Thanks to the EFers that offered invaluable 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 invaluable and insightful enter and the ultimate assessment 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 must be balanced between looking for returns above a benchmark fee and increasing EF’s function as a steward of the Ethereum ecosystem, with a selected give attention to DeFi.
This doc supplies the insurance policies and steering for EF Treasury administration and discusses the important thing indicators and issues.
1. Macro Coverage
To realize its targets, 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, length, and liquidity, whereas remaining aligned with Ethereum’s core rules.
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 instantly informs the dimensions and the cadence of ETH gross sales.
- (TotalTreasury – A × B) defines the worth of ETH reserves: dividing by ETH value 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 assessment: (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 vital 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 subsequent 5 years, ending at a long-term 5% baseline that’s frequent for endowment-based organizations. This glide path and baseline shall 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 per Ethereum’s underlying rules.
The important thing issues 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. 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 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 common portfolio flexibility. Deployments which might be considerably larger threat might occur however shall be of a extra restricted scale and in segregated sleeves. In all instances, goal to be a modest portion of any single challenge’s complete TVL.
- Ethereum’s deeper objectives: help maximally safe, decentralized, open supply, cypherpunk functions. Cypherpunk DeFi is permissionless: no barbed-wire fences. Very best 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 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 shall 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 embody 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 components. 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:
- Speedy-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 targets 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 inside reporting cadence is in place. Reviews are ready and maintained by the Finance crew, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Reviews
The Finance crew supplies quarterly reviews to the Board and Administration, together with:
- Efficiency (Absolute and in opposition to 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 many others.)
4.2. Annual Reviews
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 check 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 contributors 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 help initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and revolutionary vitality. Development, nonetheless, is commonly path-dependent: requirements adopted in intervals of chaotic speedy progress harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent programs typically 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.
Via 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 immediately: larger fuel 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 immediately’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 common absence of onchain privateness – all depart each DeFi markets and contributors uncovered to systemic vulnerabilities.
Privateness is especially vital 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 thus far. This means that sturdy, early institutional help from an EF-like entity could be uniquely invaluable 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 options
- Encouraging mature protocols to strengthen Defipunk properties with analysis collaborations, liquidity, legitimacy, and different assets
- Selling analysis and growth of decentralized UIs
A extra full checklist of standards for challenge help could 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 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 typically, the EF can use secureware instruments, construct a prudent operational construction that’s supportive of all certified contributors, together with anon and pseudonymous contributors, 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 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 course and achieve 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, meant to encourage new initiatives to begin, and current 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 simple binary determinants for deployment, others are extra advanced. For now, initiatives aren’t required to sit down on the “excellent” 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 supply legibility for EF selections and construct alignment on these axes, and in order that the broader neighborhood can take into account, 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 knowledge and/or place info shielded onchain?
- Knowledge: 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 Growth 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 reduce reliance on oracles, and reduce losses in instances the place the oracle is compromised?
- Does it use sturdy, decentralized, governance-minimized and manipulation-resistant oracles wherever oracles are obligatory?
- 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 at the least 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 instantly 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 have now for a very long time merely held ETH, however at the moment are more and more shifting into staking and DeFi, each to reinforce monetary sustainability and to help a key utility class that’s delivering on the promise of permissionless safe entry to base civilizational infrastructure for thousands and thousands of individuals immediately. EF’s involvement in these areas is well-positioned to set precedents for software use that’s accountable and appropriate with its underlying objectives. To do that, it should make investments closely in skilling up its personal competency over time.
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