Thanks to the EFers that offered worthwhile 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 worthwhile 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 “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 looking for returns above a benchmark fee and lengthening EF’s function as a steward of the Ethereum ecosystem, with a selected deal with DeFi.
This doc gives 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 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 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 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 overview: (1) figuring out pivotal years that benefit 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 vital deliverables.
EF expects to stay a long-term steward, however envisions its scope regularly 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 can be reviewed and adjusted as situations evolve.
2. Crypto Property Coverage
The EF will search to earn acceptable returns on treasury property in a way per Ethereum’s underlying ideas.
The important thing concerns of the on-chain portfolio embrace, however should 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 initiatives for assault vectors and dangers, together with however not restricted to: good contract, governance, custodial (e.g., stablecoins), and oracle dangers.
- Cheap return and danger: choose conservative selections with increased 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 can be considerably increased danger could occur however can be of a extra restricted scale and in segregated sleeves. In all circumstances, goal to be a modest portion of any single undertaking’s whole TVL.
- Ethereum’s deeper targets: assist maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Ultimate protocols are trust-minimized, composable, and maximally privacy-friendly.
We are going to ceaselessly reallocate funds between protocols for causes akin to altering market situations, 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 can be bought over the following three months. These gross sales will usually be through fiat off-ramps or onchain swaps for fiat-denominated property.
2.2 Ether Deployments
Our present methods embrace solo staking and wETH provided to established lending protocols. Core deployments are re-evaluated regularly however supposed to be long-term. EF might also borrow stablecoins and search increased 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:
- Rapid-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 aims and danger tips 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 inside reporting cadence is in place. Studies are ready and maintained by the Finance crew, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Studies
The Finance crew gives 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 so on.)
4.2. Annual Studies
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 its analysis, advocacy, and capital deployments) will construct on cypherpunk ideas to assist formalize and apply a sensible analysis framework we seek advice from as “Defipunk” which has the next properties:
Privateness is traditionally uncared for within the broader DeFi area, however it stays important. Privateness protects market individuals 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 assist initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and modern vitality. Progress, nonetheless, is usually 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 techniques typically exert delicate 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 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 right now: increased 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 right now’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 depart each DeFi markets and individuals 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 obtained little or no consideration to date. This means that sturdy, early institutional assist from an EF-like entity might be uniquely worthwhile 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 record of standards for undertaking assist might be present in §5.3.
5.2. Defipunk begins at residence
Advocating for open supply, privateness and different Defipunk targets extends far past EF, however embrace EF’s personal inside operations the place potential. 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 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 stay and breathe Defipunk ideas in its personal actions, EF will keep on course and acquire the capabilities to assist 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 start out, and present initiatives 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, initiatives should not required to take a seat on the “splendid” 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 selections 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 provide choices for shielding tx origins/locations/quantities?
- State: Is person/private information and/or place data shielded onchain?
- Information: Does the protocol (and its typical UIs) keep away from pointless assortment of person information (e.g., user-agent) and private information (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 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 sturdy, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are vital?
- Normal 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 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 desires a sturdy long-term treasury administration coverage. We’ve 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 thousands and thousands of individuals right now. EF’s involvement in these areas is well-positioned to set precedents for software use that’s accountable and appropriate with its underlying targets. To do that, it’s going to make investments closely in skilling up its personal competency over time.
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