The Ethereum Foundation has played a crucial role in the evolution of the blockchain ecosystem. They pioneered the Swiss foundation structure and ran one of the first token sales. They played a key role in developing the second-most valuable blockchain network and still play a key role in funding research and steering the future of Ethereum.
At the same time, it has been frequently criticized for a lack of transparency, being too slow in funding development and poor financial risk management. Executive Director Aya Miyaguchi joined us to discuss her journey into the space, the role of the Ethereum Foundation and their plans for the future.
Topics we discussed in this episode
- How Aya went from high school teacher to enter the crypto space
- Joining Kraken and building their presence in Japan
- The role of the Ethereum Foundation in the Ethereum ecosystem
- Decision making processes and governance in the Ethereum Foundation
- Ethereum’s grant program and funding priorities
- The Ethereum Foundation’s plans to attempt to become more transparent
- The Ethereum Foundation’s approach to conflicts of interest
- Why the EF decided to support MolochDAO
- Whether Ethereum should be concerned about competition from other blockchain networks
- Microsoft Azure: Deploy enterprise-ready consortium blockchain networks that scale in just a few clicks. More at aka.ms/epicenter.
Brian Fabian Crain: So we are here today with Aya Miyaguchi she is the executive director of the Ethereum Foundation. Of course Ethereum Foundation having had an enormous impact on the blockchain space since the beginning when it conducted kind of one of the first tokens sales or of public fundraisers for a crypto project and then has done a tremendous amount in terms of building the Ethereum ecosystems so we are really excited to have Aya on today to speak a little bit about the role of the foundation and how that has changed and evolved over time. So thanks so much for joining us.
Aya Miyaguchi: Excited to be here.
Brian: So curious to get started. Like how did you originally become involved in the crypto space, I saw you were a high school teacher for ten years. That seems quite a quite a change in transition.
Aya: Yes. So I am originally from Japan. I was born and grew up there. And like you said I my first professional career was a high school teacher and I was teaching English to high school students there for a long time actually for over 10 years. And then as a teacher basically I had some experience studying abroad and then Japan is a big economy but at the same time it’ pretty isolated. It’s surrounded by the ocean and then the culture is not that diverse. So my mission was to tell my students you know to at least go out there and see the world and then feel the diversity. So I was inspiring students to do that and then my students started to go abroad and in the meantime I also had this question about how teachers didn’t really try to go outside themselves and then I thought it was important for education for the teachers to also have a more diverse experience. And I also got jealous of my students who were going out there. And there wasn’t a lot of opportunity for teachers to kind of take a leave or paid leave to go outside and learn. So I just decided to quit. I’m still passionate about education so I thought if I want to go back I can just always come back. And then moved to the US. And originally in order for me to get a job I needed a visa and you know for me to get a working visa it was better for me to get a Master’s degree. And since I thought I learned enough about education being a teacher I decided to get a business degree. And then when I was working on my MBA my focus was sustainable business which you know like you kind of have to think about economic and environmental and social sustainability for a business to even make a profit. And I thought that was interesting. And I also had some experience working for a nonprofit when I was working on MBA. And also specifically I was focused on microfinance financial inclusion for that sustainable business study. And that’s when I heard about Bitcoin.
Friederike Ernst: When was this Aya, which year?
Aya: So this was in 2011. And that was a time that I heard about Bitcoin and originally there was no material to learn like now. Like Bitcoin seems very simple now for us. But since there was no information education it took me a while to understand what it was but then when I learned what it was I thought oh this is really the perfect opportunity or a combination with things like microfinance. And it was just then to thinking about the efficiency it can create. But now of course it’s a thing you can do a lot more. But back then I thought that was my interest. And then I thought wow this is going to create a lot of impact in finance inclusions. And then I just had a chance to since I was in San Francisco, the company who started Kraken. Well I joined Kraken when the team was getting non dev people so was one of only a few founding members. And I had an opportunity to join Kraken before its launch and that was early 2013. It was around the time that all other crypto startups started. Other groups like Coinbase all started to happen and then San Francisco is kind of a center of those companies. And Ripple was there. And I still remember my first blockchain event was Bitcoin event in 2013 in Naples. It felt big that the event seemed big back then but now looking back it was very small. We had everyone who are now the leaders of this industry. But it was still a very geeky nerdy group. Yeah it’s funny like I thought is all of this almost too geeky for me.
Brian: Cool. And so you worked at Kraken for a few years then how did you how did you end up at Ethereum Foundation?
