Ethereum Foundation Allocates 50K ETH to Support DeFi Development, Faces Criticism

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The Ethereum Foundation has moved to distribute 50,000 Ether (ETH), which equals approximately $165 million, to assist software developers in the decentralized finance (DeFi) space as part of an effort to improve Ethereum’s DeFi ecosystem. This follows criticism that the Ethereum Foundation does not care about innovative developments.

Ethereum co-founder Vitalik Bulterin announced in a Jan. 20 X post that the Ethereum Foundation will go through major organizational changes. These modifications are aimed at improving connections within the Ethereum community and expanding support for developers of decentralized apps (dApps).

The Foundation’s allocated cash will also be protected on ‘Safe’ (previously Gnosis Safe) in a 3-of-5 multi-sig wallet. The wallet completed a test transaction utilizing the lending protocol Aave, according to spokesperson for the Ethereum Foundation.

Ethereum Foundation Resolving Issues Within the Community

The allocation amounts to 18.5% of the Foundation’s actual holdings of Ethereum, representing a significant decrease. On-chain data from Arkham Intelligence show that the Ethereum Foundation’s treasury fell from 617,000 ETH in January 2020 to 269,000 ETH in January this year.

Also read: Elon Musk-Led Department of Government Efficiency Faces Lawsuit Minutes After Trump’s Inauguration

This drop in the treasury holdings comes after concerns about the Foundation’s lack of interaction with DeFi were raised by several community members. The Ethereum Foundation has also come under fire for using fund liquidation as a way to cover operational expenses related to events and wages, which added sell pressure on ETH’s price.

Staking Rewards to Boost Sustainability and Innovation

Eric Conner, an Ethereum core engineer, took the initiative to propose that the Ethereum Foundation use staking rewards from Ethereum’s proof-of-stake consensus to pay for running costs. If put into practice, this tactic might reduce sales pressure and comply with the Foundation’s activities with the objectives of the Ethereum community.

Also read: Ethereum Foundation Faces Calls to Stake Ether Instead of Selling

The current action by the Foundation aligns with difficulties in market performance. When it comes to price, ETH has been trailing behind Bitcoin (BTC) and Solana (SOL) in recent months. In contrast to proponents of Bitcoin and Solana, who have been more engaged in influencing the discourse with legislators, Ethereum backers have also been accused of a lack of regulatory involvement. Buterin clarified that the Foundation had no plans to change its ideology. Rather, he wants the Ethereum Foundation to maintain its neutrality while also adding value over the long run within the Ethereum ecosystem.

Some industry observers, such as CryptoQuant CEO Ki Young Ju, have praised the ecosystem for its increased efforts on innovation over making a profit.

Author

Steven Walgenbach

Steven's passion for cryptocurrency and blockchain technology began in 2014, inspiring him to immerse himself in the field. He notably secured a top 5 world ranking in robotics. While he initially pursued a computer science degree at the University of Texas at Arlington, he chose to pause his studies after two semesters to take a more hands-on approach in advancing cryptocurrency technology. During this period, he actively worked on multiple patents related to cryptocurrency and blockchain. Additionally, Steven has explored various areas of the financial sector, including banking and financial markets, developing prototypes such as fully autonomous trading bots and intuitive interfaces that streamline blockchain integration, among other innovations.

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