- Ethereum Foundation allocates 50,000 ETH to DeFi, marking a shift in ecosystem engagement.
- Funds stored in a multisig wallet will generate yield through Aave’s lending protocol.
- This move aims to minimize ETH sales and reduce pressure on Ethereum’s market value.
Ethereum Foundation has revealed its plans to dedicate 50,000 ETH, which is equivalent to about 165 million USD, to finance decentralized finance applications. This is considered as a plan to participate with the DeFi following months of criticism from the Ethereum community. Further, some have accused the foundation of being not so proactive when it comes to promoting the development of DeFi.
Ethereum’s co-founder, Vitalik Buterin, said that the foundation would make operational improvements to be clearer and to support app builders. The 50,000 ETH will be kept in a 3 of 5 multisig wallet, hosted on Safe. The wallet recently performed a transactional test using the Aave protocol, which would take a few days for completion.
This latest development marks a significant step for the Ethereum Foundation, which has historically relied on selling ETH to fund its operations. Data from Arkham Intelligence shows that the foundation’s treasury has decreased from 617,000 ETH in 2020 to 269,000 ETH as of press time, while the allocated 50,000 ETH represents 18.5% of its total holdings. Critics within the Ethereum community have attributed the foundation’s slow engagement in DeFi to Ether’s underperformance compared to Bitcoin and Solana in recent months.
Stani Kulechov, CEO of Aave, called this decision a milestone for the foundation, which has rarely interacted with DeFi protocols at scale. Previously, the foundation used decentralized swaps through Cow Protocol and similar platforms. This shift to Aave signals the foundation’s intent to generate passive income while exploring alternatives to selling ETH. The loan collateralized by the 50,000 ETH on Aave is expected to generate yield without immediate liquidations, barring significant price fluctuations.
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The Ethereum Foundation also holds a smaller reserve of 298,102 DAI stablecoins. Recent feedback from the Ethereum community has encouraged the foundation to focus on strategies that minimize ETH sales. Over the last year, the foundation sold 4,666 ETH to meet operational expenses. This new approach could offset the need for direct ETH sales, reducing sell-side pressure on the asset.
Buterin emphasized that the foundation does not plan to lobby regulators or deviate from its principle of neutrality. Some in the community have noted this as a missed opportunity to strengthen Ethereum’s market presence. However, others, including CryptoQuant’s CEO, have praised the foundation for prioritizing long-term value creation over short-term price gains.
The foundation’s move comes as it faces continued scrutiny for its funding choices. Despite these criticisms, the foundation is signaling a shift toward leveraging DeFi to strengthen Ethereum’s ecosystem.
