Why does the Ethereum Foundation sell ETH instead of staking?
The Ethereum Foundation, a non-profit organization that supports the development of the second largest blockchain in the world, has been the target of recent questions from the community. This is because the community has been criticizing the practice of selling, instead of staking, their Ether (ETH) reserves. In response, Ethereum co-founder Vitalik Buterin detailed the reasons behind this choice.
The discussion began in a post by Buterin on social media on October 25, in which he presented the roadmap for universal verification of light clients on Ethereum. A user then asked Buterin to stop selling, referring to recent sales of small amounts of ETH by the programmer.
Buterin responded promptly, stating that he had not sold any ETH tokens in the last month. Furthermore, he stated that his own Ether reserves had actually increased during this period. This comment prompted a new question, this time about the Ethereum Foundation's stance on sales.
Selling Ethereum instead of staking
In his response, Buterin listed reasons why the organization chooses to liquidate part of its ETH reserves. Among the reasons is the need to fund researchers and developers who contribute to continuous improvements to the network, such as EIP-1559.
This proposal, already implemented, helped reduce transaction times and network costs. Additionally, funds from ETH sales also go toward developing zero-knowledge technologies that aim to improve user privacy, account abstractions for greater security, and the global promotion of Ethereum at events focused on community.
According to Buterin, these investments have helped strengthen the security and stability of Ethereum, which has not suffered operational outages since 2016.
The importance of market neutrality
Data from blockchain analytics platform Scopescan reveals that the foundation recently sold 4,066 ETH. This represents a market value of more than US$11 million. According to calculations by Scopescan, if the foundation decided to stake its 271 thousand ETH, it could obtain an annual return of around US$20.08 million, with the current return rate of 3.1%.
However, Buterin justified that the foundation chooses not to stake to avoid the obligation to make an “official decision” if a hard fork occurs with disagreements between users. According to him, the foundation wants to preserve the decentralized philosophy of blockchain, allowing other entities to take on the role of validating and staking on behalf of the network. This would help prevent the foundation from exerting disproportionate influence on the network's governance.
For Buterin, the Ethereum Foundation's main focus remains direct funding for the platform's development and operations. This approach, he argues, is more in line with Ethereum's long-term goals and the ideal of maintaining a robust, secure and decentralized network.