In a significant move responding to community concerns, the Ethereum Foundation has deployed $120 million worth of Ether (ETH) into decentralized finance (DeFi) protocols. This is a change of approach for the foundation in managing its funds, as it had been criticized for depending too much on selling ETH to fund its activities.
On 13th February, the Ethereum Foundation’s multi-signature wallet made three significant deposits: 4,200 ETH to Compound, 10,000 ETH to Spark, and 30,800 ETH to Aave. With the ETH price of around $2,600 at that time, the value of the 45,000 ETH deployment was around $120.4 million.
Aave founder and CEO Stani Kulechov spoke to the importance of the decision, saying the 30,800 ETH allocation (valued at approximately $82.4 million) into Aave Core and Aave Prime is the largest commitment to DeFi the foundation has ever made. Kulechov was highly optimistic about the future of the space, stating, “DeFi will win,” as he received the added liquidity flowing into Aave.
Source: Ethereum Foundation
Community Applauds Ethereum Foundation’s New Approach:
Apart from Kulechov’s approval, most people in the Ethereum community welcomed the decision, interpreting it as a move towards lowering the foundation’s reliance on liquidating ETH for purposes of raising funds.
Podcaster Mark Jeffrey hailed the decision as “smart,” noting that lending is very much at the core of DeFi, and Aave holds a vital spot in the world of lending. An X user echoed similar sentiments, describing the move as a victory and encouraging the community to “keep it up.” Another user went so far as to say if the foundation would keep putting the funds out as they have, it would be a “good thing” for the ecosystem.
Meanwhile, 0xNessus, the pseudonymous co-founder of the lending protocol HyperLend, expressed surprise that the Ethereum Foundation had taken so long to engage directly with DeFi applications. “All we had to do was bully them,” the executive remarked on X, hinting at years of community pressure to see such a move.
Ethereum Foundation’s ETH Sell-Offs Previously Drew Criticism:
Before this change in strategy, the Ethereum Foundation was criticized for selling ETH to fund its operational expenses, such as employees’ salaries.
In January, Ethereum Improvement Proposal (EIP-1559) co-author Eric Conner criticized the foundation, claiming that its primary function appeared to be “dumping ETH.” Similarly, Anthony Sassano, host of The Daily Gwei, suggested that instead of selling their ETH holdings outright, the foundation should use DeFi protocols like Aave to borrow stablecoins against their ETH. Many in the community argued that frequent ETH sales put downward pressure on the asset’s price.
Ethereum co-founder Vitalik Buterin has already talked about staking the foundation’s ETH reserves due to regulatory ambiguity and the risk of being stuck in a certain position if Ethereum experiences a disputed hard fork.
Source: Ethereum Foundation
Despite the previous criticisms, the Ethereum Foundation indicated that this latest fund deployment is only the start. In a post, the organization indicated that there’s “more to come,” implying that further capital injections into DeFi may be on the horizon. In addition, the foundation indicated that it is currently looking into staking options and soliciting community feedback on how to best utilize its treasury.
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