Ethereum Foundation Pledges $165 Million to Strengthen DeFi Ecosystem

The Ethereum Foundation has announced an allocation of 50,000 Ether, approximately $165 million, to bolster Ethereum’s decentralized finance (DeFi) ecosystem. This commitment comes on the heels of Ethereum co-founder Vitalik Buterin’s recent statement on X, where he emphasized the foundation’s plans to embrace organizational changes. The new direction aims to provide greater support to decentralized application developers while fostering community transparency.

The allocated funds will be secured using a three-of-five multisig wallet on Safe, ensuring robust security for the initiative. Hsiao-Wei Wang, a representative of the foundation, shared on January 20 that the wallet had already undergone a successful test transaction via the lending protocol Aave. However, Wang also noted that it may take a few days to fully set up the wallet for its intended operations.

Treasury Pressures and Community Criticism

This move represents a significant shift for the Ethereum Foundation, as the 50,000 Ether constitutes 18.5% of its current holdings. The foundation’s treasury has seen a considerable decline, dropping by 56% from 617,000 Ether in January 2020 to 269,000 Ether today, as per data from Arkham Intelligence. Despite this, Buterin remains steadfast in prioritizing the network’s long-term growth over immediate financial concerns.

However, the announcement has sparked mixed reactions within the Ethereum community. Critics, such as Infinix founder Kain Warwick, have previously accused the Ethereum Foundation of neglecting the DeFi space, while others have raised concerns over the selling pressure created by the foundation to meet its operational costs. To address these concerns, core developer Eric Conner suggested leveraging staking rewards to cover internal budgets and reduce the need for selling Ether.

Ethereum Foundation Balancing Vision with Expectations

Buterin has clarified that the Ethereum Foundation is not planning an ideological shift or lobbying efforts, emphasizing its commitment to being “credibly neutral.” This approach contrasts with some community sentiments, which blame the foundation’s perceived lack of engagement for Ether’s lagging price performance relative to competitors like Bitcoin and Solana.

Nonetheless, the foundation’s decision to allocate substantial resources to DeFi has garnered support from figures like CryptoQuant CEO Ki Young Ju, who praised Buterin for prioritizing innovation over profit.