The Ethereum Foundation, the non-profit organization dedicated to supporting the development of the Ethereum blockchain, has seen its treasury shrink by a staggering 39% over the past two and a half years. According to a long-awaited financial report released on Friday, the foundation’s holdings stood at $970.2 million as of October 31, 2024, down from $1.6 billion in March 2022.
The significant decrease in the foundation’s treasury can be largely attributed to the prolonged cryptocurrency market downturn. Ether (ETH), the native token of the Ethereum blockchain, has experienced a 22% decline since the foundation’s last financial snapshot in March 2022, when ETH was trading around $3,300. As of the latest report, ETH is hovering near $2,600.
Treasury Allocation and Spending
The Ethereum Foundation’s treasury is primarily composed of cryptocurrency holdings, with 81.3% ($788.7 million) held in digital assets. Unsurprisingly, the vast majority (99.45%) of these crypto holdings are denominated in ether. The remaining $181.5 million is allocated to non-crypto investments and assets.
Commenting on its treasury allocation, the foundation stated, “We choose to hold the majority of our treasury in ETH. The EF believes in Ethereum’s potential, and our ETH holdings represent that long-term perspective.” However, the report also emphasized the need for a conservative treasury management policy to ensure sufficient resources are available to fund important Ethereum ecosystem projects, even in the face of a multi-year market downturn.
Over the past two years, the Ethereum Foundation has spent a considerable sum on various initiatives. In 2022, the foundation’s expenditure amounted to $105.4 million, followed by $134.9 million in 2023. These figures align with previous statements made by foundation researcher Justin Drake, who indicated that the organization spends roughly $100 million annually and has approximately 10 years of runway.
Conflict of Interest Policy
In addition to the financial details, the Ethereum Foundation also unveiled a new conflict of interest policy for its researchers and developers. The policy mandates that foundation members must disclose any outside work that pays more than $25,000 per year, as well as any investments they plan to make. These disclosures will be reviewed by a designated discussion group to ensure transparency and mitigate potential conflicts of interest.
Furthermore, the foundation has prohibited its employees from accepting outside work compensation in the form of illiquid assets with uncertain market value, such as pre-launch project tokens or advisorship packages. This move comes in the wake of recent revelations that two prominent Ethereum researchers, Justin Drake and Dankrad Feist, held advisor roles at EigenLayer, a restaking platform, which entitled them to significant token payouts.
Community Reaction and Future Outlook
The Ethereum Foundation’s financial report has been met with mixed reactions from the community. While some praise the organization’s transparency and commitment to funding the ecosystem’s growth, others express concern over the treasury’s heavy reliance on ether and the potential impact of the market downturn on future development efforts.
As the Ethereum network continues to evolve and face new challenges, including the ongoing transition to a proof-of-stake consensus mechanism and the development of scalability solutions, the foundation’s role in steering the ship remains critical. The organization’s ability to effectively manage its treasury and allocate resources will play a significant part in shaping Ethereum’s future and its position as a leading blockchain platform.
In light of the recent financial revelations, the Ethereum community will likely keep a close eye on the foundation’s spending and treasury management in the coming years. While the market downturn has undoubtedly impacted the organization’s holdings, the foundation’s commitment to transparency and its newly implemented conflict of interest policy demonstrate a proactive approach to addressing potential concerns and maintaining the trust of the Ethereum community.
As the cryptocurrency market continues to mature and navigate the challenges posed by prolonged bear markets, the Ethereum Foundation’s experience serves as a valuable case study for other blockchain projects and organizations. Balancing the need for strategic treasury management with the demands of ongoing development and community support will be a key factor in ensuring the long-term success and resilience of the Ethereum ecosystem and the broader cryptocurrency space.
