Author: Nancy, PANews
The transparency issue of the Ethereum Foundation (EF) has been brought to the fore again. Recently, the Ethereum Foundation has aroused community doubts after selling a large amount of ETH. The official responded that it was part of the financial management activities and revealed that the annual budget is about 100 million US dollars, mainly composed of grants and salaries. However, in recent years, the Ethereum Foundation has not disclosed the specific expenditure details of all expenses, and the opaque operation has caused community criticism.
At the same time, Hudson Jameson, a former employee of the Ethereum Foundation, revealed the details of EF’s funding budget, saying that the funds are mainly used to support various projects and activities around the world, and mentioned that the foundation will issue a large number of grants every year, which accounts for a large part of the budget.
So far, more than 170 million US dollars have been allocated, which once accounted for 60% of the annual budget
From the history of Ethereum Foundation's project funding, the earliest can be traced back to the DEVgrants program in April 2015, which was used to provide funding for Ethereum ecosystem projects. The program can provide each project with US$1,000 to US$10,000, but only donated about US$2.565 million to 15 projects/individuals in the first phase, and there has been no update since then. Starting in March 2018, the Ethereum Foundation launched multiple Ethereum Foundation Grants, donating more than US$19 million to more than 70 projects.
ESP is currently the main funding program of the Ethereum Foundation. It was launched in 2019 and is a branch dedicated to providing financial donations and other non-financial support to the Ethereum ecosystem, focusing mainly on financial support. PANews compiled based on the announcement released by the ESP team. In the past five years, ESP has funded 917 projects with a total of more than 148 million US dollars, with an average subsidy of nearly 162,000 US dollars per project/community, and an annual donation of approximately 27.446 million US dollars.
And from the perspective of funding intensity, ESP funding has basically shown an increasing trend year by year, especially in 2022 and 2023, when the most projects were funded. Among them, $61.091 million in funding support was provided to 285 projects in 2023, accounting for 60% of the annual budget, and each project received an average of $214,000, which is several times that of other quarters; in 2022, $30.043 million was allocated to 220 projects, with an average subsidy of $137,000. In terms of project funding types, ESP prefers community and education, cryptography, and zero-knowledge proof types. For example, last year the Ethereum Foundation donated a total of 97 community and education projects and 87 cryptography and zero-knowledge proof track projects, while developer experience and tools, consensus layer, execution layer, protocol growth and support, and Layer2 are also the focus of the foundation.
In addition, the Ethereum Foundation has also launched some other grant programs, such as the "Next Billion Fellowship" bonus program, which can provide applicants with guidance from relevant experts, resources from the Ethereum Foundation and the Ethereum community, and financial support; the Ethereum Foundation has also participated in the sponsorship of the quadratic fundraising platform Gitcoin Grants. According to the Gitcoin Grants official website, since its launch in 2019, Gitcoin Grants has established 170 quadratic financing pools and has donated more than $60 million to 3,715 projects. In terms of the annual fundraising amount, the fundraising scale of Gitcoin Grants has grown rapidly compared to its inception. The amount raised in 2022 (US$21.4 million) is 30.5 times the US$700,000 in 2019. For another example, the Ethereum Foundation teamed up with several ZK projects in June this year to launch a $900,000 prize pool to promote the development of zero-knowledge proof technology.
EF is embroiled in controversy again as concerns grow over sales methods and spending transparency
As a non-profit organization dedicated to the development of Ethereum, the world's second largest cryptocurrency by market value, the Ethereum Foundation has now been embroiled in various controversies, especially the frequent large-scale sales of ETH.
In this regard, Mask Network founder Suji Yan provided an explanation, saying, "Some institutions (such as universities and charitable organizations) sell ETH immediately after receiving it, and the price is often not handled well. It is better to sell it at a better price. In addition, some newly registered NGOs do not have the spare capacity to open accounts on exchanges (non-profit account opening time is longer). Finally, there are some public policy, political science, international relations research and politically related institutions. Basically, mainstream exchanges will refuse to provide services. The main reason is that these institutions often have former government officials serving, or institutional personnel become members of the new government, and PEP figures are very deep and should not be too public."
