Thanks to the EFers that offered priceless enter and suggestions to the draft doc: Bastian Aue, Vitalik Buterin, Bogdan Popa, Tomasz Stańczak, Fredrik Svantes, Yoav Weiss, Dankrad Feist, Tim Beiko, Nicolas Consigny, Nixo, Alex Stokes, Ladislaus, and Joseph Schweitzer.
Thanks to kpk, Steakhouse Monetary, and pcaversaccio for offering priceless and insightful enter and the ultimate evaluate of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable goals: enabling “purposes that run precisely as programmed with none chance of downtime, censorship, fraud, or third-party interference”. EF Treasury helps EF’s long-term company, sustainability, and legitimacy. Capital deployments ought to be balanced between searching for returns above a benchmark price and lengthening EF’s function as a steward of the Ethereum ecosystem, with a selected give attention to DeFi.
This doc supplies the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and concerns.
1. Macro Coverage
To attain its goals, EF will keep and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its belongings, contemplating threat, period, and liquidity, whereas remaining aligned with Ethereum’s core rules.
Our method focuses on two variables:
A: Annual Opex (expressed as % of present whole treasury)
B: Years of Opex Buffer (variety of years of working runway held in reserve)
The place:
A × B: determines goal fiat-denominated (offchain or onchain) reserves. This worth instantly informs the dimensions and the cadence of ETH gross sales.(TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH worth provides the variety of ETH that can stay in core holdings.
At common intervals, the Board and Administration re-evaluate each variables, weighing market dynamics and neighborhood enter to maintain short-term operations aligned with long-term technique. Two additional lenses form every evaluate: (1) figuring out pivotal years that benefit heightened ecosystem engagement and (2) sustaining a counter-cyclical posture—stepping up assist in downturns and moderating it in bull runs.
Present targets stand at A = 15% of treasury for annual opex and B = 2.5 years. This coverage displays our conviction that 2025-26 are more likely to be pivotal for Ethereum, warranting enhanced give attention to vital deliverables.
EF expects to stay a long-term steward, however envisions its scope steadily narrowing. We intend to scale back annual opex roughly linearly over the following 5 years, ending at a long-term 5% baseline that’s widespread for endowment-based organizations. This glide path and baseline might be reviewed and adjusted as circumstances evolve.
2. Crypto Property Coverage
The EF will search to earn acceptable returns on treasury belongings in a fashion in keeping with Ethereum’s underlying rules.
The important thing concerns of the on-chain portfolio embody, however will not be restricted to:
Security and safety: favor battle-tested, immutable, audited, permissionless protocols. Encourage positive-sum actors within the Ethereum DeFi ecosystem. Goal to counterbalance, and never contribute to, systemic dangers to Ethereum as a complete. Frequently re-evaluate tasks for assault vectors and dangers, together with however not restricted to: good contract, governance, custodial (e.g., stablecoins), and oracle dangers.Cheap return and threat: choose conservative decisions with increased levels of liquidity as a substitute of chasing solely excessive returns. Guard towards not simply the chance of lack of funds but additionally dangers to liquidity and basic portfolio flexibility. Deployments which are considerably increased threat might occur however might be of a extra restricted scale and in segregated sleeves. In all circumstances, goal to be a modest portion of any single undertaking’s whole TVL.
Ethereum’s deeper targets: assist maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Superb protocols are trust-minimized, composable, and maximally privacy-friendly.
We’ll continuously reallocate funds between protocols for causes comparable to altering market circumstances, diversification, or new yield alternatives. Withdrawals ought to be understood on this context and never as anti-endorsements.
2.1 Ether Gross sales
All year long, EF will periodically calculate the deviation of the treasury’s fiat-denominated belongings from the Opex Buffer (“B”) goal and decide how a lot, if any, Ether might be bought over the following three months. These gross sales will sometimes be by way of fiat off-ramps or onchain swaps for fiat-denominated belongings.
