Thanks to the EFers that supplied helpful 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 helpful and insightful enter and the ultimate assessment of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable targets: 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 in search of returns above a benchmark charge and increasing EF’s function as a steward of the Ethereum ecosystem, with a specific concentrate on DeFi.
This doc offers the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and issues.
1. Macro Coverage
To attain its targets, EF will preserve and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its property, contemplating threat, period, and liquidity, whereas remaining aligned with Ethereum’s core rules.
Our strategy 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 scale and the cadence of ETH gross sales.
- (TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH worth offers 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 assessment: (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 prone to be pivotal for Ethereum, warranting enhanced concentrate on vital deliverables.
EF expects to stay a long-term steward, however envisions its scope progressively 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 can be reviewed and adjusted as situations evolve.
2. Crypto Belongings 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 issues of the on-chain portfolio embrace, however aren’t 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 an entire. Regularly re-evaluate initiatives for assault vectors and dangers, together with however not restricted to: good contract, governance, custodial (e.g., stablecoins), and oracle dangers.
- Affordable return and threat: choose conservative selections with greater levels of liquidity as an alternative of chasing solely excessive returns. Guard in opposition to not simply the chance of lack of funds but in addition dangers to liquidity and basic portfolio flexibility. Deployments which can be considerably greater threat might occur however can be of a extra restricted scale and in segregated sleeves. In all circumstances, intention to be a modest portion of any single venture’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 are going to ceaselessly reallocate funds between protocols for causes corresponding 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 can be offered over the following three months. These gross sales will sometimes 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 supposed to be long-term. EF can also borrow stablecoins and search greater 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 Belongings Coverage
The EF will allocate its fiat holdings throughout:
- Rapid-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; and
- Tokenized RWAs: ruled by the identical strategic targets and threat 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. Reviews are ready and maintained by the Finance workforce, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Reviews
The Finance workforce offers quarterly reviews 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 on.)
4.2. Annual Reviews
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 means of 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 members from each digital surveillance (e.g., entrance working, 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 initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and progressive vitality. Progress, nonetheless, is commonly path-dependent: requirements adopted in durations of chaotic speedy development harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent methods typically exert refined pressures that slender 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 right this moment: greater fuel costs for privateness, UX friction, issue bootstrapping liquidity, extra stringent audit wants related to technical complexity and immutability, and, merely put, opponents to privateness. Consequently, a lot of right this moment’s DeFi ecosystem depends on centralized components: backdoor shutdown mechanisms or funds extraction features, extreme reliance on multisigs or MPC, pervasive use of whitelists, centralized and surveilled UIs, and a basic absence of onchain privateness – all depart each DeFi markets and members uncovered to systemic vulnerabilities.
Privateness is especially essential 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 acquired little or no consideration up to now. This means that robust, early institutional assist from an EF-like entity could be uniquely helpful 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 options
- Encouraging mature protocols to strengthen Defipunk properties with analysis collaborations, liquidity, legitimacy, and different sources
- Selling analysis and growth of decentralized UIs
A extra full listing of standards for venture assist could 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 embrace EF’s personal inner operations the place attainable. 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 members, and in any other case enhance its safety and privateness practices. This can assist the EF stay principled and develop in power, 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 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 initiatives to begin, and present initiatives 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 advanced. For now, initiatives aren’t required to sit down on the “ultimate” finish of each axis. We search for credible progress and a roadmap for enchancment, slightly than perfection on day one. We share the framework brazenly to supply legibility for EF choices and construct alignment on these axes, and in order that the broader neighborhood can contemplate, 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 enable 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 supply choices for shielding tx origins/locations/quantities?
- State: Is person/private knowledge and/or place info shielded onchain?
- Knowledge: Does the protocol (and its typical UIs) keep away from pointless assortment of person knowledge (e.g., user-agent) and private knowledge (e.g., IP addresses)?
- Open Improvement 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 elemental 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 the usage of authorized wrappers (like collateralization assurances) or offchain enforcement to the naked minimal required for its core operate?
- Oracle reliance
- Does it decrease reliance on oracles, and decrease losses in circumstances the place the oracle is compromised?
- Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are needed?
- Normal 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 adjustments?
- Are contract properties formally verified or no less than bytecode-verified on block explorers?
- Distributed UIs
- Are there a number of impartial 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 desires a sturdy long-term treasury administration coverage. We’ve got for a very long time merely held ETH, however are actually more and more transferring 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 tens of millions of individuals right this moment. EF’s involvement in these areas is well-positioned to set precedents for software use that’s accountable and appropriate with its underlying targets. To do that, it’s going to make investments closely in skilling up its personal competency over time.
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