Aya: So I worked at Kraken for a few years. My job involved a lot of different things basically I was heavily involved in starting the ecosystem in Japan, there was no crypto industry there when I joined. But because of what happened which was a big thing, the demagogues collapse. I was heavily involved in the regulatory situations in Japan too. And I was always having conversation with the government and bankruptcy case. And also starting off the industry association there. And I was doing all that and so the Kraken work was really still during the early stages of the crypto industry. My original passion was into this impacts side of blockchain, so I decided to leave and focus more on this social impact side of blockchain. And then when I actually was kind of working on different things and personally advising different vacations. And around that time I was asked to have interviews with the Ethereum Foundation people when they were looking for help. And I spoke with them and I joined the foundation. That was early last year.
Friederike: So the foundation is a fairly centralized organ that kind of steers a space that is very decentralized. So how would you describe the role of the Ethereum Foundation and Ethereum today.
Aya: Yeah I wouldn’t describe this organization as centralized at all. Because when I joined I think I flew to Berlin to meet some developers there and there were a bunch of other people who were all spread out to the different places in the world. But it is still compared to like even flat startup this is very decentralized because all projects in Ethereum including the stuff that the members of Ethereum foundations are involved in are not only by the foundation’s members, they’re collaborations with other community members. So it is really hard to draw the line. Who is working on one project. So I couldn’t tell the members of one project. And that alone shows how decentralized the whole thing. So it’s more like the coordination is very important and the foundation’s goal is to coordinate everything in the ecosystem so that the goal is to really support the team. And that’s it. And meaning it can be about education and can be about development and research. But how it works is it’s not for the Ethereum Foundation to do education, we can support that effort but fundamentally we are the coordinators. Our people are coordinating, especially our operations team. So the foundation’s role is to support everything in Ethereum. We have an operations team. We have grant program team. And then we do have some developers and researchers who work on projects but their project also are not centralized by the Ethereum foundation’s members. They work with people in the ecosystem to actually work on the project. So it’s really hard to say who is working on one project.
Friederike: That sounds very difficult in terms of governance, can you talk a little bit about the governance structure for the foundation so how does the Ethereum Foundation actually take decisions and who has what role in that?
Aya: Yes. So the governance is definitely difficult. Now people want to, somehow the governance has become like a super hot topic but governance exists in any organization in any structure. But again I’m like the coordinator of coordinators. Meaning we try to let each team or its members to make their own decisions. And our job is to support their decision and they coordinate their decision with other decisions. So that’s why I see my job as the coordinator of coordinators but I can’t really coordinate everything by myself so I have other people to coordinate together and it’s more like I oversee all these coordination works. So the decision making is never top down. I have this title but this title doesn’t really explain my work because this is something that doesn’t really exist in other organizations.
Brian: So just to get a little bit more specific. So you mentioned kind of coordinating in different parts but are there some kind of principles or core processes that you use to say OK this is the way Ethereum Foundation goes about it so that we get good outcomes, maybe the different interests are protected.
Aya: Yeah. But again there is a team and then we let them make decisions over their roadmap and then they suggest the budget. This is the roadmap we want to execute this year and this is how much we need. And that’s one project that we need to support and we have to think about the total by that. So that’s why the coordination happens there. They can make their own decisions for their own team. But they can’t really decide on another project. So we coordinate that effort. So that’s why when I use that term coordination, yes we have to have some structure for this coordination to work and the structure meaning they suggest, so it’s not like in the normal company that management decide on everything, here is a plan like you guys have to work this way but it’s not that way. They suggest their ideas and then we coordinate their decisions.
Friederike: But given that there’s probably not unlimited funding, this means that someone actually has to restrict teams and say this is too much, you can’t have that much and decide on the general direction that the foundation is going to go in. Is that you or who is that?
Aya: We have our other operations team that’s basically listen together with me to their requests but again. So I don’t want to get too deep into internal teams so that the plan that we are about to make it clear is that this concept of the external teams that we’re funding with grant and then internal teams that we want to eliminate this distinction between internal or external. At the end of the day the foundation’s goal is to support important projects in that ecosystem. What I mean is our focus would be like you said, when we have limited budget. How we make decisions is like what are the most important in the ecosystem now. So it shouldn’t be about internal or external. And so we are looking that number that I just mentioned that Ethereum are going to spend about 30 million to support Ethereum this year. That last decision is decided by our operations team including myself but then how we spend those money or depending on the types of decisions we have multiple people to make decisions. Again I need other people. That’s not really only unique about our organization. Maybe there are small companies who only CEO make decisions but we have experts and we all like to discuss different things. I think that’s normal for an organisation.
Brian: So of course Ethereum has its founder Vitalik, who has a very high profile and is extremely well known in Ethereum community. So what’s Vitalik’s role in the foundation. And what’s his responsibilities and how much power does he have.
