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 overview of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable targets: 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 needs 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 gives the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and concerns.
1. Macro Coverage
To realize its targets, EF will preserve 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 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 immediately informs the dimensions and the cadence of ETH gross sales.
- (TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH worth 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 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 steadily narrowing. We intend to scale 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 will probably be reviewed and adjusted as circumstances evolve.
2. Crypto Property Coverage
The EF will search to earn acceptable returns on treasury belongings in a fashion in keeping with Ethereum’s underlying rules.
The important thing concerns of the on-chain portfolio embody, however aren’t 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 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 decisions with increased 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 normal portfolio flexibility. Deployments which might be considerably increased threat could occur however will probably be of a extra restricted scale and in segregated sleeves. In all instances, intention to be a modest portion of any single mission’s whole TVL.
- Ethereum’s deeper targets: help 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’ll continuously reallocate funds between protocols for causes equivalent to altering market circumstances, diversification, or new yield alternatives. Withdrawals needs 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 will probably be bought over the following three months. These gross sales will sometimes be by way of fiat off-ramps or onchain swaps for fiat-denominated belongings.
2.2 Ether Deployments
Our present methods embody solo staking and wETH equipped to established lending protocols. Core deployments are re-evaluated frequently however supposed to be long-term. EF may borrow stablecoins and search increased 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 rigorously vetted farms and tokenized RWAs, into its fiat reserve.
3. Fiat-denominated Property Coverage
The EF will allocate its fiat holdings throughout:
- Speedy-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 targets and threat 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 inside 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 studies 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 Stories
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 Targets
The EF (by way of its analysis, advocacy, and capital deployments) will construct on cypherpunk rules to assist formalize and apply a sensible analysis framework we discuss with as “Defipunk” which has the next properties:
Privateness is traditionally uncared for within the broader DeFi house, 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 help initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and progressive vitality. Development, nonetheless, is usually path-dependent: requirements adopted in intervals of chaotic speedy development harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent programs typically exert refined pressures that slim the design house for novel DeFi primitives and constrain privacy-focused innovation. The Ethereum Basis will defend in opposition to these pressures.
By means of 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 in the present day: increased 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 in the present day’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 normal absence of onchain privateness – all go away each DeFi markets and members uncovered to systemic vulnerabilities.
Privateness is especially essential 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 up to now. This implies that robust, early institutional help from an EF-like entity might 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 mission help might be present in §5.3.
5.2. Defipunk begins at dwelling
Advocating for open supply, privateness and different Defipunk targets extends far past EF, however embody EF’s personal inside operations the place doable. 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. It will assist the EF stay principled and develop in energy, 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 dwell and breathe Defipunk rules 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, supposed to encourage new initiatives to begin, 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 complicated. 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, quite 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 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 provide 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 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 instances the place the oracle is compromised?
- Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are crucial?
- 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 a minimum of 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 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’ve got for a very long time merely held ETH, however at the moment are more and more transferring 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 hundreds of thousands of individuals in the present day. EF’s involvement in these areas is well-positioned to set precedents for instrument use that’s accountable and appropriate with its underlying targets. To do that, it would make investments closely in skilling up its personal competency over time.
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