The Ethereum Foundation (EF) has always played a key role in promoting the Ethereum ecosystem, but its past fiscal policies have been repeatedly criticized by the community, becoming a focus of internal reform. Just a few hours ago, EF released a detailed financial management strategy, marking a significant change in its long-standing asset allocation approach centered on simply holding ETH.
Below are the five major directions for EF's future financial development, compiled as follows
1. Macroeconomic Policy
To achieve its goals, the Ethereum Foundation (EF) will maintain and periodically adjust its asset and liability management policy and high-level resource allocation strategy. EF will manage its assets based on risk, duration, and liquidity while maintaining consistency with Ethereum's core principles.
Our approach focuses on two variables:
A: Annual Operating Expenses (percentage of current total Treasury)
B: Operational Buffer Years (years reserved for operations)
Where:
A × B: Determines the target reserve in fiat currency (whether on-chain or off-chain). This value will directly impact the scale and frequency of ETH sales.
(TotalTreasury – A × B): Defines the value of ETH reserves, which can be divided by the ETH price to determine the amount of ETH to be retained.
The 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 review will cover two perspectives: (1) identifying key years worth enhancing participation, and (2) adopting a countercyclical strategy—increasing support during bear markets and moderating during bull markets.
The current target is set at: A = 15% of annual operating expenses from the Treasury, B = 2.5 years of operational buffer. This policy reflects our belief that 2025-26 will be a critical period for Ethereum, thus we will focus more on key deliverables.
EF expects to continue playing the role of a long-term manager, but its functional scope will gradually narrow. We plan to linearly reduce annual operating expenses over the next five years, ultimately aligning with the long-term 5% baseline common to donation-based foundations. This trend and baseline will be reviewed and adjusted based on actual circumstances.
2. Crypto Asset Policy
EF will strive to create reasonable returns for its Treasury assets without deviating from Ethereum's core principles.
Core considerations for the on-chain portfolio include but are not limited to:
Security and Stability: Preferring protocols that have been battle-tested, immutable, audited, decentralized, and permissionless. Encouraging participation from positive actors in the Ethereum DeFi ecosystem. The goal is to offset rather than exacerbate systemic risks to the Ethereum system. Continuously reassessing potential attack vectors and risks of projects (such as smart contract, governance, custody risks, stablecoin, and oracle risks).
Reasonableness of Returns and Risks: Preferring conservative, highly liquid choices over blindly pursuing high returns. Not only preventing fund losses but also managing liquidity and asset flexibility risks. Some higher-risk positions may occupy a smaller proportion and be managed separately. In any case, we will only occupy an extremely small proportion of a single project's TVL.
Ethereum's Long-term Goals: Supporting highly secure, decentralized, open-source applications that align with the Cypherpunk spirit. Cypherpunk-style DeFi should be permissionless and unrestricted. Ideal protocols should minimize trust, be composable, and prioritize privacy.
EF will frequently reallocate assets between protocols in response to market conditions, diversification, and new revenue opportunities. Withdrawals should not be seen as opposition to a protocol but as an operational adjustment.
2.1 ETH Sale
EF will regularly calculate the deviation of Treasury fiat assets and operational buffer target (B) each year, and based on this, decide whether to sell ETH and the amount to sell in the next three months. These transactions are typically conducted through fiat off-ramp platforms or on-chain exchanges for fiat assets.
2.2 ETH Deployment
The current strategy includes solo staking and providing wETH to mainstream lending protocols. The core deployment is long-term oriented but will be continuously reassessed. EF may also borrow stablecoins to seek higher yields on-chain. Management and advisors will examine contract security, liquidity risks, de-pegging risks, and other factors of candidate protocols. As the DeFi ecosystem matures, EF plans to incorporate carefully selected farms and tokenized RWAs into its fiat reserve strategy.
3. Fiat Asset Policy
EF will allocate its fiat assets to:
Immediate liquid assets: Cash and other highly liquid fiat assets to meet actual operational needs;
Reserves matching liabilities: Time deposits, investment-grade bonds, and other low-risk instruments matching long-term obligations;
Tokenized real-world assets (RWA): To be managed according to the same strategic goals and risk guidelines as native crypto assets.
