Ethereum Foundation Leverages DeFi by Borrowing $2M in Stablecoins on Aave with ETH as Collateral

The Ethereum Foundation has strategically ventured into decentralized finance (DeFi) by securing a loan of $2 million in GHO stablecoins, using wrapped ETH as collateral on the Aave platform.

On May 29, Marc Zeller, the founder of the Aavechan Initiative, reported that the Foundation’s utilization of GHO is consistent with Aave’s foundational mission, allowing ETH holders to access liquidity while maintaining their positions.

He remarked:

“They didn’t need to sell any ETH to achieve their goals. Aave is tailored for those who are committed.”

Stani Kulechov, the Aave Protocol’s founder, shared a similar viewpoint, emphasizing that the Foundation’s action of supplying ETH and borrowing on Aave exemplifies the comprehensive utility potential of DeFi.

As of the latest updates, the Ethereum Foundation has not publicly addressed the loan transaction.

Nonetheless, the cryptocurrency community has largely embraced this approach, perceiving it as a smart strategy for managing reserves and ensuring long-term viability.

Maksym Blazhkun, co-founder of WeNode, stated:

“Taking a loan without selling — that’s a clear demonstration of faith in DeFi. The Ethereum Foundation is making a wise choice with Aave.”

Data from DeFillama reveals that Aave is the leading DeFi lending protocol on Ethereum, boasting over $43 billion in total value locked. GHO is Aave’s native overcollateralized stablecoin, currently circulating at $249 million.

Blockchain analytics company Token Terminal indicates that active lending activity and GHO issuance are vital metrics that significantly impact Aave DAO’s revenue generation capabilities.

Ethereum Foundation’s treasury strategy

This borrowing initiative comes on the heels of the Foundation’s recent endeavors to transform its treasury management approach following prolonged community feedback.

Earlier this year, the Foundation allocated 50,000 ETH across several DeFi platforms, which included a February transaction of 30,800 ETH into Aave, divided between its main market and Aave Prime. Additional distributions featured 10,000 ETH to MakerDAO’s Spark and 4,200 ETH to Compound.

This borrowing represents a strategic pivot from disposing of ETH to fund its operations. Instead, the Foundation is now leveraging DeFi lending to preserve its assets while earning returns.

This strategy also aims to mitigate the backlash the Foundation faced in January after selling 300 ETH valued at nearly $1 million.