TL;DR
1. In 2025, the Ethereum Foundation (EF) will spend approximately 15% of its Treasury funds, aiming to maintain a 2.5-year expenditure buffer in fiat currency, after which it will gradually reduce the expenditure ratio, ultimately trending towards a sustainable level (possibly 5% annually).
2. Crypto Asset Policy: The core considerations for the on-chain investment portfolio include, but are not limited to: security and reliability, yield and risk balance, and Ethereum's deeper goals (supporting highly secure, decentralized, open-source cypherpunk applications).
· ETH Sales: EF will periodically calculate the deviation of fiat-denominated assets in the Treasury from the operational expenditure "runway" target and determine whether and how much ETH to sell in the next three months.
· ETH Deployment: Current strategies include solo staking and providing wETH to mature lending protocols, which will be continuously reassessed. EF may also borrow stablecoins to seek higher on-chain yields.
3. Fiat-Denominated Asset Policy: EF will allocate its fiat assets to the following areas: immediate liquidity assets (cash and other highly liquid fiat currency instruments), liability-matching reserves (time deposits, investment-grade bonds, and other low-risk tools matching long-term debt), and tokenized RWAs.
4. Transparency Policy: The finance team will provide quarterly and annual reports. The annual report will include more Treasury-related information, including an overview of the main Treasury configuration (such as the percentage of fiat currency, idle ETH, and deployed ETH).
5. Cypherpunk Goals: Through research, advocacy, and fund allocation, EF will promote the establishment of a "Defipunk" assessment framework based on cypherpunk principles, characterized by: security, open-source, financial sovereignty, prioritizing technical solutions over trust solutions, and actively using cryptographic tools to protect civil liberties and privacy.
Original translation follows:
The Ethereum Foundation's (EF) mission is to consolidate the Ethereum ecosystem and adhere to its long-term goal: ensuring that "applications run exactly as programmed, avoiding the possibility of downtime, censorship, fraud, or third-party intervention". The EF Treasury aims to maintain the foundation's long-term autonomy, sustainability, and legitimacy. Fund allocation needs to balance pursuing returns beyond benchmarks and fulfilling the role of Ethereum ecosystem guardian, with a particular focus on the DeFi field. This document clarifies the policy framework for EF Treasury management and elaborates on key indicators and consideration factors.
Macro Policy
To achieve its goals, EF will develop and regularly optimize asset-liability management policies and advanced fund allocation strategies, managing assets under risk management, term, and liquidity considerations while always adhering to Ethereum's core principles. Focusing on two variables:
A: Annual Operational Expenditure (percentage of current Treasury total)
B: Operational Buffer Years (number of years operational funds can cover)
Where:
A × B: Determines the fiat-denominated (off-chain or on-chain) reserve target value, directly affecting the scale and frequency of ETH sales. (Treasury Total - A × B): Defines the ETH reserve value, which can be divided by the ETH price to obtain the core holding ETH quantity.
The board and management regularly reassess these two variables, weighing market dynamics and community opinions to ensure short-term operations align with long-term strategy. Additional focus during assessment includes: (1) identifying key years requiring enhanced ecosystem participation; (2) maintaining a countercyclical stance—increasing support during bear markets, moderately contracting during bull markets.
The current target values are A=15% (annual operational expenditure as 15% of Treasury funds), B=2.5 years (buffer years). This policy reflects the Ethereum Foundation's determination that 2025-2026 are critical years for Ethereum, requiring concentrated resources to advance important deliverables.
EF plans to long-term fulfill the steward role but intends to gradually narrow its responsibilities, planning to linearly reduce annual operational expenditure over the next five years, ultimately maintaining a 5% long-term benchmark (in line with donation-type institution practices). This path and benchmark will be adjusted according to circumstances.
Crypto Asset Policy
EF will manage Treasury assets in a manner consistent with Ethereum's fundamental principles, pursuing reasonable returns.
The core considerations for the on-chain investment portfolio include, but are not limited to:
· Security and Reliability: Prioritizing proven, immutable, audited permissionless protocols; supporting "positive-sum" participants in Ethereum's DeFi ecosystem; avoiding exacerbating systemic risks; continuously evaluating projects' attack vectors and risks, such as smart contract, governance, custodial (e.g., stablecoins), and oracle risks.
· Yield and Risk Balance: Selecting conservative options with high liquidity, rather than blindly pursuing high returns. Preventing not only fund loss risks but also liquidity and overall investment portfolio flexibility risks. Potentially making slightly riskier allocations, but limited in scale and separately managed. In any case, the goal is a moderate proportion of the total locked value (TVL) for individual projects.
· Ethereum's Deeper Goals: Supporting highly secure, decentralized, open-source cypherpunk applications. Ideal protocols should minimize trust dependencies, possess composability, and maximize privacy support.
We will frequently adjust fund allocations in response to market changes, risk diversification, or new yield opportunities. Withdrawal actions should not be interpreted as negative evaluations.