2.2 Ether Deployments
Our present methods embody solo staking and wETH equipped to established lending protocols. Core deployments are re-evaluated frequently however supposed to be long-term. EF may borrow stablecoins and search increased yields onchain. EF Administration and advisors will vet candidate protocols for contract safety, liquidity threat and de-peg threat, and different elements. Because the DeFi ecosystem matures, EF plans to fold choose on-chain allocations, together with to fastidiously vetted farms and tokenized RWAs, into its fiat reserve.
3. Fiat-denominated Property Coverage
The EF will allocate its fiat holdings throughout:
Speedy-liquidity belongings: money and different extremely liquid fiat-denominated devices that cowl real-time operational wants;Legal responsibility-matched reserves: fixed-term deposits, investment-grade bonds, and different low-risk devices aligned with longer-term obligations; andTokenized RWAs: ruled by the identical strategic goals and threat pointers as native crypto belongings.
4. Transparency Coverage
The EF Co-EDs are accountable to the Board for the administration of the treasury.
To make sure transparency, accountability, and knowledgeable oversight, a structured inner reporting cadence is in place. Studies are ready and maintained by the Finance crew, with distribution primarily based on scope and sensitivity.
4.1. Quarterly Studies
The Finance crew supplies quarterly reviews to the Board and Administration, together with:
Efficiency (Absolute and towards Benchmarks)All positions (Open & Closed because the final report)A abstract of notable occasions, together with:
Operations (processes, infrastructure, safety updates/incidents)Ecosystem engagement (conferences taken, partnerships, and so on.)
4.2. Annual Studies
The annual EF Report will embody additional treasury-related data, together with a abstract of main treasury allocations. For instance, percentages in fiat, idle ETH, and deployed ETH.
5. Cypherpunk Targets
The EF (by its analysis, advocacy, and capital deployments) will construct on cypherpunk rules to assist formalize and apply a sensible analysis framework we check with as “Defipunk” which has the next properties:
Privateness is traditionally uncared for within the broader DeFi area, however it stays important. Privateness protects market individuals from each digital surveillance (e.g., entrance operating, sandwiching, liquidation sniping, focused phishing, profiling and data-based coercion) and bodily threats (i.e. in-person coercion).
5.1. EF ought to actively assist tasks of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and revolutionary power. Progress, nevertheless, is commonly path-dependent: requirements adopted in durations of chaotic fast progress harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent programs usually exert delicate pressures that slim the design area for novel DeFi primitives and constrain privacy-focused innovation. The Ethereum Basis will defend towards these pressures.
Via analysis, advocacy, and strategic capital deployments, the EF might help domesticate an Ethereum-native monetary ecosystem that safeguards self-sovereignty and sustains, at scale, “an open society within the digital age.”
Turning this imaginative and prescient into actual infrastructure takes work. There are quite a few challenges to constructing cypherpunk DeFi protocols at present: increased fuel costs for privateness, UX friction, problem bootstrapping liquidity, extra stringent audit wants related to technical complexity and immutability, and, merely put, opponents to privateness. Because of this, a lot of at present’s DeFi ecosystem depends on centralized parts: backdoor shutdown mechanisms or funds extraction capabilities, extreme reliance on multisigs or MPC, pervasive use of whitelists, centralized and surveilled UIs, and a basic absence of onchain privateness – all go away each DeFi markets and individuals uncovered to systemic vulnerabilities.
Privateness is especially vital to get proper. As A Cypherpunk’s Manifesto factors out, “for privateness to be widespread it should be a part of a social contract”. Privateness has inherent community results, and but it has obtained little or no consideration up to now. This implies that sturdy, early institutional assist from an EF-like entity might be uniquely priceless in flipping the equilibrium towards a extra privacy-focused DeFi panorama.
EF is well-positioned to assist information DeFi’s evolution towards these targets. For instance:
Supporting nascent DeFi protocol to develop privateness featuresEncouraging mature protocols to strengthen Defipunk properties with analysis collaborations, liquidity, legitimacy, and different resourcesPromoting analysis and improvement of decentralized UIs
A extra full checklist of standards for undertaking assist might be present in §5.3.
