Ethereum Foundation's Mysterious 35,000 ETH Transfer: Where's the Transparency?

Ethereum Foundation's Mysterious 35,000 ETH Transfer: Where's the Transparency?On August 24, the Ethereum Foundation deposited 35,000 ETH (approximately $94.07 million) into Kraken, sparking widespread discussion within the crypto community

Ethereum Foundation's Mysterious 35,000 ETH Transfer: Where's the Transparency?

On August 24, the Ethereum Foundation deposited 35,000 ETH (approximately $94.07 million) into Kraken, sparking widespread discussion within the crypto community. While this isn't the first time the Ethereum Foundation has transferred ETH to Kraken, the last transfer happened on May 6, 2022, when the foundation moved 15,000 ETH (approximately $30.1 million) to Kraken, followed by a 13% drop in ETH price within six days. This recent transfer has once again raised concerns about the Ethereum Foundation's fund management and transparency.

Aya Miyaguchi, Executive Director of the Ethereum Foundation, responded by stating that this is part of the foundation's fund management activities, with an annual budget of approximately $100 million, primarily used for grants and employee salaries, where some recipients can only accept fiat currency. She insisted that this ETH transfer does not signify a sale, and there may be a planned gradual sale in the future.

However, crypto KOL Ignas questioned how the Ethereum Foundation uses ETH, highlighting the lack of comprehensive transparent expense reports. Ignas pointed out that the Ethereum Foundation holds 8.45 billion dollars worth of ETH, accounting for 0.25% of the total ETH supply. According to the latest reports, the Ethereum Foundation allocated $30 million in Q4 2023 and $8.9 million in Q3 2023.

What does the Ethereum Foundation use its funds for? Some examples include:

Conferences worldwide, aimed at attracting new Ethereum users through introductory talks and training developers through technical sessions and workshops.

Online courses about the core concepts and components of Zero-Knowledge (ZK) systems.

"Email Wallets," allowing users to send crypto via email without any action required from the recipient.

"Daimo" ERC-4337 smart contract wallet: limited to stablecoins, non-custodial, and without a seed phrase.

The Ethereum Foundation seems to favor allocating grants to educational and niche (but cool) products that might not attract significant venture capital support. This might partly explain their reluctance to fund DeFi protocols, as these protocols typically receive external funding from venture capital firms.

However, there's a lack of comprehensive transparent expense reports from the Ethereum Foundation. The latest audit report dates back to 2021, showing a total of $48 million spent on internal expenses, external grants, and bonuses. The largest expenses include:

$21 million for L1 R&D

$9.7 million for community development, including grants and education

$5.1 million for internal operations (salaries, legal fees, etc.)

Therefore, 10% of the total expenses in 2021 were used to pay developer salaries and support the Ethereum Foundation's maintenance.

It's worth noting that while Polkadot faces controversy due to its extravagant spending, its reports are at least transparent and readily available. In contrast, the Ethereum Foundation's expenditure transparency is notably deficient.

If the Ethereum Foundation continues spending at a rate of $100 million per year, it will deplete its ETH reserves in eight years. To sustain operations for longer, either the ETH price needs to rise, or the foundation needs to start staking to generate income.

Finally, we encourage the Ethereum Foundation to operate more transparently and provide more detailed expense reports. This would help build community confidence in the foundation's fund management and foster a healthy ecosystem for Ethereum.

Regarding the Ethereum Foundation's transparency, many questions remain unanswered. Here are some key questions: