EF's asset management will comprehensively consider risk, duration, and liquidity, while ensuring alignment with Ethereum's core principles.
Author: Hsiao-Wei Wang
Translation: Deep Tide TechFlow
Thanks to the following EF members for their valuable comments and feedback on the draft of this document: 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 also to kpk, Steakhouse Financial, and pcaversaccio for their valuable insights and final review of this document.
The Ethereum Foundation (EF) is committed to strengthening the Ethereum ecosystem and consistently upholding its uncompromising core goal: to support "applications that can run completely as programmed, without downtime, censorship, fraud, or third-party interference." The EF Treasury aims to maintain the foundation's long-term independence, sustainability, and credibility. In capital allocation, EF focuses on expanding its role as a steward of the Ethereum ecosystem while pursuing returns that exceed benchmark rates, particularly in support of decentralized finance (DeFi).
This document provides the policies and guidelines for EF Treasury management and discusses key metrics and considerations.
1. Macroeconomic Policy
To achieve its goals, EF will formulate and regularly optimize asset-liability management policies and high-level funding allocation strategies. EF's asset management will comprehensively consider risk, duration, and liquidity, while ensuring alignment with Ethereum's core principles.
Our management strategy focuses on the following two variables:
A: Annual operating expenses (expressed as a percentage of the current total treasury)
B: Operating buffer duration (expressed as the number of years the reserves can support operations)
The formulas are as follows:
A × B: Determines the target reserve size in fiat currency (on-chain or off-chain), which directly affects the scale and pace of ETH sales.
(TotalTreasury - A × B): Defines the value of the ETH reserves, and dividing this value by the ETH price yields the number of ETH in the core holdings.
The EF board and management will regularly reassess these two variables, considering market dynamics and community feedback to ensure alignment between short-term operations and long-term strategy. Each assessment will also be based on the following two perspectives:
Identify key years that require enhanced ecosystem participation;
Maintain a counter-cyclical stance—intensifying support during market downturns and moderately retracting support during bull markets.
The current targets are: A = 15% of the treasury for annual operating expenses; B = 2.5 years of operating buffer duration.
This policy reflects our belief that 2025-2026 may be critical years for Ethereum's development, necessitating a concentration of resources to accomplish important tasks.
EF is expected to assume a long-term stewardship role, but its scope of responsibilities will gradually narrow. Over the next five years, we plan to gradually linearly reduce annual operating expenses, ultimately reaching a long-term baseline level of 5%, a ratio commonly seen in donor-funded organizations. This adjustment path and baseline will be reviewed and optimized based on actual circumstances.
2. Cryptocurrency Asset Policy
EF will strive to achieve reasonable returns on treasury assets while adhering to Ethereum's core principles.
Key considerations for the on-chain portfolio include, but are not limited to:
Security and Reliability: Prioritize protocols that are rigorously tested, immutable, audited, and permissionless. Support participants in the Ethereum DeFi ecosystem that have positive-sum effects. Avoid increasing the overall systemic risk of Ethereum while continuously assessing potential attack vectors and risks of projects, including but not limited to smart contracts, governance, custody (such as stablecoins), and oracle risks.
Reasonable Returns and Risk Control: Choose conservative options with high liquidity rather than solely pursuing high returns. Not only should we guard against the risk of capital loss, but we must also pay attention to liquidity and portfolio flexibility. For investments with slightly higher risk, we will limit their scale and adopt independently segregated investment methods. In any case, EF will ensure that the total locked value (TVL) in any single project remains relatively low.
Deep Goals of Ethereum: Support highly secure, decentralized, open-source applications that align with the cypherpunk ethos. Cypherpunk-style DeFi should possess permissionless characteristics: no high walls. Ideal protocols should minimize trust requirements, be composable, and place a strong emphasis on privacy protection.
EF will frequently adjust the allocation of funds among different protocols based on changes in market conditions, diversification of investment risks, or new yield opportunities. Fund withdrawals should be understood as strategic adjustments rather than a denial of the project.
2.1 Ether Sale Strategy
Throughout the year, EF will regularly calculate the deviation between fiat-valued assets in the treasury and the operating buffer target ("B") and decide whether to sell Ether and the quantity to be sold in the next three months. These sales are typically completed through fiat withdrawal channels or exchanges with fiat-valued assets.