Aya: So his role is to, I think he claims himself as a chief science officer and he’s a researcher. And of course he’s involved in important research team decisions. And then he is involved in, like I’m in charge of the foundation’s operations meaning things like budget and he’s aware of how we decide on things and then also including budget. And then the community, whoever wants to listen to him they will listen to him but he doesn’t really control any decision making.
Friederike: In effect someone actually has not only to control the budget but also the strategic direction of the foundation right. So you said that you have experts that you listen to but it sounded like the team that finally calls the shots is the operations team. So is that correct and if so what kind of experts do you consult and basically are these known within the ecosystem as advisors to the foundation. And so what’s what’s the process?
Aya: So actually when I joined that operation the operation team wasn’t big and then also the foundation wasn’t really giving up grants as you know. And then when we started getting a lot of grants starting last year we built this grant program team and since this is still new the team was originally very small but now we have more people including community members. Someone like Evan Van Ness is also providing information like what he thinks is most important because as you know he’s watching everything in the ecosystem. So we have those people who actually join the screening process of the grant program. And I also talked about this about the whole process from the screening and doing interviews and making the final decisions and that involves all those other people and then depending on the topic we go to like when it involves security discussion the grant team talks to our security team but also sometimes our security teams outside they have to reach different groups depending on the topic or depending on the project that they are considering. So we see the entire ecosystem as basically we can reach anyone, like if we want to take a look at prediction market discussion and likely we go to Gnosis team and then maybe ask their feedback and that’s totally possible unless you don’t want to give any feedback.
Brian: So you mentioned that the Ethereum Foundation is going to give out 30 million dollars in grants. What are the funding priorities like are you dividing it into different categories and allocating some amount to different categories or how are you going to go about deploying that money.
Aya: Yes. So again this detail is going to be provided very soon. But there are different ways to categorize this. I think that the fundamental criteria that we use in the grant program is when you take a look at one project and then the solution it is providing how critical of course how important the solution is and how urgent that solution needs to happen. How unique this solution is compared to other ways. So solving the problem. So that kind of key criteria we do have when the grant program screens projects. And then there were topics that we originally kind of asked, like security, scaling, UX and all that but now the big categories that we have regarding the support from the Ethereum Foundation is what’s happening on the Ethereum now. And also the future with Ethereum and then it was something like bringing more developers to Ethereum or like that the different types of things that we like the ecosystem to have more of. And then when we make decisions we try to focus on the things that if we don’t give support no one else would give support but this is very important. So something. That some. Like sometimes there are things that only the Ethereum Foundation can do because of our unique position with the history.
Friederike: Can you give an example for that?
Aya: Yeah. Like something like a research project, a lot of projects we support are research project. Right. And then most of them don’t have a business model. Meaning that investors wouldn’t be interested in supporting them unless investors could be interested in supporting them if they see like long term effect including the price of these and but normally it’s hard for them to receive support because they don’t have a business model.
Friederike: OK that makes sense. So you just said that you’re going to give out 30 million in grants for this year. As far as I know the foundation doesn’t release financial statement, so can you give us a sense of what percentage….. So how much money does the foundation have. So basically if you continue giving out grants for 30 million a year how long would it last you. I guess that’s what I’m asking.
Aya: Well that depends on of course the price of Eth. So how much Ether we have is sort of public information because you can just go and get that information online. So it’s already out there the information about like about 650k Ether that EF has and also we do have some other and then combining is like how long this last depends on the price of Eth and it changes every day.
Brian: So why doesn’t the Ethereum Foundation publish every quarter’s like these are the assets we have, here’s how we spent the money.It feels like there’s a lack of communication and transparency in the foundation. Do you see that the same way?
Aya: So just objectively, Ethereum as you know is a Swiss Foundation and the EF has to do everything that is required by the Swiss laws because we are Swiss Foundation. And so it’s doing everything that it’s required regarding finances. As a foundation when there is an obligation to disclose financial aid, you are required when you have actual source of income from other organization meaning normal foundations have received grants from other organizations or governments. And that’s where you have responsibility.
Brian: I mean I don’t think anyone doubts that Ethereum Foundation is complying with all of the foundation regulations and stuff I’m sure you are. But it still seems that maybe there is besides the legal issues there’s sort of from the Ethereum community a reasonable expectation that there would be transparency and sharing of information.
Aya: Yeah so that’s why we are trying to share, like you said it’s not legal it;s about the community to feel good about the entire ecosystem. But again like since it does have a unique position. So we try to give more information that’s coming very soon. So that’s like right now we are having this conversation. I’m pretty sure when this podcast is out there I don’t know when it’s going to be out there. Yes that’s what’s happening now.
