Thanks to the EFers that supplied beneficial enter and suggestions to the draft doc: Bastian Aue, Vitalik Buterin, Bogdan Popa, Tomasz StaĆczak, 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 overview of this doc.
The Ethereum Basis (EF) exists to strengthen Ethereumâs ecosystem and uphold its long-standing non-negotiable targets: enabling “functions that run precisely as programmed with none risk 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 in search of returns above a benchmark fee and increasing EF’s function as a steward of the Ethereum ecosystem, with a specific deal with DeFi.
This doc supplies the insurance policies and steerage for EF Treasury administration and discusses the important thing indicators and issues.
1. Macro Coverage
To attain 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 danger, length, and liquidity, whereas remaining aligned with Ethereumâs 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 Ă B: determines goal fiat-denominated (offchain or onchain) reserves. This worth instantly informs the dimensions and the cadence of ETH gross sales.(TotalTreasury – A Ă B) defines the worth of ETH reserves: dividing by ETH value 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 advantage heightened ecosystem engagement and (2) sustaining a counter-cyclical postureâstepping 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 prone to be pivotal for Ethereum, warranting enhanced deal with essential deliverables.
EF expects to stay a long-term steward, however envisions its scope step by step narrowing. We intend to cut 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 will likely be reviewed and adjusted as circumstances evolve.
2. Crypto Belongings Coverage
The EF will search to earn acceptable returns on treasury property in a fashion in step with Ethereum’s underlying ideas.
The important thing issues of the on-chain portfolio embody, however are usually 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. 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 greater levels of liquidity as an alternative of chasing solely excessive returns. Guard in opposition to not simply the danger of lack of funds but in addition dangers to liquidity and basic portfolio flexibility. Deployments which might be considerably greater danger 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 challengeâs complete TVL.
Ethereumâs deeper targets: 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 are going to often reallocate funds between protocols for causes reminiscent of 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 treasuryâs fiat-denominated property from the Opex Buffer (âBâ) goal and decide how a lot, if any, Ether will likely be bought over the subsequent three months. These gross sales will sometimes be by way of 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 frequently however supposed to be long-term. EF may borrow stablecoins and search greater yields onchain. EF Administration and advisors will vet candidate protocols for contract safety, liquidity danger and de-peg danger, 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:
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 targets and danger 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. Stories are ready and maintained by the Finance workforce, with distribution based mostly on scope and sensitivity.
4.1. Quarterly Stories
The Finance workforce supplies quarterly experiences 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 Stories
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 Targets
The EF (by means of its analysis, advocacy, and capital deployments) will construct on cypherpunk ideas to assist formalize and apply a sensible analysis framework we confer with as âDefipunkâ which has the next properties:
Privateness is traditionally uncared for within the broader DeFi house, but it surely 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 initiatives of their Defipunk journey
Ethereum is poised to draw exponentially bigger flows of capital, expertise, and modern power. Development, nonetheless, is usually 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 techniques typically exert delicate pressures that slender the design house 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 may also help domesticate an Ethereum-native monetary ecosystem that safeguards self-sovereignty and sustains, at scale, âan open society within the digital age.â
Turning this imaginative and prescient into actual infrastructure takes work. There are quite a few challenges to constructing cypherpunk DeFi protocols as we speak: greater 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. In consequence, a lot of as we speak’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 basic absence of onchain privateness â all go away each DeFi markets and members uncovered to systemic vulnerabilities.
Privateness is especially vital to get proper. As A Cypherpunkâs Manifesto factors out, âfor privateness to be widespread it should be a part of a social contractâ. Privateness has inherent community results, and but it has obtained little or no consideration up to now. This implies that robust, early institutional assist from an EF-like entity could 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 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 challenge assist could 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 embody EFâs personal inner operations the place doable. Utilizing Defipunk ideas within the EFâs 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 power, 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 reside and breathe Defipunk ideas in its personal actions, EF will keep heading in the right direction 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 initiatives to begin, and current initiatives to enhance. They are going to apply to all of EFâs 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 are usually not required to take a seat on the âexcellentâ finish of each axis. We search for credible progress and a roadmap for enchancment, reasonably 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 contemplate, 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 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 fairly 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 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 needed?
Normal 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 very 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’ve 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 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. EFâs involvement in these areas is well-positioned to set precedents for software use that’s accountable and suitable 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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