2.2 Ether Deployment Strategy
Currently, EF's deployment strategy includes solo staking and providing wETH to mature lending protocols. Core deployments will be continuously reassessed, but overall, the goal is long-term holding. Additionally, EF may seek higher on-chain yields by borrowing stablecoins. The management team and advisory group of EF will conduct rigorous reviews of candidate protocols, focusing on factors such as contract security, liquidity risk, and de-pegging risk. As the DeFi ecosystem matures, EF plans to integrate a portion of selected on-chain asset allocations (including rigorously vetted yield farms and tokenized real-world assets RWA) into its fiat reserves.
3. Fiat-Valued Asset Policy
EF will allocate its fiat holdings based on the following three categories of needs:
Immediate Liquidity Assets: Cash and other highly liquid fiat-valued instruments to meet real-time operational needs;
Reserves Matching Liabilities: Time deposits, investment-grade bonds, and other low-risk instruments to meet long-term obligations;
Tokenized Real-World Assets (RWA): Managed according to the same strategic goals and risk guidelines as native crypto assets.
4. Transparency Policy
EF's Co-Executive Directors (Co-EDs) are accountable to the board and must manage the treasury while ensuring transparency, accountability, and informed oversight. To this end, EF has established a structured internal reporting mechanism, with the finance team responsible for preparing and maintaining reports, which are distributed based on scope and sensitivity.
4.1 Quarterly Reports
The finance team provides quarterly reports to the board and management, including:
Performance Metrics (absolute performance and comparison with benchmarks);
All Positions (open and closed positions since the last report);
Summary of Significant Events, including:
Operational status (processes, infrastructure, security updates/events, etc.);
Ecosystem participation (meetings, partnerships, etc.).
4.2 Annual Reports
The annual EF report will include more treasury-related information, such as a summary of major allocations, including the percentage distribution of fiat, idle ETH, and deployed ETH.
5. Cypherpunk Goals
The Ethereum Foundation (EF) is committed to establishing and applying a practical evaluation framework based on cypherpunk principles through research, advocacy, and capital deployment, which we call "Defipunk." This framework has the following characteristics:
Security
Open Source
Financial Sovereignty
Technical Solutions Over Trust Solutions (e.g., multi-signature mechanisms, solutions heavily reliant on legal enforcement)
Proactive Deployment of Cryptographic Tools to Protect Civil Liberties
Privacy Protection
Privacy has historically been overlooked in the broader DeFi space, yet it remains crucial. Privacy not only protects market participants from digital surveillance (e.g., front-running trades, sandwich attacks, liquidation sniping, targeted phishing, profiling, and data-based coercion) but also guards against real-world physical threats (such as face-to-face coercion).
5.1 EF Should Actively Support Projects Realizing the Defipunk Vision
Ethereum is attracting exponentially growing capital, talent, and innovative energy. However, growth often has path dependencies: standards adopted during periods of rapid growth may solidify into future legacy constraints; designs that prioritize transparency may default to monitoring modes. Existing systems often subtly pressure and narrow the design space for new DeFi primitives, limiting privacy-centric innovation. The Ethereum Foundation will be committed to resisting these pressures.
Through research, advocacy, and strategic capital deployment, EF can help cultivate an Ethereum-native financial ecosystem that defends financial sovereignty while scaling and maintaining an open society in the electronic age.
Transforming this vision into practical infrastructure requires significant effort. Currently, building cypherpunk DeFi protocols faces numerous challenges, including higher gas fees due to privacy features, user experience friction, difficulties in launching liquidity, technical complexity, and stricter audit requirements due to immutability, as well as opposing forces related to privacy. As a result, today's DeFi ecosystem largely relies on centralized elements, such as backdoor shutdown mechanisms or fund withdrawal features, excessive reliance on multi-signatures or multi-party computation (MPC), widespread use of whitelists, centralized and monitored user interfaces, and a general lack of on-chain privacy—these all expose the DeFi market and participants to systemic vulnerabilities.
Privacy especially needs to be treated correctly. As stated in the "Cypherpunk Manifesto," “For privacy to be widespread, it must be part of a social contract.” Privacy has inherent network effects, but it has received little attention so far. This indicates that strong early support from institutions like EF can play a unique role in shaping a more privacy-focused DeFi ecosystem.
