Ethereum reveals financial status, foundation loses $9 million due to BTC price drop

Ethereum has released its latest financial update, ending ongoing speculation among technology enthusiasts about the project’s finances.

Last July, Ethereum, one of the most successful token crowdfunding projects in history, raised 31,529 BTC for its ambitious blockchain distributed application platform token, Ether. Based on the Bitcoin market price at the time, these tokens were worth about $18.4 million.

Since then, Ethereum’s financial situation has remained opaque, which has also attracted a lot of controversy.

On this issue, Ethereum founder Vitalik Buterin provided new details in an official blog post today, revealing the current status update of the open source project.

Buterin said the Ethereum Foundation, a Switzerland-based nonprofit that handles the finances and operating development funds for the Ether token, is facing budget constraints due to the fall in the price of Bitcoin.

Buterin said:

“It is true that the foundation’s funds are limited, and a large part of the reason is that we failed to sell all the BTC we held before the price fell to $220. As a result, we lost about $9 million.”

The former editor-in-chief and founder of Bitcoin Magazine said Ethereum is currently going through a “complex transformation.”

When asked about the Ethereum Foundation’s hiring plans, Buterin told CoinDesk that the team has already laid off some people and will soon lay off more. However, he also expressed optimism:

“It is important to note that a large portion of the Ethereum Foundation’s affiliated staff will move to the rapidly growing for-profit Ethereum ecosystem over the next six months, so that they can bring more funding, attention, and development work to the Ethereum ecosystem.”

Overall, Buterin was trying to make the point that the current ethereum project is going through a natural transition from a period of initial funding to a more open-source network with a different funding model.

Buterin highlighted that the biggest news of the day was that Ethereum had received financial support from Chinese multinational giant Wanxiang Group, which had launched a non-profit Blockchain Labs.

A Wanxiang Group representative confirmed the news, saying the blockchain lab recently purchased $500,000 in ETH as part of its attempt to support the technology.

Limited start-up capital

In the blog, Buterin mentioned the current fund holdings of the project, which totals about $2.52 million. Among them, there are 200,000 Swiss francs, 1,800 BTC and 2.7 million ETH. As of press time, the price of 1 ETH on the Kraken trading platform is $0.7.

Furthermore, these figures do not include Ethereum’s 490,000 Swiss francs ($502,976) legal defense fund, which is allegedly intended for possible legal defense.

Buterin went on to say that the Ethereum Foundation and its affiliates do not have “enough manpower” to complete Ethereum’s current projects, but he did not believe that this puts the Ethereum project in jeopardy.

According to Buterin, the foundation’s monthly expenditure has dropped from 410,000 Swiss francs ($420,858) per month to 340,000 Swiss francs ($349,201) on October 1. The ultimate goal is to reduce the foundation’s expenditure to between 200,000 Swiss francs ($205,370) and 250,000 Swiss francs ($256,818) per month.

“Assuming we reach this target within three months (at a rate of CHF 340,000 per month), and assuming that ether and bitcoin prices remain constant, we should have enough to last until June 2016, and until September-December 2016 at the latest if plans change,” the blog post continued. “During this period, the Foundation will focus on securing alternative sources of income.”

According to Buterin, contributors to the Ethereum project can be paid in ETH, BTC or CHF, although he is not sure how these payment methods interact with the cryptocurrency market.

Buterin said that the Ethereum Foundation no longer has enough funds to meet the hiring plans of its related projects.

Possible sources of income

The blog also mentions the Ethereum Foundation and its potential sources of funding, including development workshops and conferences, which Buterin said are already underway.

In addition, the Ethereum project is committed to making its financial situation public and transparent. They are currently working with Consensys, an Ethereum-based accounting software provider, to record all of the foundation’s expenses on the blockchain.

Note: Ethereum’s token ETH has fallen from 0.0059 BTC on September 1 to the current 0.0026 BTC.

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