ETH Sales
EF will periodically calculate the deviation of fiat-denominated assets in the Treasury from the operational expenditure buffer ("B") target and determine whether to sell ETH and the quantity for the next three months. These sales are typically conducted through fiat currency exit channels or on-chain exchanges to fiat currency assets. EF will regularly calculate the deviation of fiat reserves from the buffer target (B) and decide on ETH sales volume for the next three months (if any). Sales are usually completed through fiat channels or on-chain exchanges.
ETH Deployment
Current strategies include solo staking and providing wETH to mature lending protocols. Core deployments will be continuously reassessed, but the goal is long-term development. EF may also borrow stablecoins to seek higher on-chain yields. EF's management and advisors will review candidate protocols based on contract security, liquidity risks, de-pegging risks, and other factors. As the DeFi ecosystem matures, EF plans to incorporate some on-chain allocations (including rigorously reviewed pools and tokenized RWAs) into its fiat reserves.
Fiat-Denominated Asset Policy
EF will allocate its fiat assets to the following areas:
· Immediate Liquidity Assets: Cash and other highly liquid fiat currency instruments for real-time operational needs;
· Liability-Matching Reserves: Time deposits, investment-grade bonds, and other low-risk tools matching long-term debt;
· Tokenized RWAs: Following the same strategic goals and risk guidelines as native crypto assets.
Transparency Policy
EF's joint executive directors are responsible to the board for Treasury management. To ensure transparency, accountability, and informed oversight, a structured internal reporting mechanism has been established. Reports are prepared and maintained by the finance team and distributed based on scope and sensitivity.
Quarterly Reports
The finance team provides quarterly reports to the board and management, including:
Performance (absolute values and benchmark comparisons)
All Positions (openings and closings since the last report)
Major Event Summary (Operational: processes, infrastructure, security updates/incidents; Ecosystem Participation: meetings, partnerships, etc.)
Annual Report
The EF annual report will include more Treasury-related information, including an overview of the main Treasury configuration (such as the percentage of fiat currency, idle ETH, and deployed ETH).
Cypherpunk Goals
EF (through research, advocacy, and fund allocation) will promote the establishment of a "Defipunk" assessment framework based on cypherpunk principles, characterized by:
· Security
· Open-source
· Financial Sovereignty
· Technical Solutions Prioritized Over Trust Solutions (such as multisig)
· Actively Using Cryptographic Tools to Protect Civil Liberties and Privacy
· Privacy
Long-term overlooked but crucial in DeFi. Privacy can protect market participants from digital surveillance (such as front-running, sandwich attacks, liquidation sniping, targeted phishing, user profiling, and data-based coercion) and physical threats.
EF Should Actively Support Defipunk Transformation of Projects
Ethereum is expected to attract exponential growth of capital, talent, and innovative vitality. However, growth often has path dependency: standards adopted during chaotic rapid growth periods can solidify into legacy constraints, and designs prioritizing transparency may by default lock in monitoring mechanisms. Existing systems often impose subtle pressures that narrow the design space for new DeFi primitives and limit privacy-focused innovation. The Ethereum Foundation will resist these pressures.
Through research, advocacy, and strategic capital allocation, EF can help cultivate an Ethereum-native financial ecosystem that safeguards self-sovereignty and sustains an "open society of the electronic age" at scale.
Transforming this vision into actual infrastructure requires effort. Today, building Cypherpunk DeFi protocols faces numerous challenges: higher privacy-related gas fees, user experience friction, difficulty in launching liquidity, more stringent audit requirements related to technical complexity and immutability, and the presence of privacy opponents. Therefore, many current DeFi ecosystems rely on centralized elements: backdoor closure mechanisms or fund withdrawal functions, over-reliance on multisig or multi-party computation (MPC), widespread use of whitelists, centralized and monitored user interfaces, and a general lack of on-chain privacy—all of which expose DeFi markets and participants to systemic vulnerabilities.
Privacy especially needs to be treated correctly. As the Cypherpunk's Manifesto points out: "Privacy is necessary for an open society in the electronic age." Privacy has inherent network effects but has received little attention so far. This suggests that strong early institutional support from entities like EF has unique value in shifting the landscape towards a more privacy-focused DeFi.
EF has the ability to help guide DeFi towards these goals. For example:
· Support emerging DeFi protocols in developing privacy features.
· Encourage mature protocols to strengthen Defipunk attributes through research collaboration, liquidity support, legitimacy, and other resources.
· Promote R&D of decentralized user interfaces (UI).
Defipunk Starts from Within
Advocating for open-source, privacy, and other Defipunk goals is not limited to external EF efforts but also includes potential internal operations of EF itself. Applying Defipunk principles in EF's own Treasury management is a crucial first step. More broadly, EF can use secure software tools, establish prudent operational structures to support all qualified contributors (including anonymous and pseudonymous participants), and improve its security and privacy practices in other ways. This will help EF stay true to its principles and enhance its strength, stability, and resolve.