EF has a unique advantage in guiding DeFi towards these goals. For example:
Supporting early DeFi protocols in developing privacy features;
Encouraging mature protocols to strengthen Defipunk attributes through resources such as research collaboration, liquidity support, and legitimacy empowerment;
Promoting research and development of decentralized user interfaces.
For a more complete set of project support standards, see §5.3.
5.2 Defipunk Starts from Within
Advocating for open source, privacy protection, and other Defipunk goals applies not only to the external environment of the Ethereum Foundation (EF) but also to EF's internal operations. Practicing Defipunk principles in EF's treasury management is an important first step towards this goal. More broadly, EF can utilize secure tools to build a prudent operational structure that supports all qualified contributors, including anonymous and pseudonymous participants, and further improve its security and privacy protection practices. This will help EF adhere to its principles while enhancing its capacity for strength, stability, and steadfastness.
Staff involved in treasury management should use and/or contribute to open-source privacy protection tools, especially when the use of these tools requires skill enhancement. By concretely implementing Defipunk principles in its activities, EF will maintain a clear focus and gain the ability to support the entire ecosystem in practicing these principles.
5.3 Defipunk Evaluation Criteria
The following are specific criteria used to evaluate protocols and user interfaces (UI), aimed at encouraging the launch of new projects and the improvement of existing ones. These criteria will apply to all future on-chain deployments by EF. While some criteria (such as permissionless access, self-custody, and free open-source software) are clear binary judgments, other criteria are more complex. Currently, projects are not required to achieve an "ideal" state on every dimension. We value credible progress and improvement roadmaps over the pursuit of perfection from the outset. We share this framework publicly to enhance the transparency of EF's decision-making and establish consistency across these dimensions, while also hoping that the broader community will consider, adjust, or apply these standards in forming their own views.
Permissionless Access Does the core smart contract allow anyone to interact without KYC (identity verification) or whitelisting?
Self-Custody Does the protocol allow users to maintain self-custody and set it as the default option?
Free Open-Source Software (FLOSS) Is the contract code freely open-source and licensed under a Copyleft license (such as AGPL) or a permissive license (such as MIT, Apache)? Merely providing source code (such as BSL) does not meet the requirement.
Privacy Protection
Transaction Privacy: Does it provide options to obscure transaction sources/destinations/amounts?
State Privacy: Are user/personal data and location information obscured on-chain?
Data Privacy: Does the protocol and its typical user interface avoid unnecessarily collecting user data (such as user agents) and personal data (such as IP addresses)?
Open Development Process
Is the development process reasonably transparent?
Is the codebase publicly accessible and actively maintained?
Are there clear reasons and version histories for protocol changes?
Is the decision-making process for upgrades, parameters, and roadmaps visible?
Core Logic with Maximum Trust Minimization
Immutability Is the core logic of the protocol non-upgradable, or is it managed by a highly decentralized, time-locked, and transparent process? (Avoid using administrator keys with broad permissions.)
Maximizing Viable Cryptoeconomic Models Does the protocol rely as much as possible on cryptographic guarantees and economic incentives while minimizing reliance on legal wrappers (such as collateral) or off-chain execution to the lowest level necessary for its core functionality?
Oracle Dependence
Does it minimize reliance on oracles and limit losses in the event of oracle compromise?
When oracles must be used, are robust, decentralized, governance-minimized, and manipulation-resistant oracles employed?
General Security
Is the contract audited, and is there a process to track the hash of audit submissions against the final deployed version? Ideally, it should include monitoring/alert mechanisms to detect differential changes.
Are the contract attributes formally verified, or at least is the bytecode verification completed on a block explorer?
Distributed User Interface (UI)
Are there multiple independent user interfaces?
Is the main user interface open-source and hosted in a decentralized manner?
Can users interact directly with the contract?
6. Ongoing Management Responsibility
The Ethereum Foundation (EF) is committed to long-term development and requires a robust long-term treasury management policy. In the past, EF held ETH for the long term, but is now gradually shifting towards staking and DeFi, not only to enhance financial sustainability but also to support a key application area that currently promises permissionless, secure access to foundational civil infrastructure for millions. EF's participation in these areas sets a good precedent for responsible and goal-aligned tool usage.
To achieve this goal, EF will invest significantly over time to enhance its own capabilities.
If you have ideas that could contribute to the integration of EF with DeFi, please fill out this form.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
