There is a question mark over the financial footing of the Ethereum Foundation. While it is possible for the organization to pocket $390 million a year from protocol fees, for now it has to make do with what comes in through donations.
Missed Revenue Opportunities for Ethereum
A piece in CoinDesk puts some numbers to it: a 5% take on the protocol’s revenue would be more than enough to bankroll the Foundation’s activities. But since no such fee is in place, there is a void where steady funding should be. The result is that the Foundation has had to rein in its spending and rely on contributions, a situation that points to some of the deeper issues facing Ethereum down the road.
Comparing Ethereum and Cardano: Fund Management Approaches
Put in the context of other blockchain networks, the Ethereum Foundation’s financial position is a bit of an open secret. Take Cardano for instance: according to CoinDesk, it was once backed by a $4.5 billion trust fund that covered its development and day-to-day operations. Ethereum has no such safety net. Without a formalized way to secure funding, the Foundation has to rely on what it can get from donors, which is hardly a reliable basis for any long-term strategy.
The Public Goods Dilemma and Its Impact
The ‘public goods dilemma,’ as described by analysts at CoinDesk, is a problem the Ethereum Foundation has to contend with. In the absence of a way to collect and direct funds in a centralized manner, there is not always enough incentive for parties to contribute resources to maintaining the network. The result can be under-resourced infrastructure and a lag in new ideas, which is no good for the stability or growth of the ecosystem.
According to those in the know at CoinDesk, you need a properly run fund management apparatus if you want a blockchain to have any kind of lasting development or sound governance. Ethereum’s structure doesn’t provide for that, and it is an open question how much this hampers the project’s long-term planning and exposes it to financial risk. What the Foundation is up against now may well be felt far beyond its own plans, with ripples across the DeFi space.
Source — CoinDesk: https://www.youtube.com/watch?v=T7IBR11jeQU
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