How Will a $100 Mln Grant Help Ethereum Scale?

On Feb. 16, six large-scale Blockchain projects OmiseGo, Cosmos, Golem, Maker and Raiden, that have completed successful multi-million dollar initial coin offerings (ICOs) last year, along with Japanese venture capital firm Global Brain have created the Ethereum Community Fund (ECF), to fund projects and businesses within the Ethereum ecosystem.

The ECF will begin with $100 mln, likely raised by the six Blockchain projects. Some members of the Ethereum Foundation including Ethereum creator Vitalik Buterin plan to advise the fund. Buterin told TechCrunch:

“Ethereum has grown beyond my expectations over the last few years, but the work is clearly not finished. Delivering value that matches the hype should be the mantra of 2018; efforts such as the ECF which help organize the development of the ecosystem are going to help to make that possible.”

Buterin’s personal goal of funding open-source projects

In September 2017, Buterin revealed that his advisor shares from $1.8 bln project OmiseGo and $370 mln decentralized cryptocurrency exchange Kyber Network will be allocated in a private fund to finance open-source projects building innovative technologies such as scaling solutions for the Ethereum Blockchain network.

Buterin emphasized that he will no longer advise any other Blockchain project apart from OmiseGo and Kyber Network and that all of the incentives he received from the two Blockchain projects will be used to improve the Ethereum protocol. At the time, Buterin said:

“I’m announcing that 100% of my OmiseGo + Kyber Network advisor shares will be either donated to charity (AMF, GiveD, SENS etc) or used to privately fund Ethereum second-layer infrastructure (state channels, multisig wallets etc) or some combination of the two.”

But, Buterin noted that all projects eligible to receive financing from his private fund must be completely open-source and have no profit schemes in place.

“Must be 100 percent open source, no baked-in profit scheme (including ICO token), must be good,” noted Buterin, emphasizing that open-source projects, especially those focusing on Ethereum scalability, are struggling to obtain funding.

“Open source infrastructure projects currently are struggling to get funding without the ICO+token route; hopefully this can help.”

Given Buterin’s support towards open-source projects, the same rule of only funding open-source projects used by his private fund will likely be applied to the $100 mln ECF. TechCrunch reported that grants will be in the range of $50,000 to $500,000, and some projects may even receive additional funding to complete long-term development of technologies and solutions. Only open-source projects with no profit schemes will most likely be eligible for the grants.

Lack of developers working on scaling

Previously, Augur co-founder and cryptocurrency venture capital firm chief investment officer Joey Krug publicly expressed his concerns regarding the lack of developers and open-source projects working on scaling solutions to enhance the Ethereum network. Krug  said:

“Ethereum really needs more developers on problems like sharding, proof of stake, and plasma, right now there simply aren’t enough. It should also hire some more operations people to help orchestrate it all, for instance, Solidity is just now being formally audited.”

Without open-source scaling projects, the Ethereum network will continue to struggle with scaling issues, and the network is currently processing just over a million transactions per day. Coinbase co-founder Fred Ehrsam also noted that the Ethereum network would have to improve by 100-fold in order to support decentralized applications with millions of users.

Scaling solutions needed to address popular Dapps

Over the past few months, the entrance of successful decentralized applications such as CryptoKitties, CryptoKribs, Bancor and EtherCraft had led the Ethereum Blockchain network to struggle with scaling issues. Because decentralized applications like CryptoKitties can severely congest the Ethereum network by processing several transactions every time an order is executed, an efficient scaling solution is necessary to address the growing demand.

Image source: Dappradar.com

The development of scaling solutions such as Sharding and Plasma that can expand the transaction capacity of the Ethereum network can be sped up through funds and grant systems like ECF, and with that, Ethereum could evolve into a better platform for decentralized applications.