Ethereum Has Only $2.5 Million Cash, Limited Manpower, But Buterin Confident with $50m China VC Fund

Vitalik Buterin, the founder of Ethereum protocol, revealed this week that the Ethereum Foundation’s finances were very limited, confirming speculation about the high profile blockchain project’s financial health.

The major reason for the foundation’s limited funds is the failure to sell off its holdings in bitcoin before the price dropped to $220 at the beginning of 2015, Buterin indicated.

Currently, the foundation has the following currency  holdings: 200,000 CHF (US$204,412), 1,800 bitcoins (US$430,434) and 2.7 million ethers (ETH) (US$1,829,598). This accounting puts the Ethereum Foundation’s reserves at approximately US$2.46 million at today’s exchange rates.

In its original coin sale in September 2013, Ethereum raised 31,529 BTC or more than $18 million. The value of ETH has dropped significantly in recent months, with the price going from a high of $2.19 on August 14th to a low of $0.63 on September 28th when Buterin made the comments, and a market capitalization dropping from $132.3 million to $46.8 million during the same period.

Buterin indicated that just the failure to offload BTC resulted in the loss of $9 million in capital, and that the project’s requirements have actually expanded.

First of all, it is indeed true that the foundation’s finances are limited, and a large part of this was the result of our failure to sell nearly as much of our BTC holdings as we were planning to before the price dropped to $220; as a result, we suffered roughly $9m in lost potential capital , and a hiring schedule that was meant to last over three years ended up lasting a little under two (although bolstered by a “second wind” from our ETH holdings).

Second, the project’s needs have grown. Over the past twenty months, the project has grown from being a simple attempt to improve on Mastercoin by adding a programming language into an effort to push forward a powerful and expansive vision of “web 3.0” that includes multiple technologies, some built by ourselves and some by others, and a complex software stack that integrates them all with one simple aim: to make it as easy to build secure, globally accessible and trust-minimized decentralized applications as it is to build a website – and hopefully even easier.

The Ethereum inventor also emphasized that the foundation and its network of susbsidiaries did not have the human resources to complete the project:

The foundation and its subsidiaries alone simply do not have the manpower to push the entirety of this vision through to its ultimate completion, including proof-of-stake driven scalable blockchains, seamlessly integrated distributed hash tables, programming languages with formal verification systems backed by state-of-the-art theorem provers and dozens of categories of middleware, all by itself; although the foundation and its subsidiaries can, and will, continue to be the primary driver of technology at the core, a highly community-driven model is necessary and essential, both to help the Ethereum ecosystem maximally grow and flourish and to establish Ethereum as a decentralized project which is ultimately owned by all of humanity, and not any one group.

The Ethereum community however is pulling its weight delivering parts of the ecosystem. Buterin highlighted some of these parts in a list of projects independent from the foundation.

  • Augur: a prediction market that has earned $4.5 million in its recent and still ongoing crowdsale
  • GroupGnosis: another prediction market being developed by Consensys which is already processing bets on the Ethereum block difficulty, sports games, and soon presidential elections
  • Embark: a NodeJS-based dapp development, testing and deployment framework
  • Truffle: anothe DApp (distributed application) development, testing and deployment framework
  • Ether.camp: a block explorer
  • etherscan.io: another block explorer
  • TradeBlock: another block explorer
  • EtherEx: an Ethereum-based asset exchange
  • Ether.camp’s web-based integrated development environment (coming soon)
  • EthereumWallet.com: an online ether wallet
  • Ethereum Java implementation : Java version with some original work under the Foundation, but now continuing independently
  • Ethereum Haskell implementation: written in Haskell programming language, independent from the foundation
  • MyEtherWallet: another ether wallet
  • Metamask: an Ethereum browser-in-a-browser
  • Andreas Oloffson’s development tutorials
  • The first data feed contract: current example provides price feeds of exchange rates, precious metals, securities exchanges & indexes, major corporations.
  • Ethereum Alarm Clock, an implementation of one of the major planned features for Ethereum 1.1, but as a decentralized middleware service right on the 1.0 Ethereum blockchain.
  • dapps.ethercasts.com: a webpage listing many of the above.

Internally, some Ethereum developers are implementing lightning networks, identity and reputation systems, and other projects.

According to Buterin, various non-profit and for-profit entities will emerge in the space, with involvement from other Ethereum team members and partial involvement from himself.

The first of these to emerge is the deal with Chinese automotive conglomerate Wanxiang Group based in Shanghai, which includes an agreement to purchase 416,000 ETH for $500,000, an upcoming conference in October, a non-profit blockchain research institute, and a $50 million blockchain technology focused venture capital fund.

Buterin seems confident about more money coming into Ethereum projects:

I fully expect that within six months the Ethereum for-profit ecosystem may well be much more well-capitalized than the Foundation itself.