Stark's post, underscoring the necessity of these investments. He humorously noted, “No World Economic Forum insect protein research exists within the foundation’s fund allocation.”
Community Concerns Over Large Transfers
The $94 million worth transfer triggered concerns about potential market impacts, as ETH’s price had already seen a 22% drop in the preceding month. An angel investor, DCInvestor, proposed reducing anxiety over large transactions by splitting them into smaller transfers. However, Buterin highlighted logistical challenges posed by such a strategy due to the multi-signature wallet's requirement for multiple confirmations, adding, “There are solutions of course, but for obvious reasons, we don’t want to rush on something so security-sensitive.”
In summary, the Ethereum Foundation aims to maintain transparency and reassure stakeholders about its financial strategies, particularly during volatile market periods.
