Thanks to the EFers that supplied precious 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 precious 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 goals: enabling “functions that run precisely as programmed with none risk 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 price and lengthening EF’s function as a steward of the Ethereum ecosystem, with a specific give attention to DeFi.
This doc supplies the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and issues.
1. Macro Coverage
To realize its goals, EF will keep and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its property, contemplating danger, period, and liquidity, whereas remaining aligned with Ethereum’s core ideas.
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 dimensions and the cadence of ETH gross sales.
- (TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH value offers the variety of ETH that may stay in core holdings.
At common intervals, the Board and Administration re-evaluate each variables, weighing market dynamics and group enter to maintain short-term operations aligned with long-term technique. Two additional lenses form every evaluation: (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 give attention to vital deliverables.
EF expects to stay a long-term steward, however envisions its scope steadily narrowing. We intend to cut back annual opex roughly linearly over the subsequent 5 years, ending at a long-term 5% baseline that’s frequent for endowment-based organizations. This glide path and baseline will probably be reviewed and adjusted as circumstances evolve.
2. Crypto Belongings Coverage
The EF will search to earn acceptable returns on treasury property in a way per Ethereum’s underlying ideas.
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: sensible contract, governance, custodial (e.g., stablecoins), and oracle dangers.
- Cheap return and danger: choose conservative decisions with increased levels of liquidity as an alternative of chasing solely excessive returns. Guard towards not simply the danger of lack of funds but in addition dangers to liquidity and basic portfolio flexibility. Deployments which might be considerably increased danger could occur however will probably be of a extra restricted scale and in segregated sleeves. In all circumstances, intention to be a modest portion of any single mission’s complete TVL.
- Ethereum’s deeper objectives: assist maximally safe, decentralized, open supply, cypherpunk functions. Cypherpunk DeFi is permissionless: no barbed-wire fences. Supreme protocols are trust-minimized, composable, and maximally privacy-friendly.
We’ll ceaselessly reallocate funds between protocols for causes resembling 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 property from the Opex Buffer (“B”) goal and decide how a lot, if any, Ether will probably be offered over the subsequent three months. These gross sales will usually be through 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 might also 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 elements. Because the DeFi ecosystem matures, EF plans to fold choose on-chain allocations, together with to rigorously vetted farms and tokenized RWAs, into its fiat reserve.
3. Fiat-denominated Belongings Coverage
The EF will allocate its fiat holdings throughout:
- Quick-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 goals 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 group, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Experiences
The Finance group supplies quarterly studies 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 many others.)
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 Objectives
The EF (by means of its analysis, advocacy, and capital deployments) will construct on cypherpunk ideas 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 house, but it surely 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 revolutionary vitality. Development, nonetheless, is usually path-dependent: requirements adopted in durations of chaotic fast development harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent techniques typically exert refined pressures that slender the design house for novel DeFi primitives and constrain privacy-focused innovation. The Ethereum Basis will defend towards these pressures.
By 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, issue bootstrapping liquidity, extra stringent audit wants related to technical complexity and immutability, and, merely put, opponents to privateness. Consequently, a lot of at the 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 necessary 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 assist from an EF-like entity will be uniquely precious 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 options
- Encouraging mature protocols to strengthen Defipunk properties with analysis collaborations, liquidity, legitimacy, and different assets
- Selling analysis and improvement of decentralized UIs
A extra full record of standards for mission assist will be present in §5.3.
5.2. Defipunk begins at residence
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 ideas 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 members, and in any other case enhance its safety and privateness practices. This can 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 ideas 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, meant to encourage new initiatives to start out, and present 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 aren’t required to take a seat on the “very best” finish of each axis. We search for credible progress and a roadmap for enchancment, fairly 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 group can think about, 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 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?
- Information: 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 fairly 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 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 strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are needed?
- Common 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 not 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 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’ve got for a very long time merely held ETH, however are actually 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 hundreds of thousands of individuals at the moment. EF’s involvement in these areas is well-positioned to set precedents for instrument use that’s accountable and suitable with its underlying objectives. To do that, it’ll make investments closely in skilling up its personal competency over time.
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