Franc Smidt, Editor-in-Chief of FUTURUM
The Ethereum Foundation (EF) — one of the most secretive and at the same time most influential players in the blockchain industry — has, for the first time in many years, made public an updated treasury management strategy. The new approach marks a transition from reactive responses to a systemic financial model, but experts still have questions: is it too late, and how effective will this strategy be under the conditions of a new market cycle?
How much money does the Ethereum Foundation have — and in what form?
As of October 2024, EF held $1.29 billion on its balance sheet, of which approximately 81.4% was in ETH (≈320,000 ETH), 14.3% in stablecoins (including USDC and GUSD), and the rest in fiat and other crypto assets. However, denominated in ETH, the treasury was exposed to significant volatility: for example, in November 2022 its value crashed to $670 million — nearly a 50% drop. At the time, the foundation faced a wave of criticism — from bloggers to institutional actors — questioning how over 90% of treasury assets could be held in such an unstable form.
Previously, EF had already sold ETH at market “peaks” — for example, in May 2021, they sold 39,000 ETH at around $3,500 each, totaling $137 million. At the time, this was viewed as an attempt to time the top of the market. However, another wave of criticism followed in August 2022, when the foundation sold another 20,000 ETH right before the next price rally — again, with no explanation provided.
Why was a new strategy needed?
Ethereum is entering a decisive two-year phase. On the horizon are the large-scale deployment of Layer-2 networks, Account Abstraction (EIP‑4337), implementation of Proto-Danksharding, and the development of native stablecoins. This requires systematic, predictable, and professionally managed spending. The fundamental question arises: can the foundation ensure sustainable funding for the ecosystem without resorting to emergency sales of ETH?
The response was a revised strategy. EF now commits to maintaining a “cash buffer” sufficient for at least 2.5 years ahead — in other words, enough to cover current operating expenses without destabilizing the balance sheet. Planned expenditures are to be limited to 15% of the annual treasury in the first year, with a gradual reduction to 5–7% over five years.
How will EF manage its funds?
The shift is from passive holding to an active model involving participation in DeFi protocols. The foundation has already deployed 45,000 ETH (≈$120 million) into Aave, Compound, and Spark, using them as yield-generating “vaults.” It also utilizes GHO — the stablecoin issued by Aave DAO. Notably, some ETH is deployed indirectly, through “Wrapped ETH + staking” strategies, which enhance yield without sacrificing liquidity.
However, this approach also raises concerns: DeFi platforms are not without risks, especially in volatile market conditions. Critics are already asking: could this become another Terra or Celsius scenario if the foundation overdoes its “yield optimization”?
EF has stated that it will follow “Defipunk principles” — open-source code, immutability, rejection of KYC, and maximum transparency. But these are declarations — and in practice, DeFi protocols do not guarantee asset recovery in the event of critical vulnerabilities.
Lessons from the past: what went wrong?
In 2016, following the DAO hack, the foundation played a key role in rolling back the blockchain and initiating the hard fork that resulted in Ethereum Classic. To this day, that decision is viewed by some as a violation of decentralization principles in favor of preserving trust. Between 2018 and 2020, EF was also criticized for “opaque grant distribution” and a closed governance structure — despite allocating millions to ecosystem projects.
Until 2023, the foundation published almost no financial reports. It was only under community pressure that EF began releasing regular balance reports — and even today, its transparency lags behind what is demonstrated by, for example, the Uniswap Foundation or Optimism Collective.
What’s next?
Under the new model, the foundation will publish quarterly treasury reports, disclosing asset allocations, buffer levels, and operating expenses. Funding for Layer-2 networks, Ethereum Protocol Fellows, ZK‑proof projects, and the grants program will be handled through a special investment and grants structure — the Treasury Allocations Board.
EF’s goal by 2027 is to become something akin to a university endowment for blockchain: stable, diversified, and operating under the principle of “spend the earnings, not the principal.”
One thing is clear — the Ethereum Foundation is taking a major step toward maturity. The new treasury mechanism could transform the foundation from a protective “Ethereum parent” into a mature institutional coordinator, allocating resources responsibly and transparently. But trust is not a gift — it is capital. And this capital, EF is only beginning to earn again: after years of silence, secrecy, and critical mistakes, the community will need to relearn how to trust that the foundation is ready not only to manage code — but also money.
