The Ethereum community is expressing growing dissatisfaction with the organization that is intended to bolster the ecosystem.
Vitalik Buterin, the co-founder of Ethereum, has expressed mixed views on decentralized finance (DeFi). While he acknowledges the innovation and potential that DeFi brings to the blockchain space, he has also raised concerns about its risks and long-term sustainability.
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Vitalik has pointed out that the high yields and speculative nature of many DeFi projects could lead to instability and are often unsustainable. He has also cautioned against the overemphasis on short-term financial gains at the expense of security and long-term growth. Additionally, he has emphasized the need for DeFi projects to focus on real-world use cases and ensuring accessibility, security, and reliability.
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Overall, while Vitalik supports the core principles of DeFi, he is critical of its current trajectory, advocating for more responsible development within the space.
The Ethereum Foundation (EF), which is primarily overseen by co-founder Vitalik Buterin and executive director Aya Miyaguchi, is encountering criticism due to its perceived lack of transparency, the significant sale of ETH holdings, and a reluctance to adequately support Ethereum’s most substantial sector, decentralized finance (DeFi).
In light of ETH’s status as the poorest-performing major cryptocurrency of 2024, the Foundation transferred an additional 35,000 ETH, valued at $94 million, to the Kraken exchange shortly after ETH surpassed the $2,700 mark on August 23.
In response to community inquiries for transparency, Miyaguchi clarified, “This falls under our treasury management operations. The Ethereum Foundation (EF) operates with an annual budget of approximately $100 million, primarily funded through grants and salaries, with some recipients only able to accept payments in fiat currency.”
The debate has intensified, with strong opinions emerging from both factions. Justin Bons, the CEO of Cyber Capital, expressed his disillusionment by stating, “There is minimal optimism remaining for ETH; its leadership has compromised for Layer 2 solutions. Enhancing ETH would undermine all capital and fees generated by Layer 2s, as venture capitalists cannot benefit from scaling at Layer 1. These opportunists have perverted a public asset into a vehicle for venture capital chains to exploit!”
A significant aspect of the concern revolves around the EF’s seemingly unpredictable selling practices. There remains a lack of transparency regarding the volume of ETH the Foundation intends to sell and the timing of such sales.
Historical evidence indicates that the Ethereum Foundation (EF) may make its financial decisions based on fluctuations in the market rather than adhering to a predetermined timetable. The substantial deposit of $94 million on August 23 followed a notable 6.3% increase in the price of Ethereum within a single day. Similarly, the EF’s previous significant deposit to Kraken, amounting to $29 million on May 6, 2023, occurred the day after a 6% price surge.
Conversely, some analysts argue that a $100 million expenditure is reasonable given Ethereum’s substantial market capitalization of $320 billion.
“We should continue advocating for greater transparency from the EF, but it is essential to approach this in a manner that is constructive and advantageous to the ecosystem. Criticizing the EF for allocating $100 million annually, which is relatively insignificant compared to Ethereum’s market cap, is not a productive approach,” remarked Anthony Sassano of The Daily Gwei.
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