Thanks to the EFers that offered 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 “applications that run exactly as programmed without any possibility 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 increasing EF’s position as a steward of the Ethereum ecosystem, with a selected concentrate on DeFi.
This doc offers the insurance policies and steerage for EF Treasury administration and discusses the important thing indicators and issues.
1. Macro Coverage
To realize its goals, 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, 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 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 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 scale back annual opex roughly linearly over the subsequent 5 years, ending at a long-term 5% baseline that’s widespread for endowment-based organizations. This glide path and baseline will likely be reviewed and adjusted as circumstances evolve.
2. Crypto Property Coverage
The EF will search to earn acceptable returns on treasury property in a way according to Ethereum’s underlying ideas.
The important thing issues of the on-chain portfolio embody, however are usually 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. 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.
- Affordable return and danger: choose conservative selections with greater levels of liquidity as an alternative of chasing solely excessive returns. Guard towards not simply the danger of lack of funds but additionally dangers to liquidity and normal portfolio flexibility. Deployments which are considerably greater danger could occur however will likely be of a extra restricted scale and in segregated sleeves. In all circumstances, goal to be a modest portion of any single undertaking’s complete TVL.
- Ethereum’s deeper objectives: assist maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Perfect protocols are trust-minimized, composable, and maximally privacy-friendly.
We are going to often 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 likely be bought over the subsequent 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 embody solo staking and wETH equipped to established lending protocols. Core deployments are re-evaluated regularly however supposed to be long-term. EF may additionally borrow stablecoins and search greater 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 fastidiously vetted farms and tokenized RWAs, into its fiat reserve.
3. Fiat-denominated Property 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 pointers 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 staff, with distribution primarily based on scope and sensitivity.
4.1. Quarterly Reviews
The Finance staff offers 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 many others.)
4.2. Annual Reviews
The annual EF Report will embody 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 (via its analysis, advocacy, and capital deployments) will construct on cypherpunk ideas to assist formalize and apply a sensible analysis framework we confer with as “Defipunk” which has the next properties:
Privateness is traditionally uncared for within the broader DeFi house, nevertheless 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 modern vitality. Development, nevertheless, is usually path-dependent: requirements adopted in intervals of chaotic fast progress harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent techniques typically exert refined pressures that slim 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 will help domesticate an Ethereum-native monetary ecosystem that safeguards self-sovereignty and sustains, at scale, “an open society in the electronic age.”
Turning this imaginative and prescient into actual infrastructure takes work. There are quite a few challenges to constructing cypherpunk DeFi protocols at this time: greater gasoline 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 this time’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 normal absence of onchain privateness – all depart each DeFi markets and individuals uncovered to systemic vulnerabilities.
Privateness is especially vital to get proper. As A Cypherpunk’s Manifesto factors out, “for privacy to be widespread it must be part of a social contract”. Privateness has inherent community results, and but it has acquired little or no consideration thus far. This implies that robust, early institutional assist from an EF-like entity may 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 sources
- Selling analysis and improvement of decentralized UIs
A extra full record of standards for undertaking assist 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 embody EF’s personal inner operations the place doable. Utilizing Defipunk ideas 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 flexibility 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 heading in the right direction and acquire 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 current tasks to enhance. They’ll 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 are usually not required to sit down on the “preferrred” finish of each axis. We search for credible progress and a roadmap for enchancment, relatively than perfection on day one. We share the framework brazenly to offer legibility for EF selections 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 enable 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 provide choices for shielding tx origins/locations/quantities?
- State: Is consumer/private knowledge and/or place info shielded onchain?
- Knowledge: 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 Improvement 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 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 mandatory?
- 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 modifications?
- Are contract properties formally verified or not 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. Now we have 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 thousands and thousands of individuals at this time. EF’s involvement in these areas is well-positioned to set precedents for device use that’s accountable and appropriate with its underlying objectives. To do that, it’s going to make investments closely in skilling up its personal competency over time.
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