Friederike: That’s good to hear that you’re working on transparency and so may I just come back to the runway question again. So basically if you look at the 650k Eth that the foundation holds and if we assume that that’s the main money that the foundation actually has so doesn’t have enormous amounts in Fiat, that’s 130 million today. So if you give up 30 million in grants and that’s your main expense that’s the runway of four years at today’s Ether prices. So do you expect that Ether prices go up or do you expect that development is done in a very few a number of years.
Aya: So we do have some Fiat amount, there’s some information out there. Again like we’re going to give more information soon. But we do have some Fiat like you just mentioned. But at the same time again one of the things we tried to do here is we don’t think that only EF providing or supporting the entire ecosystem is not sustainable and one it’s not sustainable but it’s also not good for that. This is supposed to be decentralized. So that’s why they’re are other funding mechanisms now exist which we are excited for them to exist but also at the same time we’re happy to work together with them. That’s why we’re talking about more collaborations there. And then there are other efforts we’re starting like dao funding so we are optimistic that there will be more other funding systems to exist in the near future. And they already exist compared to before and that’s the beauty about making this more decentralized.
Brian: Yeah totally. I mean we’d love to come back to that in a second but I’m just curious. So you mentioned EF has a bunch of Eth and it has a bunch of Fiat, are there other investments the Ethereum Foundation has made like either into equity of companies or potentially in different tokens. And if so, what are they and how do you go about managing conflicts of interest.
Aya: A foundation in non-profit can legally, again going back to invest. But we don’t invest, that’s not the decision at least so far that EF has never made the decision to invest in other things or it could invest in the Ethereum project but we are not doing that now. So that’s the question sometimes I get asked but we don’t invest in things but we do hold Ether.
Friederike: How do you deal with other potential conflicts of interest. So what comes to mind for example is Vitalik’s angel investment into StarkWare and StarkWare then receiving a four million grant from the foundation. Do you have processes in place to make sure that everything is above board?
Aya: Yeah basically I think it never starts with whoever is involved in investment and then we should support that. Like you always start from bottom up. What are the most important and then someone applies for a grant and then is this important for the ecosystem, so we had no doubt that what StarkWare was working on was important. And they have a great team and our whole team discussed with them and then we were confident that they would make good progress and their milestone that set place so the entire money has not been provided yet of course. And then they report to us every quarter. So one thing it’s already creating good impact but also about StarkWare is I don’t know how he was actually involved but it is public information that he already made it clear before this happened. And yeah that’s the only detail I know. But yeah again of course we watch because this was public information and then of course we watch if that could happen we will definitely watch and discuss.
Friederike: You talked about dao mechanisms of funding earlier and at Ethereum you made the announcement that the EF is actually going to invest into the Moloch dao. Can you talk about the rationale behind that and what your hopes for dao funding mechanisms are for the future.
Aya: We just made an announcement that the Ethereum Foundation is supporting Moloch dao with one thousand Eth along with Vitalik himself as an individual. And ConsenSys as individual was announced in that detail. But then there are other individuals who have been part of the Moloch dao already. And we are always open to experiment with this technology but then you can’t really put a lot of money into something dangerous but this is something that we thought had a good team and dao funding is something that we should experiment in. And so we are happy to support those efforts and and start doing this with small amount and that’s not just for Moloch dao but this was the first thing we did and we’re really excited to see more if there will be something that will work. So yeah I’m excited to see this coming and then how this will work and it’s an exciting thing to see in the ecosystem.
Brian: So historically the Ethereum community has been this super open minded place and very tolerant of all kinds of opinions. At least that’s my my personal impression. It seems though that in the last I don’t know year or I’m not sure exactly the sort of timeframe but like it’s kind of been changing and there’s a lot for a bunch of things so I think one is this Ethereum maximalism has kind of come up with a lot of people being very adamant that Ethereum is the one and only a little bit like you know people have done it often in Bitcoin and it’s become much more like hostile or contentious and argumentative. Do you also see those changes and what do you think is the driving factor here?
Aya: I personally blame Twitter. I think it’s the modern world not just about Ethereum or crypto I think it’s kind of the challenge this modern society has. It’s a free debate space and then used to be there is professionals of media who passed things and then you actually check the source of information and so it’s really hard to see what information is correct. And even this concept of though Ethereum is becoming more maximalism it’s it’s when one person started to say you know other people could be manipulated but I still see that the whole Ethereum ecosystem to be very very open and peaceful. I mean like the first of all when I decided to go to Ethereum, not another blockchain or other crypto, is really about the culture. To me technology is something anyone can copy but the reason why this attracted so many people, Ethereum didn’t really do a lot of money marketing, it’s just that it naturally attracted so many people.
