The Ethereum Foundation, the non-profit organization supporting the Ethereum blockchain, has established a new reserve policy aimed at enhancing financial stability and resource allocation. This strategic move is designed to ensure efficient capital deployment while continuing to support the decentralized finance (DeFi) ecosystem.
According to a June 4 announcement by Executive Director Hsiao-Wei Wang, the foundation will now closely align its operational costs and cash requirements with its Ethereum (ETH) reserves and market activities. This structured approach introduces greater transparency and financial discipline during what the foundation describes as a crucial developmental phase for the network.
Details of the New Reserve Strategy
The updated policy links the foundation’s spending and liquidity management directly to its crypto holdings. Regular reassessments will consider market conditions and community feedback to maintain alignment between short-term operations and long-term objectives.
Hsiao-Wei Wang highlighted that the Ethereum Foundation currently holds cash reserves covering approximately 2.5 years of operating expenses. However, the next 18 months are viewed as especially significant for Ethereum’s evolution, requiring more focused resource deployment and ecosystem support.
“This policy reflects our belief that 2025 to 2026 may represent a critical period for Ethereum, warranting reinforced focus on key outcomes.”
This shift follows community concerns over unexpected ETH sales by the foundation in recent months. Some critics argued that these moves eroded trust, prompting calls for clearer communication and financial planning.
Commitment to Transparency and Reporting
In line with its renewed emphasis on openness, the Ethereum Foundation will release quarterly and annual reports detailing asset holdings, investment performance, and major operational updates.
As of October 31, the foundation’s total reserves were valued at approximately $970.2 million. This included $788.7 million in crypto assets—over 81% of which was held in ETH—and $181.5 million in non-crypto investments.
Per CoinGecko data, the price of ETH has declined around 1.8% since that date.
Expanding Involvement in DeFi Ecosystems
A notable aspect of the new strategy is the foundation’s intention to engage more actively within DeFi protocols. By participating in permissionless, audited, and immutable smart contract platforms, it aims to generate acceptable returns on reserve assets.
This approach allows the foundation to support protocols that align with its core values—often referred to as the “Defipunk principles”—while strengthening its financial position.
In February, the foundation allocated 45,000 ETH (worth around $120 million at the time) for deployment across various DeFi applications. More recently, Aave founder Stani Kulechov noted on May 29 that the foundation had supplied ETH to Aave’s lending pool and borrowed $2 million in GHO stablecoins.
Other DeFi platforms such as Spark and Compound have also received support.
This marks a shift from the foundation’s historical stance of avoiding protocol-specific endorsements to maintain neutrality. Some ecosystem builders, including Infinex founder Kain Warwick, had previously criticized the foundation for what they perceived as an anti-DeFi stance.
Internal Reorganization and Market Context
The reserve policy update coincides with an internal reorganization within the foundation’s development teams. On June 2, the organization announced team restructuring efforts, which included staff reductions. The exact number of affected employees was not disclosed.
These changes occur against a backdrop of ETH underperforming relative to other major cryptocurrencies like Bitcoin (BTC) and Solana (SOL) in the current market cycle. While BTC and SOL have reached new all-time highs, ETH remains about 46.5% below its peak of $4,878 in November 2021.
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Frequently Asked Questions
What is the Ethereum Foundation?
The Ethereum Foundation is a non-profit organization dedicated to supporting the Ethereum blockchain and its ecosystem. It provides grants, conducts research, and facilitates development efforts to promote Ethereum’s growth and decentralization.
Why did the Ethereum Foundation create a new reserve policy?
The new policy aims to improve financial transparency, align resource allocation with long-term goals, and address community concerns over unexpected ETH sales. It also prepares the foundation for a critical 18-month period of ecosystem development.
How will the foundation’s DeFi participation work?
The foundation will deploy portions of its ETH holdings into audited, non-custodial DeFi protocols to earn yield and support innovative projects. This includes supplying liquidity to lending markets and other decentralized applications.
Will the foundation continue to sell ETH?
Any future sales or deployments will be guided by the new reserve policy and disclosed in regular financial reports. The intent is to manage reserves responsibly while minimizing market disruption.
What does the reorganization mean for Ethereum’s development?
The internal changes are intended to streamline operations and focus resources on high-priority projects. Core development continues to be a priority, though specific team structures may evolve.
How can the community stay informed about the foundation’s activities?
The foundation will publish quarterly and annual reports detailing finances, investments, and key initiatives. These documents will be made publicly available.