The Ethereum Foundation Has Allocated $32.65 Million in Grants During the First Quarter of 2025

This funding demonstrates Ethereum's commitment to advancing blockchain technology while addressing scalability challenges.

The Ethereum Foundation distributed $32.65 million in grants to fund 32 initiatives across various domains in the first quarter of 2025.

The largest portion of the funding went to community and education projects. These initiatives include sponsoring events like ETHPrague, launching the first Ethereum event in Ethiopia with ETHiopia, and organizing regional developer bootcamps.

Projects like the Arabic Blockchain Developer Bootcamp focused on creating localized materials and organizing meetups to engage developers in underrepresented regions. This approach aligns with Ethereum's vision of building a global decentralized community.

Projects focused on zero-knowledge proofs (ZKPs) and cryptographic research claimed the second-largest portion of the funding.

Highlighting ZKPs for scalability without privacy or security trade-offs. Supported projects explored post-quantum cryptography, built general-purpose ZKP tooling, and improved SNARK/STARK efficiency.

These technologies are pivotal for scaling Ethereum's Layer 2 solutions.

While Layer 2 solutions have helped reduce congestion on the Ethereum mainnet and lower gas fees, concerns are emerging about revenue distribution. Some community members argue that Ethereum is not being fairly compensated for the security it provides.

Layer 2 platforms like Base, Optimism, and Arbitrum are collecting substantial transaction ordering fees (sequencing fees) while paying relatively little back to the Ethereum mainnet.

This has sparked debate about whether Layer 2s are beneficial or “extractive” to the Ethereum ecosystem.

According to CoinMetrics researcher Tanay Ved, Base has earned approximately $98 million in revenues from user-transaction fees while paying only about $4.9 million to Ethereum, resulting in an estimated profit of $94 million since the Dencun upgrade in March 2024.

Base representatives contend that they have paid Ethereum more than $20 million in settlement fees since launch. They argue that Base makes blockchain access more accessible with fast and cheap transactions, aiding in the growth of the Ethereum ecosystem by onboarding more users and builders.

However, financial statements reveal that Base's overall fees are typically about 10 times the amount paid to Ethereum for settling trades. In April 2024, Base collected $3.7 million in fees but delivered only $305,000 to Ethereum—approximately 8% of total fees.

Some researchers suggest that the imbalance may correct itself as Ethereum implements upgrades like Pectra and Fusaka, which will increase blob throughput and potentially drive higher total blob fees to the mainnet.

The recent Pectra upgrade, which went live on May 7, raises the blob target from three to six per block, creating space for increased fee capture as Layer 2 activity scales.

Potential solutions to the fee imbalance include “based rollups,” where transaction ordering occurs on the mainnet rather than on Layer 2s.

Proponents argue that this would provide better security by addressing the centralization risks of current Layer 2 sequencers.

Several based-rollup Layer 2s have launched in the past year, with Taiko Alethia being the first and largest. While its $148.3 million in total value secured ranks far behind Base's $12.06 billion, its performance is comparable to established platforms like Arbitrum One.

Another proposed solution is implementing a tax on Layer 2s, although this could have unintended consequences. It might make Layer 2s less competitive and risk activity shifting to rival Layer 1 blockchains outside the Ethereum ecosystem.

The Ethereum Foundation seems to be prioritizing long-term growth over short-term revenue. However, proposals like EIP-7762, which increases the minimum blob base fee to speed up price discovery during demand surges, could drive more fee income to the Ethereum mainnet.

Some community members believe that social pressure may be necessary to encourage leading centralized Layer 2s to voluntarily share more of their sequencing fees with Ethereum.

Despite these challenges, many remain optimistic about Ethereum's future. The blockchain continues to lead in DeFi assets, stablecoins, and institutional adoption, positioning it well to serve as the infrastructure for a “network of networks” in blockchain's future.

In summary, the Ethereum Foundation's grant activity and the ongoing debate over Layer 2 fee structures highlight the dynamic and community-driven nature of the Ethereum ecosystem. As the ecosystem evolves, new technologies, revenue models, and governance structures are being developed to support the long-term vision of a scalable, secure, and inclusive decentralized ecosystem.