Ethereum Foundation Busted: Conflict of Interest Policy Enforced After EigenLayer Crossovers

In a move aimed at safeguarding its credibility and neutrality, the Ethereum Foundation has announced the implementation of a conflict of interest policy. This decision comes in response to recent controversies involving key researchers from the foundation taking on significant roles within EigenLayer, a new layer-2 restaking protocol. Executive Director Aya Miyaguchi emphasized the necessity of this policy to ensure transparency and maintain the foundation’s integrity.

Background and Context

The Ethereum Foundation has long been a cornerstone of the Ethereum ecosystem, playing a pivotal role in its development and support. However, recent events have cast a spotlight on the potential conflicts of interest that can arise when foundation members engage in external ventures. The foundation’s forthcoming policy aims to address these concerns and reinforce its commitment to impartiality.

The EigenLayer Connection

The controversy centers around two prominent Ethereum researchers who recently joined EigenLayer as paid advisers. On May 19, 2024, Justin Drake, a well-respected figure in the Ethereum community, announced his new advisory role at EigenLayer through a detailed post on X (formerly Twitter).

He revealed that he would receive incentives worth millions of dollars from EigenLayer, which he planned to reinvest into the Ethereum ecosystem. The following day, fellow researcher Dankrad Feist made a similar announcement, acknowledging his receipt of a substantial number of tokens from EigenLayer. He said:

Both researchers stressed that their new roles were personal decisions and not representative of the Ethereum Foundation. They assured the community of their continued commitment to the foundation’s mission, with Drake promising to remain critically engaged with EigenLayer and Feist committing to maintaining a contrarian perspective when necessary.

Mixed Reactions from the Community

The reaction from the cryptocurrency community has been mixed. Some praised the researchers for their transparency and integrity. For instance, David Wong, co-founder of ZkSecurity, lauded the level of openness displayed by the researchers, calling it “next level transparency.” He expressed admiration for the integrity of the Ethereum Foundation’s personnel.

However, not all feedback was positive. Skeptics pointed out that the disclosures seemed prompted by external pressure rather than voluntary transparency. Crypto trader Jordan Fish, known as Cobie, had questioned Ethereum co-founder Vitalik Buterin about foundation staff’s connections to EigenLayer shortly before Drake’s public announcement. Some community members questioned the timing and motivation behind the disclosures, suggesting they were reactionary rather than proactive.

Miyaguchi’s Response and Policy Implementation

In response to the controversy, Aya Miyaguchi made a public statement on X, acknowledging that relying solely on the foundation’s culture and individual judgment was insufficient to maintain credible neutrality. She revealed that the Ethereum Foundation had been working on a formal conflict of interest policy for some time and that more information would be provided soon.

Miyaguchi’s statement underscores the foundation’s recognition of the need for clear guidelines to prevent conflicts of interest. The new policy aims to ensure that foundation members’ external engagements do not compromise the foundation’s integrity or its mission to support the Ethereum ecosystem impartially.

Drake mentioned that a third member of the Ethereum Foundation is also connected to EigenFoundation as an investor, though he chose not to disclose the individual's identity.

Understanding EigenLayer

EigenLayer, the protocol at the heart of the controversy, is an Ethereum layer-2 restaking protocol. It allows Ethereum node operators and validators to earn additional fees by restaking their liquid Ether (ETH). This restaking can occur on other Ethereum Virtual Machine (EVM) platforms, such as Lido, or be used to validate and secure other networks, including sidechains or non-EVM blockchains. Essentially, EigenLayer enables validators to stake the same assets twice, potentially increasing their earnings.

EigenLayer launched on the Ethereum Goerli testnet in April 2023 and had a partial launch on the Ethereum mainnet in April 2024. The protocol’s innovative approach to staking has attracted significant attention and investment within the cryptocurrency community.

Implications for the Ethereum Foundation

The introduction of a conflict of interest policy marks a significant step for the Ethereum Foundation. It highlights the foundation’s proactive approach to governance and its commitment to maintaining the highest standards of transparency and ethical conduct. By formalizing guidelines around external engagements, the foundation aims to prevent any actions that could undermine its mission or the trust placed in it by the community.

The policy is expected to cover various aspects, including disclosure requirements for external roles and financial interests, guidelines for managing potential conflicts, and measures to ensure that the foundation’s activities remain unbiased and focused on supporting the Ethereum ecosystem.

Bottom Line

The Ethereum Foundation’s decision to implement a conflict of interest policy is a timely and necessary measure to address the concerns raised by the community. As the foundation navigates the complexities of supporting a decentralized ecosystem while maintaining its own neutrality, clear and enforceable guidelines will be crucial. The upcoming policy will not only enhance transparency but also reinforce the foundation’s commitment to ethical conduct and its role as a trusted steward of the Ethereum network.

By taking these steps, the Ethereum Foundation aims to preserve its credibility and continue its mission of fostering innovation and development within the Ethereum ecosystem, ensuring that it remains a cornerstone of the blockchain industry.