Ethereum Foundation Moves Deeper Into DeFi with $2 Million GHO Loan

The Ethereum Foundation appears to be jumping deeper into DeFi, as the founder of Aave revealed on X that it has just borrowed $2 million worth of the decentralized lending platform’s GHO stablecoin.

“The EF is not only supplying ETH to Aave, but also borrowing from Aave,” said Stani Kulechov. “The full DeFi circle.”

Data from Etherscan shows that the EF opened a 2,000,000 GHO loan against its stash of ETH, previously deposited on Aave, which is currently valued at roughly $55 million.

The GHO tokens are currently held in the EF wallet at the time of writing. However, the funds are slated to be used for operating expenses, Avara's Chief of Communications, Claudia Ceniceros, told The Defiant.

GHO is a yield-bearing, overcollateralized, and decentralized stablecoin governed by the Aave decentralized autonomous organization (DAO), which oversees collateral requirements and sets interest rates.

Leveraging DeFi

On Feb. 13, the Ethereum Foundation (EF) revealed that it had deployed 45,000 ETH, then worth $120 million, into three decentralized finance (DeFi) protocols, Aave, Spark and Compound. Aave got the lion’s share, with 10,000 ETH sent to Aave Prime and 20,800 ETH to Aave Core.

At the time, the EF said that it was exploring staking, among other DeFi options.

The Ethereum Foundation did not respond to The Defiant’s request for comment.

Stop Selling

The EF has faced criticism for periodically selling ETH to fund its day-to-day activities, with critics arguing that using its holdings to generate yield would be a more effective way to finance operations.

Ethereum developer Eric Conner criticized the foundation for spending its ETH, saying in January that the “EF could easily stake ETH and use DeFi to cover most if not all of their internal budget.”

Vitalik Buterin responded that there were two concerns. The first was regulatory, something that he said is decreasing, presumably because of the new U.S. administration's friendlier approach to crypto regulation.

The second reason was that “if EF stakes ourselves, this de-facto forces us to take a position on any future contentious hard fork,” although he added that there are ways to minimize this risk that the Foundation was looking into.

With its latest foray into DeFi lending, the EF appears to be taking an initial step towards minimizing its ETH sales.