Brian: What is special about Ethereum’s culture?
Aya: So like you said, you probably know better than I. Like it’s very open but also to me Ethereum is really about, I use the term Kaizen at DevCon like improving something that exists. And as long as the long term vision is we want to finish creating this platform so that the apps can create the more distributed word the power decentralized word, so that we can solve problems like financial inclusions. And that’s the vision we want to see because we see a lot of problems because of this because of centralized structure of this modern society. And that vision naturally attracted people like oh I want to be part of this community because people care about this. And I don’t think that has changed. But if you only focus on some arguments on social media it does. You know like kind of spotlight those problems, but I still don’t think Ethereum has a lot of maximalist but you know sometimes people have passion about what they work on, so they might feel very protective about what they’re working on but that doesn’t mean Ethereum has become maximalist. I don’t think so. Yeah. And then I personally, like when I said we need to support experiments is this whole crypto thing is experiment. And that’s why it’s so hard to work with regulators because they’re scared of risks and therefore for experiments to be extremented we have to have different efforts we can’t just have one effort when it’s still an experiment. That’s why we’re very open to different ideas.
Friederike: So many blockchains are actually seen as competitors to Ethereum. How do you feel about that and how do you think Ethereum should deal with competition.
Aya: Yes. So the competition exists, I don’t want to sound too naive that I don’t see any competition. It does exist in different definitions but we as the Ethereum culture in general, we’re not really working on this to win. And so there are other efforts that exist for us, like it can actually help us to be better. That already happens before too. So again Vitalik created Ethereum when he thought about the better way to use blockchain than Bitcoin. And because of Bitcoin he was able to get Ethereum. Without that Ethereum hasn’t been born. So it’s not that that’s not competition. It’s more like this is one idea that can inspire other ideas. So any other ideas can be an inspiration for us to be better. And again it’s not about winning. And we think other things out there could inspire us. And that’s the fundamental philosophy here. And I think that’s the fundamental philosophy that Ethereum community also believes.
Brian: But in the end you have all of these different applications. And we have all of these different platforms and they’re all trying to get applications to build on them. So it is competitive. Right. Because if the applications go elsewhere then the project is not going to win. Or not going to succeed.
Aya: For the application side, when you’re a business you have you your own priorities right. And it’s their decision to decide which blockchain makes the most sense for them. But for Ethereum decentralization is the priority, we don’t compromise there. That’s why there is scaling issues that the whole ecosystem has been working on. If you don’t care about decentralization and then your decision could be something else. And that’s ok because that’s their decision. And you can define that as competition but when your priority is something else we don’t see it as a competition. Then you decide on something else and then there’s no point for us to convince them no you should. Because you care about different things in the world. We care about decentralization and maybe some people don’t. But I think it’s naturally attracted so many people because so many people care about decentralization.
Friederike: So what are your hopes for Ethereum by the end of the year and maybe for the next five years?
Aya: So for the entire ecosystem and also EF, the end of the year just to show more progress. But also we see a lot of the applications are making huge progress already. And again at DevCon we often have these announcements and updates from them and that’s always exciting. And by the way DevCon this year is happening in Osaka in Japan, in October. We hope to see those more exciting announcements, new applications happening. And then I personally hope to see more use of ET in Ethereum both for developer experience but also for the apps and end users. And then in the long run, again like my original passion was really for this technology of blockchain to be used for social impact or financial inclusion, I’d like to see that more. It’s actually already happening which is exciting. But I’d like to see that more in in the long run. And then with that we are doing this survey of the apps solving issues. We started to do that the end of last year and we are receiving like hundreds of submissions now which show that how many these apps are actually solving like real stuff like compared to five years ago. A long time ago it was only those applications who said they were using blockchains but you didn;t necessarily see the solution happening but now we see that. I’m excited about that now but I am excited about the future that the world will have more of those and then again going back to my original passion. It’s something I’m excited about.
Brian: Yeah. Well thanks so much for coming on Aya and just regarding DevCon 5 so that’s gonna be in Japan and of course we’ll put the links in. Can you remind us of the dates.
Aya: Oh yes. October 8th to 11th, in Osaka, Japan. And more information will come very soon. And of course I’m from there so I’m very excited about that. And Osaka is more unique, has more character, so that’s perfect for Ethereum. And I’m pretty sure a lot of people haven’t been there. So I’m excited to see our community people there.
Brian: OK. Well thanks so much Aya it was a pleasure having you on and learning about Ethereum Foundation.