4. Transparency Policy
EF Co-Executive Directors (Co-EDs) are responsible for Treasury management to the Board.
To ensure transparency, accountability, and oversight, EF has established a structured internal reporting process. The finance team is responsible for preparing reports and distributing them based on scope and sensitivity.
4.1 Quarterly Reports
The finance team provides quarterly reports to the Board and management, including:
Performance (absolute values and benchmark comparisons)
All positions (opened and closed during the period)
Summary of significant events, including:
Operations (processes, infrastructure, security incidents)
Ecosystem participation (conferences, partnerships, etc.)
4.2 Annual Report
EF's annual report will include more Treasury-related information, such as main asset allocations (e.g., fiat percentage, idle ETH, deployed ETH, etc.).
5. Cypherpunk Goals
EF will expand Cypherpunk principles through research, advocacy, and capital deployment, establishing a practical assessment framework called "Defipunk" with core attributes including:
Security
Open-source
Financial sovereignty
Technical solutions prioritized over trust-based mechanisms (e.g., multi-sig, legal sanctions)
Active use of cryptographic tools to protect civil liberties
Privacy
Privacy has been long neglected in mainstream DeFi but is crucial. It not only protects market participants from digital surveillance (such as front-running, sandwich attacks, liquidation sniping, phishing attacks, and data oppression) but also protects them from physical risks (such as personal threats).
5.1 EF Should Actively Support Defipunk Projects
Ethereum is about to attract massive capital, talent, and innovative energy. However, growth often has path dependency: standards adopted during chaotic growth periods become future burdens. Excessive transparency will make surveillance the default. Existing systems often limit DeFi's design space and privacy innovations.
EF will resist these pressures, helping establish a sovereign, scalably sustainable Ethereum-native financial ecosystem through research, advocacy, and strategic capital deployment.
This is not easy. Cypherpunk DeFi still faces various challenges today: privacy requires higher gas fees, user experience friction, liquidity launch difficulties, higher audit and technical thresholds, and even direct political opponents.
Therefore, most DeFi today still relies on centralized elements (such as backdoor mechanisms, multi-sig, whitelists, monitoring UIs, lack of on-chain privacy), exposing markets and participants to systemic risks.
5.2 Defipunk Starts from Within
Promoting open-source, privacy, and Defipunk principles is not just external but includes EF's own operations. EF's Treasury management is the first step in practicing Defipunk. EF should use secure tools, support anonymous participants, and improve its security and privacy practices.
Teams participating in Treasury management should use and contribute to open-source, privacy-protecting tools and self-upgrade skills when necessary. Only by living these principles can EF truly support the ecosystem to make similar choices.
5.3 Defipunk Assessment Criteria
These are specific guidelines for EF's internal evaluation of protocols and UIs, encouraging new projects and existing protocols to align with the Defipunk spirit. While some criteria are hard conditions (such as open access, self-custody, and FLOSS), others are progressive goals. EF values progress and roadmaps, not initial perfection.
Core assessment axes:
Open access: Can users interact with contracts without KYC or whitelisting?
Self-custody: Can users inherently maintain asset sovereignty?
Free open-source: Do contracts have free licenses (AGPL, MIT, Apache)? (BSL not qualified)
Privacy: Can transactions shield source, address, and amount? Avoid unnecessary data collection?
Open development process: Is code public, maintained, with clear versioning?
Minimal trust core logic: Are protocols non-upgradable or have sufficiently distributed, delayed, and transparent governance?
Cryptoeconomics maximization: Do they rely on cryptography and economic incentives rather than legal guarantees?
Oracle dependency: Is dependency minimized? Are decentralized, manipulation-resistant oracles used?
General security: Have contracts been audited? Do on-chain code and audit versions match?
Distributed UI: Are multiple UIs available? Are they open-source and decentralized? Can direct interaction occur?
Sustainable Management
EF is committed to long-term existence, requiring a robust long-term Treasury policy. We previously held mostly ETH, and now gradually enter staking and DeFi, not just for financial sustainability but to support this key, permissionless application category that protects fundamental rights. EF's participation will also establish positive precedents for these tools. This requires continuous investment in internal skill enhancement.
