Thanks to the EFers that offered invaluable 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 invaluable and insightful enter and the ultimate evaluation of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable aims: enabling “functions 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 looking for returns above a benchmark price and increasing EF’s position as a steward of the Ethereum ecosystem, with a specific give attention to DeFi.
This doc gives the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and concerns.
1. Macro Coverage
To attain its aims, EF will preserve and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its property, contemplating danger, length, and liquidity, whereas remaining aligned with Ethereum’s core rules.
Our method focuses on two variables:
A: Annual Opex (expressed as % of present complete 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 straight informs the scale and the cadence of ETH gross sales.(TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH value 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 evaluation: (1) figuring out pivotal years that advantage heightened ecosystem engagement and (2) sustaining a counter-cyclical posture—stepping up help 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 prone to be pivotal for Ethereum, warranting enhanced give attention to vital deliverables.
EF expects to stay a long-term steward, however envisions its scope step by step narrowing. We intend to cut 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 shall be reviewed and adjusted as situations evolve.
2. Crypto Property Coverage
The EF will search to earn acceptable returns on treasury property in a fashion in line with Ethereum’s underlying rules.
The important thing concerns of the on-chain portfolio embrace, however should not restricted to:
Security and safety: favor battle-tested, immutable, audited, permissionless protocols. Encourage positive-sum actors within the Ethereum DeFi ecosystem. Purpose to counterbalance, and never contribute to, systemic dangers to Ethereum as a complete. Regularly re-evaluate initiatives for assault vectors and dangers, together with however not restricted to: sensible contract, governance, custodial (e.g., stablecoins), and oracle dangers.Cheap return and danger: choose conservative selections with increased levels of liquidity as a substitute of chasing solely excessive returns. Guard in opposition to not simply the chance of lack of funds but in addition dangers to liquidity and common portfolio flexibility. Deployments which might be considerably increased danger could occur however shall be of a extra restricted scale and in segregated sleeves. In all circumstances, purpose to be a modest portion of any single challenge’s complete TVL.
Ethereum’s deeper objectives: help maximally safe, decentralized, open supply, cypherpunk functions. Cypherpunk DeFi is permissionless: no barbed-wire fences. Ultimate protocols are trust-minimized, composable, and maximally privacy-friendly.
We are going to steadily reallocate funds between protocols for causes akin to altering market situations, 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 property from the Opex Buffer (“B”) goal and decide how a lot, if any, Ether shall be offered over the following three months. These gross sales will usually be by way of fiat off-ramps or onchain swaps for fiat-denominated property.
2.2 Ether Deployments
Our present methods embrace solo staking and wETH provided to established lending protocols. Core deployments are re-evaluated regularly however meant to be long-term. EF may additionally borrow stablecoins and search increased yields onchain. EF Administration and advisors will vet candidate protocols for contract safety, liquidity danger and de-peg danger, and different components. 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:
Fast-liquidity property: 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 aims and danger tips as native crypto property.
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. Experiences are ready and maintained by the Finance crew, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Experiences
The Finance crew gives quarterly stories to the Board and Administration, together with:
Efficiency (Absolute and in opposition to 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 forth.)
4.2. Annual Experiences
The annual EF Report will embrace additional treasury-related info, together with a abstract of main treasury allocations. For instance, percentages in fiat, idle ETH, and deployed ETH.
5. Cypherpunk Targets
The EF (by way of its analysis, advocacy, and capital deployments) will construct on cypherpunk rules to assist formalize and apply a sensible analysis framework we consult with as “Defipunk” which has the next properties:
Privateness is traditionally uncared for within the broader DeFi area, but it surely stays important. Privateness protects market contributors 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 help initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and revolutionary power. Development, nonetheless, is commonly path-dependent: requirements adopted in durations of chaotic speedy 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 in opposition to these pressures.
Via analysis, advocacy, and strategic capital deployments, the EF may also 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 the moment: 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. In consequence, a lot of at the moment’s DeFi ecosystem depends on centralized parts: backdoor shutdown mechanisms or funds extraction features, extreme reliance on multisigs or MPC, pervasive use of whitelists, centralized and surveilled UIs, and a common absence of onchain privateness – all depart each DeFi markets and contributors uncovered to systemic vulnerabilities.
Privateness is especially vital to get proper. As A Cypherpunk’s Manifesto factors out, “for privateness to be widespread it have to be a part of a social contract”. Privateness has inherent community results, and but it has acquired little or no consideration to this point. This means that robust, early institutional help from an EF-like entity may be uniquely invaluable in flipping the equilibrium towards a extra privacy-focused DeFi panorama.
EF is well-positioned to assist information DeFi’s evolution towards these objectives. 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 record of standards for challenge help may be present in §5.3.
5.2. Defipunk begins at house
Advocating for open supply, privateness and different Defipunk objectives extends far past EF, however embrace EF’s personal inner operations the place potential. Utilizing Defipunk rules within the EF’s personal treasury administration is a key first step on this regard. Extra typically, the EF can use secureware instruments, construct a prudent operational construction that’s supportive of all certified contributors, together with anon and pseudonymous contributors, and in any other case enhance its safety and privateness practices. This may assist the EF stay principled and develop in energy, stability, and the power to face agency.
Workers 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 stay and breathe Defipunk rules in its personal actions, EF will keep heading in the right direction and achieve the capabilities to help the remainder of the ecosystem in doing the identical.
5.3. Defipunk Standards
These are concrete standards for inner analysis of protocols and UIs, meant to encourage new initiatives to begin, and current initiatives to enhance. They may 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 advanced. For now, initiatives should not required to sit down on the “very best” 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 selections and construct alignment on these axes, and in order that the broader neighborhood can take into account, adapt, or apply them when forming its personal views.
Permissionless entry
Can anybody work together with the core sensible contracts with out KYC or whitelisting?
Self Custody
Does the protocol permit customers to keep up 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 supply choices for shielding tx origins/locations/quantities?State: Is consumer/private information and/or place info shielded onchain?Knowledge: Does the protocol (and its typical UIs) keep away from pointless assortment of consumer information (e.g., user-agent) and private information (e.g., IP addresses)?
Open Growth Processes
Is the event course of moderately clear?Are code repositories publicly accessible and actively maintained?Are protocol modifications 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 cut back the usage of authorized wrappers (like collateralization assurances) or offchain enforcement to the naked minimal required for its core perform?Oracle reliance
Does it reduce reliance on oracles, and reduce losses in circumstances the place the oracle is compromised?Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are mandatory?
Common Safety
Are the contracts audited, and processes in place to trace the audited commit hash in opposition to what was final deployed, ideally together with monitoring/alerting when the diff modifications?Are contract properties formally verified or no less than 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 straight with contracts?
Enduring Stewardship
The EF is right here to remain for a very long time and desires a sturdy long-term treasury administration coverage. We now have 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 help a key utility class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for hundreds of thousands of individuals at the moment. EF’s involvement in these areas is well-positioned to set precedents for software use that’s accountable and suitable with its underlying objectives. To do that, it is going to make investments closely in skilling up its personal competency over time.
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