Thanks to the EFers that offered useful 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 useful and insightful enter and the ultimate overview 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 risk of downtime, censorship, fraud, or third-party interference“. EF Treasury helps EF’s long-term company, sustainability, and legitimacy. Capital deployments must be balanced between searching for returns above a benchmark price and lengthening EF’s position as a steward of the Ethereum ecosystem, with a selected give attention to DeFi.
This doc supplies the insurance policies and steerage for EF Treasury administration and discusses the important thing indicators and concerns.
1. Macro Coverage
To attain its aims, EF will keep and periodically refine an asset-liability administration coverage and a high-level grant allocation technique. EF will handle its belongings, contemplating threat, length, and liquidity, whereas remaining aligned with Ethereum’s core ideas.
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 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 group enter to maintain short-term operations aligned with long-term technique. Two additional lenses form every overview: (1) figuring out pivotal years that benefit 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 more likely to be pivotal for Ethereum, warranting enhanced give attention to essential 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 frequent for endowment-based organizations. This glide path and baseline shall be reviewed and adjusted as situations evolve.
2. Crypto Belongings Coverage
The EF will search to earn acceptable returns on treasury belongings in a way in step with Ethereum’s underlying ideas.
The important thing concerns of the on-chain portfolio embody, 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. Intention 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.
- Cheap return and threat: choose conservative decisions with greater levels of liquidity as a substitute 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 greater threat could occur however shall be of a extra restricted scale and in segregated sleeves. In all instances, purpose to be a modest portion of any single undertaking’s whole TVL.
- Ethereum’s deeper objectives: help maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Best protocols are trust-minimized, composable, and maximally privacy-friendly.
We’ll continuously reallocate funds between protocols for causes equivalent to altering market situations, diversification, or new yield alternatives. Withdrawals must 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 shall be bought over the following three months. These gross sales will sometimes be through fiat off-ramps or onchain swaps for fiat-denominated belongings.
2.2 Ether Deployments
Our present methods embody solo staking and wETH provided to established lending protocols. Core deployments are re-evaluated frequently however meant to be long-term. EF may 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:
- Instant-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 threat tips 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 inside reporting cadence is in place. Experiences are ready and maintained by the Finance workforce, with distribution primarily based on scope and sensitivity.
4.1. Quarterly Experiences
The Finance workforce 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 so on.)
4.2. Annual Experiences
The annual EF Report will embody additional treasury-related data, 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 area, 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 help tasks 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 fast development harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent programs usually exert refined pressures that slender the design area 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 present: greater gasoline costs for privateness, UX friction, problem bootstrapping liquidity, extra stringent audit wants related to technical complexity and immutability, and, merely put, opponents to privateness. Consequently, a lot of at present’s DeFi ecosystem depends on centralized parts: backdoor shutdown mechanisms or funds extraction capabilities, extreme reliance on multisigs or MPC, pervasive use of whitelists, centralized and surveilled UIs, and a basic absence of onchain privateness – all go away each DeFi markets and individuals 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 sturdy, early institutional help from an EF-like entity might be uniquely useful 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 growth of decentralized UIs
A extra full listing of standards for undertaking help might 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 embody EF’s personal inside operations the place attainable. 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. This can assist the EF stay principled and develop in power, stability, and the flexibility 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 ideas in its personal actions, EF will keep on course and acquire the capabilities to help the remainder of the ecosystem in doing the identical.
5.3. Defipunk Standards
These are concrete standards for inside analysis of protocols and UIs, meant 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 advanced. For now, tasks usually are not required to sit down on the “perfect” finish of each axis. We search for credible progress and a roadmap for enchancment, quite 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 group 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 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 consumer/private knowledge and/or place data shielded onchain?
- Information: 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 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 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 cut back using authorized wrappers (like collateralization assurances) or offchain enforcement to the naked minimal required for its core operate?
- Oracle reliance
- Does it reduce reliance on oracles, and reduce losses in instances the place the oracle is compromised?
- Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are obligatory?
- 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 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 straight with contracts?
Enduring Stewardship
The EF is right here to remain for a very long time and wishes a strong 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 help 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 present. EF’s involvement in these areas is well-positioned to set precedents for instrument use that’s accountable and appropriate with its underlying objectives. To do that, it would make investments closely in skilling up its personal competency over time.
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