Thanks to the EFers that supplied 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 evaluation of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable goals: 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 ought to be balanced between in search of returns above a benchmark charge and increasing EF’s function as a steward of the Ethereum ecosystem, with a selected give attention to 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 goals, 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 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 dimensions 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 evaluation: (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 important deliverables.
EF expects to stay a long-term steward, however envisions its scope progressively narrowing. We intend to scale back annual opex roughly linearly over the subsequent 5 years, ending at a long-term 5% baseline that’s widespread for endowment-based organizations. This glide path and baseline might be reviewed and adjusted as circumstances evolve.
2. Crypto Belongings Coverage
The EF will search to earn acceptable returns on treasury property in a way according to Ethereum’s underlying ideas.
The important thing concerns of the on-chain portfolio embrace, 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. Frequently re-evaluate initiatives 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 in addition dangers to liquidity and normal portfolio flexibility. Deployments which can be considerably larger threat might occur however might be of a extra restricted scale and in segregated sleeves. In all instances, goal to be a modest portion of any single mission’s whole TVL.
Ethereum’s deeper objectives: help maximally safe, decentralized, open supply, cypherpunk purposes. Cypherpunk DeFi is permissionless: no barbed-wire fences. Superb protocols are trust-minimized, composable, and maximally privacy-friendly.
We are going to often reallocate funds between protocols for causes reminiscent of altering market circumstances, 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 might be bought over the subsequent 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 equipped to established lending protocols. Core deployments are re-evaluated regularly however meant 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 rigorously vetted farms and tokenized RWAs, into its fiat reserve.
3. Fiat-denominated Belongings Coverage
The EF will allocate its fiat holdings throughout:
Fast-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 goals and threat 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 inner reporting cadence is in place. Reviews are ready and maintained by the Finance workforce, with distribution primarily based on scope and sensitivity.
4.1. Quarterly Reviews
The Finance workforce gives 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 Reviews
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 Objectives
The EF (by way of 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 help initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and progressive power. Development, nevertheless, is commonly path-dependent: requirements adopted in durations of chaotic fast progress harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent techniques typically 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 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 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 right this moment: larger 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. Because of this, a lot of right this moment’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 normal absence of onchain privateness – all depart 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 acquired little or no consideration up to now. This means that robust, early institutional help from an EF-like entity may 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 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 listing of standards for mission help 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 doable. 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 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.
Employees 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 ideas in its personal actions, EF will keep heading in the right direction and achieve the capabilities to help the remainder of the ecosystem in doing the identical.
5.3. Defipunk Standards
These are concrete standards for inner analysis of protocols and UIs, meant 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 aren’t required to take a seat 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 overtly 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 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 provide choices for shielding tx origins/locations/quantities?State: Is consumer/private knowledge and/or place data shielded onchain?Knowledge: 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 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 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 instances the place the oracle is compromised?Does it use sturdy, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are essential?
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 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 straight with contracts?
Enduring Stewardship
The EF is right here to remain for a very long time and wishes a sturdy long-term treasury administration coverage. We now have for a very long time merely held ETH, however are actually more and more transferring into staking and DeFi, each to reinforce monetary sustainability and to help a key software class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for hundreds of thousands of individuals right this moment. EF’s involvement in these areas is well-positioned to set precedents for instrument use that’s accountable and suitable with its underlying objectives. To do that, it should make investments closely in skilling up its personal competency over time.
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