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 assessment of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable aims: 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 looking for returns above a benchmark charge 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 issues.
1. Macro Coverage
To realize its aims, EF will preserve and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its belongings, contemplating danger, period, 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 immediately informs the dimensions 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 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 assessment: (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 crucial deliverables.
EF expects to stay a long-term steward, however envisions its scope step by step 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 can be reviewed and adjusted as circumstances evolve.
2. Crypto Belongings Coverage
The EF will search to earn acceptable returns on treasury belongings in a way according to Ethereum’s underlying rules.
The important thing issues of the on-chain portfolio embrace, however usually are 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 an entire. 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 in opposition to not simply the danger of lack of funds but additionally dangers to liquidity and normal portfolio flexibility. Deployments which might be considerably greater danger might occur however can be of a extra restricted scale and in segregated sleeves. In all instances, intention to be a modest portion of any single venture’s complete TVL.
- Ethereum’s deeper objectives: help maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Splendid protocols are trust-minimized, composable, and maximally privacy-friendly.
We are going to often reallocate funds between protocols for causes corresponding 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 can be bought over the subsequent three months. These gross sales will usually be through fiat off-ramps or onchain swaps for fiat-denominated belongings.
2.2 Ether Deployments
Our present methods embrace solo staking and wETH equipped to established lending protocols. Core deployments are re-evaluated regularly however supposed to be long-term. EF might also 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 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 Belongings Coverage
The EF will allocate its fiat holdings throughout:
- Quick-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; and
- Tokenized RWAs: ruled by the identical strategic aims and danger 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. Stories are ready and maintained by the Finance group, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Stories
The Finance group gives quarterly stories to the Board and Administration, together with:
- Efficiency (Absolute and in opposition to Benchmarks)
- All positions (Open & Closed for the reason that 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 Stories
The annual EF Report will embrace 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 means of its analysis, advocacy, and capital deployments) will construct on cypherpunk rules 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 area, however it 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 tasks of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and revolutionary vitality. Progress, 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 programs typically exert delicate 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.
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 immediately: greater 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 immediately’s DeFi ecosystem depends on centralized components: backdoor shutdown mechanisms or funds extraction capabilities, extreme reliance on multisigs or MPC, pervasive use of whitelists, centralized and surveilled UIs, and a normal absence of onchain privateness – all go away each DeFi markets and contributors uncovered to systemic vulnerabilities.
Privateness is especially necessary 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 thus far. 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 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 record of standards for venture help may be present in §5.3.
5.2. Defipunk begins at dwelling
Advocating for open supply, privateness and different Defipunk objectives extends far past EF, however embrace 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 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 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 rules in its personal actions, EF will keep on course 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, supposed to encourage new tasks to begin, and current 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 simple binary determinants for deployment, others are extra complicated. For now, tasks usually are not required to take a seat on the “superb” finish of each axis. We search for credible progress and a roadmap for enchancment, moderately than perfection on day one. We share the framework brazenly to offer legibility for EF choices and construct alignment on these axes, and in order that the broader group can take into account, 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 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 person/private knowledge and/or place data 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 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 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 operate?
- Oracle reliance
- Does it decrease reliance on oracles, and decrease losses in instances the place the oracle is compromised?
- Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are essential?
- 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 modifications?
- 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 immediately with contracts?
Enduring Stewardship
The EF is right here to remain for a very long time and desires a strong long-term treasury administration coverage. We have now 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 help a key utility class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for tens of millions of individuals immediately. 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’s going to make investments closely in skilling up its personal competency over time.
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