Original author: Hsiao-Wei Wang
Original translation: KarenZ, Foresight News
TL;DR
1. In 2025, the Ethereum Foundation (EF) will spend approximately 15% of its treasury funds, with the goal of maintaining a 2.5-year spending buffer denominated in fiat currency, after which the spending ratio will be gradually reduced to a sustainable level (possibly 5% per year).
2. Cryptoasset policy: The core considerations of the on-chain investment portfolio include but are not limited to: security and reliability, return and risk balance, and Ethereum’s deep goals (supporting highly secure, decentralized, open source cypherpunk applications).
ETH sales: EF will regularly calculate the deviation between the fiat-denominated assets in the treasury and the operating expenditure runway target, and determine whether to sell ETH and the amount to be sold in the next three months.
ETH deployment: The current strategy includes solo staking and providing wETH to mature lending protocols, which will be constantly re-evaluated. EF may also borrow stablecoins to seek higher on-chain returns.
3. Legal denominated asset policy: EF will allocate its legal assets to the following areas: immediate liquidity assets (cash and other highly liquid legal currency instruments), liability matching reserves (time deposits, investment grade bonds and other low-risk instruments matched with long-term debt) and tokenized RWA.
4. Transparency Policy: The finance team provides quarterly and annual reports. The annual report will contain more information related to the treasury, including an overview of the main treasury configurations (such as fiat currency, idle ETH, and percentage of deployed ETH).
5. Cypherpunk Goal: Through research, advocacy and funding, EF will promote the establishment of a Defipunk evaluation framework based on cypherpunk principles. Its characteristics include: security, open source, financial sovereignty, technical solutions take precedence over trust solutions, and the active use of cryptographic tools to protect civil liberties and privacy.
The original text is translated as follows:
The mission of the Ethereum Foundation (EF) is to consolidate the Ethereum ecosystem and adhere to its long-term goal: to ensure that applications run exactly as programmed, without the possibility of downtime, censorship, fraud, or third-party intervention. The EF Treasury is intended to maintain the long-term autonomy, sustainability, and legitimacy of the Foundation. Fund allocation needs to strike a balance between pursuing returns that exceed the benchmark and fulfilling the role of the guardian of the Ethereum ecosystem, with a particular focus on the DeFi field.
This document defines the policy framework for EF treasury management and explains the key indicators and considerations.
Macroeconomic policies
To achieve its goals, EF will develop and regularly optimize asset-liability management policies and advanced capital allocation strategies, manage assets under risk management, maturity and liquidity considerations, while always adhering to the core principles of Ethereum.
Focus on two variables:
A: Annual operating expenses (as a percentage of current treasury total)
B: Operating buffer period (the number of years that the reserved operating funds can cover)
in:
A × B: Determines the target value of reserves (off-chain or on-chain) denominated in fiat currency, which directly affects the scale and frequency of ETH sales.
(Total Treasury - A × B): Defines the value of ETH reserves. Dividing it by the ETH price gives the amount of ETH in the core holdings.
The board and management regularly re-evaluate these two variables, weighing market dynamics and community opinions to ensure that short-term operations are consistent with long-term strategies. Two additional points are paid attention to during the evaluation: (1) Identifying key years that require increased ecosystem participation; (2) Maintaining a counter-cyclical stance - increasing support in bear markets and moderately shrinking in bull markets.
The current target value is A = 15% (annual operating expenses account for 15% of treasury funds), B = 2.5 years (buffer period). This policy reflects that the Ethereum Foundation believes that 2025-2026 is a critical period for Ethereum and that resources need to be concentrated to promote important deliverables.
EF plans to continue to serve as a steward in the long term, but plans to gradually reduce its responsibilities, intending to linearly reduce annual operating expenses over the next five years, ultimately maintaining a long-term benchmark of 5% (in line with the practice of grant-making institutions). This path and benchmark will be adjusted as the situation changes.
Crypto Asset Policy
EF will manage treasury assets in a manner consistent with the fundamental principles of Ethereum and pursue reasonable returns.
The core considerations of the on-chain investment portfolio include but are not limited to:
Security and reliability: Prioritize time-tested, tamper-proof, audited permissionless protocols; support positive “positive-sum game” participants in the Ethereum DeFi ecosystem; avoid exacerbating systemic risks; and continuously evaluate the project’s attack vectors and risks, such as smart contracts, governance, custodial (such as stablecoins), oracle risks, etc.
Balance of return and risk: Choose conservative options with higher liquidity rather than blindly pursuing high returns. Not only guard against the risk of capital loss, but also against the risk of liquidity and overall flexibility of the portfolio. Slightly higher-risk allocations are possible, but they are limited in scale and managed separately. In any case, the goal is to account for a moderate proportion of the total locked value (TVL) of a single project.
