Thanks to the EFers that offered beneficial 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 beneficial and insightful enter and the ultimate evaluate 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 needs 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 selected deal with DeFi.

This doc supplies the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and concerns.

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 threat, period, and liquidity, whereas remaining aligned with Ethereum’s core rules.

Our strategy 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 worth offers 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 evaluate: (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 more likely to be pivotal for Ethereum, warranting enhanced deal with important 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 following 5 years, ending at a long-term 5% baseline that’s widespread 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 belongings in a fashion according to Ethereum’s underlying rules.

The important thing concerns of the on-chain portfolio embody, however will not be 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. Regularly re-evaluate tasks for assault vectors and dangers, together with however not restricted to: sensible contract, governance, custodial (e.g., stablecoins), and oracle dangers.
• Cheap return and threat: choose conservative decisions with larger levels of liquidity as a substitute of chasing solely excessive returns. Guard towards not simply the danger of lack of funds but additionally dangers to liquidity and common portfolio flexibility. Deployments which can be considerably larger threat could occur however will probably 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 targets: assist maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Very best protocols are trust-minimized, composable, and maximally privacy-friendly.

We are going to ceaselessly reallocate funds between protocols for causes corresponding 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 offered over the following 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 embody solo staking and wETH equipped to established lending protocols. Core deployments are re-evaluated frequently however supposed to be long-term. EF can also borrow stablecoins and search larger 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:

1. Rapid-liquidity belongings: money and different extremely liquid fiat-denominated devices that cowl real-time operational wants;
2. Legal responsibility-matched reserves: fixed-term deposits, investment-grade bonds, and different low-risk devices aligned with longer-term obligations; and
3. Tokenized RWAs: ruled by the identical strategic aims 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 inner reporting cadence is in place. Reviews are ready and maintained by the Finance workforce, with distribution based mostly on scope and sensitivity.

4.1. Quarterly Reviews

The Finance workforce supplies quarterly stories to the Board and Administration, together with:

• Efficiency (Absolute and towards 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 forth.)

4.2. Annual Reviews

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 (by means 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 area, however it stays important. Privateness protects market members 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 revolutionary power. Progress, nonetheless, 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 methods usually exert delicate pressures that slim the design area for novel DeFi primitives and constrain privacy-focused innovation. The Ethereum Basis will defend towards these pressures.

By way of analysis, advocacy, and strategic capital deployments, the EF can assist 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: larger 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. Because of this, a lot of immediately’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 common absence of onchain privateness – all go away 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 obtained little or no consideration to date. This implies that sturdy, early institutional assist from an EF-like entity will be uniquely beneficial 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 improvement of decentralized UIs

A extra full listing of standards for undertaking assist will 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 inner 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. This may assist the EF stay principled and develop in energy, 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 dwell and breathe Defipunk rules in its personal actions, EF will keep on the right track 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 start out, and present 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 easy binary determinants for deployment, others are extra advanced. For now, tasks will not be required to take a seat on the “perfect” finish of each axis. We search for credible progress and a roadmap for enchancment, slightly 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 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 consumer/private information and/or place data shielded onchain?
  • Information: Does the protocol (and its typical UIs) keep away from pointless assortment of consumer information (e.g., user-agent) and private information (e.g., IP addresses)?

• Open Improvement Processes
  
  • Is the event course of fairly 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 reduce reliance on oracles, and reduce losses in circumstances the place the oracle is compromised?
    • Does it use strong, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are crucial?

• 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 modifications?
  • 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 straight 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 are actually more and more transferring into staking and DeFi, each to boost monetary sustainability and to assist a key utility class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for hundreds of thousands of individuals immediately. EF’s involvement in these areas is well-positioned to set precedents for device use that’s accountable and suitable with its underlying targets. To do that, it is going to make investments closely in skilling up its personal competency over time.

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