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 evaluate of this doc.

The Ethereum Basis (EF) exists to strengthen Ethereum’s ecosystem and uphold its long-standing non-negotiable targets: 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 must be balanced between searching for returns above a benchmark charge and increasing EF’s position 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 realize its targets, EF will preserve 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 rules.

Our strategy 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 provides 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 group enter to maintain short-term operations aligned with long-term technique. Two additional lenses form every evaluate: (1) figuring out pivotal years that advantage 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 prone to be pivotal for Ethereum, warranting enhanced deal with vital 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 following 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 situations 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 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.
• Affordable return and threat: choose conservative decisions with increased levels of liquidity as a substitute of chasing solely excessive returns. Guard towards not simply the chance of lack of funds but additionally dangers to liquidity and normal portfolio flexibility. Deployments which can be considerably increased threat could 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 challenge’s complete TVL.

• Ethereum’s deeper objectives: 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 incessantly reallocate funds between protocols for causes reminiscent of 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 might be bought over the following three months. These gross sales will sometimes be through fiat off-ramps or onchain swaps for fiat-denominated property.

2.2 Ether Deployments

Our present methods embody solo staking and wETH provided to established lending protocols. Core deployments are re-evaluated frequently however meant to be long-term. EF can also borrow stablecoins and search increased 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 fastidiously vetted farms and tokenized RWAs, into its fiat reserve.

3. Fiat-denominated Belongings Coverage

The EF will allocate its fiat holdings throughout:

1. Fast-liquidity property: money and different extremely liquid fiat-denominated devices that cowl real-time operational wants;
2. Legal responsibility-matched reserves: fixed-term deposits, investment-grade bonds, and different low-risk devices aligned with longer-term obligations; and
3. Tokenized RWAs: ruled by the identical strategic targets 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 inside reporting cadence is in place. Reviews are ready and maintained by the Finance staff, with distribution based mostly on scope and sensitivity.

4.1. Quarterly Reviews

The Finance staff supplies quarterly reviews to the Board and Administration, together with:

• Efficiency (Absolute and towards 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 so on.)

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 Objectives

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 consult with as “Defipunk” which has the next properties:

Privateness is traditionally uncared for within the broader DeFi house, 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 revolutionary power. Development, nonetheless, is usually path-dependent: requirements adopted in intervals of chaotic fast development harden into legacy constraints, and designs that privilege transparency can lock in surveillance by default. Incumbent programs usually exert refined pressures that slender the design house 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 may also 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: increased gasoline costs for privateness, UX friction, problem 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 components: 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 obtained little or no consideration to this point. This means that robust, early institutional assist from an EF-like entity will 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 improvement of decentralized UIs

A extra full listing of standards for challenge assist will be present in §5.3.

5.2. Defipunk begins at residence

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 members, and in any other case enhance its safety and privateness practices. This can assist the EF stay principled and develop in energy, stability, and the power 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 rules in its personal actions, EF will keep on the right track 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, meant to encourage new initiatives to begin, and present initiatives to enhance. They’ll 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, reasonably than perfection on day one. We share the framework overtly 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 consumer/private information and/or place info shielded onchain?
  • Knowledge: Does the protocol (and its typical UIs) keep away from pointless assortment of consumer 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 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 scale 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 mandatory?

• Basic 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 no less than 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 got 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 this moment. EF’s involvement in these areas is well-positioned to set precedents for software use that’s accountable and suitable with its underlying objectives. To do that, it’s going to make investments closely in skilling up its personal competency over time.

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