In response to this statement, Aya Miyaguchi, executive director of the Ethereum Foundation, also revealed in the latest response that some recipients can only accept legal tender. And (the latest large transfer is) because the foundation has been told not to conduct any financial activities for a long time this year, the supervision is complicated, which makes it impossible to share plans in advance.
However, Sundial Mirage co-founder SIGNAL believes that considering the value generated by the Ethereum Foundation, even with an annual operating budget of US$100 million, this amount is far lower than the market average. For example, Netflix is a company with a market capitalization of $295 billion, while Ethereum’s market capitalization is $332 billion, but Netflix only paid two executives $80 million in compensation and $72 million in wages in 2024. In reality the $100 million liquidity treatment will not have a significant impact on the assets, but the way it is dealt with may be affected (slightly and temporarily).
“At present, everyone has exaggerated the influence of the Ethereum Foundation and Vitalik Buterin. In fact, they are nothing more than tools to build roads according to the roadmap. Those who build cars are the builders of this beautiful era of ours,” said Chen Mo, a crypto KOL.
Liu Feng, former editor-in-chief of Chain News, also believes that a budget of $100 million a year is not crazy for an organization like the Ethereum Foundation. After all, this organization is large and has heavy responsibilities, not to mention that this organization has many people and is "bureaucratic" enough (this is not a derogatory term but a neutral fact). However, he also pointed out that EF had previously published an annual report, which was a good attempt, but then it was abandoned. Since it is prone to attracting criticism, it should take the initiative to do better.
In fact, the Ethereum Foundation has released its 2021 financial report, showing that the payment fees reached $48 million that year. But according to crypto KOL Ignas, the Ethereum Foundation currently holds $845 million worth of ETH, accounting for 0.25% of the total ETH supply. At the current annual expenditure rate of $100 million, EF can only maintain expenditures for eight years.
Suji Yan also believes that the lack of transparency in EF's spending is indeed a problem, but I'm afraid that many contents can only be audited and reviewed, and cannot be fully disclosed. If Zk can be combined with something verifiable, it will be the best of both worlds? Most government and public institutions in the United States can use FOIA (Freedom of Information Act) to request data, but it is uncertain whether the response will be ambiguous, and even the requester will be in trouble.
"It's a big problem that no information is made public until people protest. I don't understand why it's so difficult to publish a quarterly report with financial data and basic updates, such as expenses, expected sales, where the funds are used, team size and distribution, etc. The lack of transparency will only make people focus on these negative issues, instead the community can focus on how EF spends a lot of money to promote the development of Ethereum." said eric.eth, a core developer of Ethereum.
For example, after Polkadot released its treasury financial report, although it caused dissatisfaction due to excessive expenditure and insufficient income, compared with Ethereum, Polkadot is at least worthy of praise for its transparency.
Zhu Su, founder of Three Arrows Capital, admitted that the problem with the Ethereum Foundation is not that they sell tokens before their value is discovered. They are born dumpers. The biggest problem is that they are currently unable to provide a coherent roadmap and effective leadership for the ecosystem.
"Today's Ethereum Foundation is becoming a burden for ETH. This organization with a strong ideological color has become a negative asset for Ethereum and its ecosystem." Web3 venture capitalist @LordWilliamUK said, and pointed out the six sins of the Ethereum Foundation, including the "congressionalization" of the foundation, which has led to it being hunted by various funds and interests, the vast majority of members who receive ETH subsidies are doing research on paper but are indifferent to innovative projects that apply for subsidies, the annual expenditure of 100 million US dollars is not transparent, the Ethereum circle does not discuss application scenarios but talks about "orthodoxy", the foundation does not serve high-quality potential projects, and iteration is slow.
