Introduction
The Ethereum Foundation (EF) is committed to strengthening the Ethereum ecosystem while upholding its long-term vision: ensuring applications run exactly as programmed without downtime, censorship, fraud, or third-party interference. The EF treasury aims to maintain the foundation’s autonomy, sustainability, and legitimacy through strategic financial management. This document outlines EF’s treasury policies, key metrics, and objectives.
Macro Policy Framework
EF’s asset-liability management focuses on two variables:
- Annual Operational Expenditure (A): Percentage of the treasury spent yearly (currently 15%).
- Operational Buffer (B): Years of reserve coverage (target: 2.5 years).
Key Adjustments:
- ETH Reserve Calculation:
(Treasury Total − A × B) ÷ ETH Price = Core ETH Holdings. - Long-Term Strategy: Gradually reduce annual expenditure to 5%, aligning with endowment norms.
EF prioritizes counter-cyclical support—increasing ecosystem backing during bear markets and scaling back during bull markets.
Crypto Asset Policy
EF manages on-chain investments based on:
- Security & Reliability: Audited, permissionless protocols.
- Risk-Reward Balance: Conservative, liquid options over high-yield risks.
- Ethereum’s Core Principles: Supporting decentralized, open-source cypherpunk applications.
ETH Deployment Strategies:
- Solo Staking
- wETH Loans: Allocated to mature lending protocols.
- Stablecoin Borrowing: For higher on-chain yields.
ETH Sales:
EF periodically sells ETH to maintain fiat reserves matching the operational buffer (B). Transactions occur via fiat off-ramps or on-chain swaps.
Fiat-Denominated Asset Policy
EF allocates fiat assets to:
- Liquidity Tools: Cash and high-liquidity instruments.
- Debt-Matching Reserves: Low-risk tools (e.g., term deposits, bonds).
- Tokenized RWAs: Follows crypto asset risk guidelines.
Transparency Policies
- Quarterly Reports: Performance, portfolio changes, ecosystem engagement.
- Annual Reports: Treasury allocation snapshots (fiat, idle ETH, deployed ETH).
Defipunk Vision
EF champions Defipunk—a framework for DeFi protocols embodying:
- Privacy: Shielding transactions, states, and data.
- Self-Sovereignty: Permissionless access, self-custody.
- FLOSS: Free/libre open-source software.
EF’s Defipunk Initiatives:
- Funding privacy-focused DeFi features.
- Supporting decentralized UIs.
- Advocating for immutable, trust-minimized protocols.
Evaluation Standards for Projects:
| Criteria | Ideal State |
|---|---|
| Permissionless Access | No KYC/whitelisting. |
| Self-Custody | Default option for users. |
| FLOSS License | AGPL/MIT/Apache. |
| Privacy Features | Masked transactions/user data. |
| Decentralized Governance | Transparent, slow-upgrade processes. |
Long-Term Mission
EF’s treasury policies evolve to ensure financial sustainability and ecosystem support. Transitioning from passive ETH holding to staking/DeFi aligns with both goals.
FAQ Section
1. Why is EF reducing ETH expenditure to 5%?
To achieve long-term sustainability, mirroring endowment models while maintaining operational flexibility.
2. How does EF select DeFi protocols for ETH deployment?
Based on security audits, liquidity, and alignment with Ethereum’s cypherpunk principles.
3. What is Defipunk?
A movement prioritizing privacy, sovereignty, and open-source tools in DeFi—core to EF’s funding agenda.
4. How often does EF sell ETH?
Quarterly, adjusted to maintain the 2.5-year fiat buffer.
👉 Explore Ethereum’s latest staking strategies
👉 Learn about Defipunk’s privacy tools
Acknowledgments: EF members and external reviewers contributed insights to this policy.
Original Source
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