5.2. Defipunk begins at residence
Advocating for open supply, privateness and different Defipunk targets extends far past EF, however embody EF’s personal inner operations the place doable. Utilizing Defipunk rules within the EF’s personal treasury administration is a key first step on this regard. Extra usually, the EF can use secureware instruments, construct a prudent operational construction that’s supportive of all certified contributors, together with anon and pseudonymous individuals, and in any other case enhance its safety and privateness practices. It will assist the EF stay principled and develop in energy, stability, and the power to face agency.
Employees concerned in treasury administration ought to use and/or contribute to open-source, privacy-preserving instruments for routine duties, particularly if this requires upskilling in these areas. By taking care to dwell and breathe Defipunk rules in its personal actions, EF will keep on course and achieve the capabilities to assist the remainder of the ecosystem in doing the identical.
5.3. Defipunk Standards
These are concrete standards for inner analysis of protocols and UIs, supposed to encourage new tasks to begin, and present tasks to enhance. They are going to apply to all of EF’s future onchain deployments. Whereas some standards (e.g., permissionless entry, self-custody, and FLOSS) are easy binary determinants for deployment, others are extra complicated. For now, tasks will not be required to sit down on the “ideally suited” finish of each axis. We search for credible progress and a roadmap for enchancment, somewhat than perfection on day one. We share the framework overtly to offer legibility for EF choices and construct alignment on these axes, and in order that the broader neighborhood can think about, adapt, or apply them when forming its personal views.
Permissionless entry
Can anybody work together with the core good contracts with out KYC or whitelisting?
Self Custody
Does the protocol permit customers to take care of self-custody and current it as default?
Free-Libre & Open Supply (FLOSS)
Is the contract code free-libre open-source, with both a copyleft license (e.g., AGPL) or a permissive license (e.g., MIT, Apache)? Supply-available (e.g., BSL) does NOT qualify.
Privateness
Transactions: Does it provide choices for shielding tx origins/locations/quantities?State: Is consumer/private knowledge and/or place data shielded onchain?Information: Does the protocol (and its typical UIs) keep away from pointless assortment of consumer knowledge (e.g., user-agent) and private knowledge (e.g., IP addresses)?
Open Growth Processes
Is the event course of moderately clear?Are code repositories publicly accessible and actively maintained?Are protocol adjustments documented with clear rationales and versioning historical past?Is there visibility into the decision-making course of for upgrades, parameters, and roadmaps?
Maximally Trustless Core Logic
Immutability: is the basic logic of the protocol non-upgradeable or ruled by a extremely decentralized, time-locked, and clear course of? (Keep away from admin keys with broad powers.)Maximal viable cryptoeconomics: does the protocol rely maximally on cryptographic ensures & financial incentives, and scale back using authorized wrappers (like collateralization assurances) or offchain enforcement to the naked minimal required for its core perform?Oracle reliance
Does it decrease reliance on oracles, and decrease losses in circumstances the place the oracle is compromised?Does it use sturdy, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are needed?
Basic Safety
Are the contracts audited, and processes in place to trace the audited commit hash towards what was final deployed, ideally together with monitoring/alerting when the diff adjustments?Are contract properties formally verified or a minimum of bytecode-verified on block explorers?
Distributed UIs
Are there a number of unbiased UIs?Is the first UI open supply and hosted in a decentralized method?Can customers work together instantly with contracts?
Enduring Stewardship
The EF is right here to remain for a very long time and wishes a strong long-term treasury administration coverage. We’ve for a very long time merely held ETH, however at the moment are more and more shifting into staking and DeFi, each to boost monetary sustainability and to assist a key software class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for thousands and thousands of individuals at present. EF’s involvement in these areas is well-positioned to set precedents for device use that’s accountable and appropriate with its underlying targets. To do that, it can make investments closely in skilling up its personal competency over time.
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