TLDR
- Ethereum Foundation allocated $32.65 million in Q1 2025 to fund 32 initiatives across seven domains
- Community and education received the largest portion of funding, supporting global events like ETHPrague and ETHiopia
- Zero-knowledge proofs (ZKPs) research claimed the second-largest share of funding with 16 projects selected
- Layer 2 solutions are raising questions about fee distribution, with some critics calling them “extractive”
- The Ethereum ecosystem is exploring solutions like “based rollups” to address revenue imbalances between L2s and mainnet
The Ethereum Foundation (EF) has allocated $32.65 million in grants during Q1 2025 to fund 32 initiatives across seven key domains. This funding push comes as the blockchain ecosystem grapples with questions about Layer 2 revenue sharing and long-term sustainability for the network.
The largest portion of funding was directed toward community building and education, supporting 37 initiatives including major events like ETHPrague and ETHiopia, the first Ethereum event in Ethiopia. Projects such as the Arabic Blockchain Developer Bootcamp are creating localized material to engage developers in underserved regions.
Zero-knowledge proofs (ZKPs) and cryptographic research received the second-largest chunk of funding, with 16 projects selected. This focus on ZKPs underscores their critical role in scaling Ethereum without compromising privacy or security.
The grants also support seven initiatives aimed at Ethereum’s Consensus Layer, including improvements to validator performance and rollup compatibility. Five projects in the Execution Layer received funding to refine gas mechanics and optimize client implementations.
Developer experience and tooling saw 17 funded projects covering mobile SDK development, validator toolkits, and multi-language library support. Two initiatives under the Overall Growth and Support category focus on attracting new talent through fellowships and internships.
The timing of these grants follows Ethereum’s recent Pectra upgrade, which combined the Prague execution layer and Electra consensus layer. This upgrade implemented 11 Ethereum Improvement Proposals (EIPs) to optimize network performance.
Layer 2 Revenue Debate Heats Up
As Layer 2 solutions grow in popularity, questions about fee distribution between L2s and the Ethereum mainnet have emerged. Some critics argue that L2s are becoming “extractive,” keeping most transaction fees while benefiting from Ethereum’s security.
CoinMetrics research shows Base has earned approximately $98 million in user-transaction fees since the Dencun upgrade in March 2024, while paying only about $4.9 million to the Ethereum base layer. This imbalance has sparked debate about whether L2s are net positive for Ethereum.
A Base spokesperson defended their model, stating: “Today, Base already pays Ethereum fees for every transaction on Base. All transactions are settled on Ethereum, and so far, Base has paid Ethereum more than $20 million in settlement fees since Base’s inception.”
However, financial statements show Base typically keeps about 90-92% of total fees collected, with only 8-10% going to Ethereum for settlement costs.
Some Ethereum community members suggest the network should be more assertive about claiming revenue. David Hoffman, an owner at Bankless, said at a Cornell Tech conference: “People in the Ethereum Foundation will tell you that, ‘Yes, we effed up by being too ivory tower.'”
The community is exploring solutions like “based rollups,” where transaction ordering would occur on the mainnet rather than on L2s. This approach could address both revenue and security concerns, as centralized sequencers used by many L2s represent potential points of failure.
Taiko Alethia, launched in May 2024, leads the based-rollup movement with $148.3 million in total value secured. While this falls well short of Base’s $12.06 billion, Taiko’s processing speed of 20.3 operations per second compares favorably with established L2s like Arbitrum One and Optimism.
Some have proposed a tax on L2s, but critics warn this could drive activity to competing Layer 1 networks like Solana. The Ethereum Foundation appears to prioritize long-term growth over short-term revenue, though proposals like EIP-7762 could indirectly increase mainnet fee income.
The timing of the grant announcement and ongoing L2 debate coincides with Ethereum co-founder Vitalik Buterin’s revised Layer 1 roadmap, which emphasizes blobs, user experience, and Layer 2 rollup growth while preserving decentralization and accessibility.
By funding education, cryptography, and tooling in one cohesive round, the Ethereum Foundation is positioning the network for both technical progress and global participation as it navigates the evolving relationship with its Layer 2 ecosystem.
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