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 evaluation of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable aims: enabling “functions 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 must be balanced between searching for returns above a benchmark fee and lengthening EF’s function as a steward of the Ethereum ecosystem, with a selected 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 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 property, contemplating threat, period, and liquidity, whereas remaining aligned with Ethereum’s core ideas.
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 neighborhood enter to maintain short-term operations aligned with long-term technique. Two additional lenses form every evaluation: (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 give attention to important deliverables.
EF expects to stay a long-term steward, however envisions its scope regularly 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 likely 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 in keeping with Ethereum’s underlying ideas.
The important thing issues 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. Goal 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 selections with larger levels of liquidity as a substitute of chasing solely excessive returns. Guard in opposition to not simply the chance of lack of funds but in addition dangers to liquidity and basic portfolio flexibility. Deployments which can be considerably larger threat might occur however will likely 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 objectives: assist maximally safe, decentralized, open supply, cypherpunk functions. Cypherpunk DeFi is permissionless: no barbed-wire fences. Ultimate protocols are trust-minimized, composable, and maximally privacy-friendly.
We’ll ceaselessly reallocate funds between protocols for causes corresponding 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 property from the Opex Buffer (“B”) goal and decide how a lot, if any, Ether will likely be bought over the following three months. These gross sales will usually be by way of 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 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 components. 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:
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; andTokenized RWAs: ruled by the identical strategic aims and threat pointers 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 inner reporting cadence is in place. Reviews are ready and maintained by the Finance crew, with distribution primarily based on scope and sensitivity.
4.1. Quarterly Reviews
The Finance crew 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 Reviews
The annual EF Report will embrace 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 (via its analysis, advocacy, and capital deployments) will construct on cypherpunk ideas 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, nevertheless 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 assist initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and progressive power. Progress, nonetheless, is commonly 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 techniques usually 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 way of analysis, advocacy, and strategic capital deployments, the EF might 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 as we speak: larger 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. Consequently, a lot of as we speak’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 basic 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 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 up to now. This implies that sturdy, early institutional assist from an EF-like entity may 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 objectives. For instance:
Supporting nascent DeFi protocol to develop privateness featuresEncouraging mature protocols to strengthen Defipunk properties with analysis collaborations, liquidity, legitimacy, and different resourcesPromoting analysis and improvement of decentralized UIs
A extra full checklist of standards for undertaking assist may be present in §5.3.
5.2. Defipunk begins at house
Advocating for open supply, privateness and different Defipunk objectives extends far past EF, however embrace EF’s personal inner operations the place potential. Utilizing Defipunk ideas 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 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 reside and breathe Defipunk ideas in its personal actions, EF will keep on track and achieve 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 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 advanced. For now, initiatives should not required to take a seat on the “ultimate” finish of each axis. We search for credible progress and a roadmap for enchancment, relatively than perfection on day one. We share the framework overtly to offer legibility for EF choices and construct alignment on these axes, and in order that the broader neighborhood 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 enable 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 information and/or place info 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 Improvement Processes
Is the event course of moderately 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 cut 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 circumstances the place the oracle is compromised?Does it use sturdy, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are vital?
Common 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 not less than 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 now have for a very long time merely held ETH, however are actually more and more shifting into staking and DeFi, each to reinforce 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 as we speak. EF’s involvement in these areas is well-positioned to set precedents for device use that’s accountable and appropriate with its underlying objectives. To do that, it can make investments closely in skilling up its personal competency over time.
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