Ethereums underlying goal: to support highly secure, decentralized, and open-source cypherpunk applications. The ideal protocol should minimize trust dependency, be composable, and support privacy to the greatest extent possible.
We will frequently adjust capital allocation in response to market changes, risk diversification or new profit opportunities. Withdrawal behavior should not be interpreted as a negative evaluation.
ETH for sale
EF will periodically calculate the deviation of the fiat-denominated assets in the treasury from the target of the operating expense buffer (“B”) and determine whether to sell ETH and the amount of sales in the next three months. These sales are usually carried out through fiat currency exit channels or on-chain conversion to fiat currency assets.
EF will regularly calculate the deviation between the fiat currency reserves and the buffer target (B) and determine the amount of ETH sold (if any) in the next three months. Sales are usually completed through fiat currency channels or on-chain exchanges.
ETH Deployment
Current strategies include solo staking and providing wETH to mature lending protocols. The core deployment will be constantly re-evaluated, but the goal is long-term development. EF may also borrow stablecoins to seek higher on-chain returns. EFs management and advisors will review candidate protocols based on contract security, liquidity risk, decoupling risk, and other factors. As the DeFi ecosystem matures, EF plans to incorporate some on-chain configurations (including strictly reviewed pools and tokenized RWA) into its fiat currency reserves.
Fiat currency denominated assets policy
EF will allocate its legal assets to the following areas:
Immediate liquidity assets: cash and other highly liquid fiat currency instruments used to meet real-time operational needs;
Liability matching reserves: time deposits, investment-grade bonds and other low-risk instruments that match long-term debt;
Tokenized RWAs: Follow the same strategic objectives and risk guidelines as the native crypto assets.
Transparency Policy
The EF Joint Executive Directors are responsible to the Board for treasury management.
A structured internal reporting mechanism is in place to ensure transparency, accountability and informed oversight. Reports are prepared and maintained by the Finance team and distributed based on scope and sensitivity.
Quarterly Report
The Finance team provides quarterly reports to the Board and management including:
Performance (absolute and relative to benchmark)
All positions (opened and closed since last report)
Summary of major events (operations: processes, infrastructure, security updates/incidents; ecosystem engagement: conferences, partnerships, etc.)
Annual Report
The EF annual report will contain more treasury-related information, including an overview of major treasury configurations (such as fiat currencies, idle ETH, and percentage of deployed ETH).
Cypherpunk Target
EF (through research, advocacy and funding) will promote the establishment of a “Defipunk” evaluation framework based on cypherpunk principles, whose features include:
Security
Open Source
Financial sovereignty
Technical solutions take precedence over trust solutions (such as multi-signature, etc.)
Actively use cryptographic tools to protect civil liberties
privacy
Privacy is a long-overlooked but critical issue in DeFi. Privacy protects market participants from digital surveillance (e.g., front-running, sandwich attacks, liquidation sniping, targeted phishing, user profiling, and data-based coercion) and physical threats.
EF should actively support the Defipunk transformation of projects
Ethereum is poised to attract exponentially more capital, talent, and innovation. However, growth is often path-dependent: standards adopted during periods of chaotic rapid growth can solidify as legacy constraints, and designs that prioritize transparency can lock in surveillance mechanisms by default. Existing systems often exert subtle pressures that shrink the design space for new DeFi primitives and constrain privacy-focused innovation. The Ethereum Foundation will resist these pressures.
Through research, advocacy, and strategic capital allocation, EF can help foster an Ethereum-native financial ecosystem that secures self-sovereignty and sustains “an open society for the electronic age” at scale.
It takes work to turn this vision into actual infrastructure. Today, there are many challenges to building cypherpunk DeFi protocols: higher privacy-related gas fees, user experience friction, difficulty in launching liquidity, stricter audit requirements related to technical complexity and immutability, and the existence of privacy opponents. As a result, many DeFi ecosystems today rely on centralized elements: backdoor closing mechanisms or fund withdrawal functions, over-reliance on multi-signature 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 in particular needs to be treated correctly. As the Cypherpunks Manifesto states: For privacy to be widespread, it must be part of the social contract. Privacy has inherent network effects, but has received little attention to date. This suggests that strong early institutional support from entities such as EF is uniquely valuable in shifting the balance toward a more privacy-focused DeFi landscape.
EF has the ability to help guide DeFi towards these goals. For example:
Support emerging DeFi protocols to develop privacy features.
Encourage mature protocols to strengthen Defipunk attributes through research collaboration, liquidity support, legitimacy, and other resources.
Promote the research and development of decentralized user interfaces (UI).
Defipunk starts with itself
Advocacy for open source, privacy, and other Defipunk goals extends beyond the EF’s external operations to include the EF’s own internal operations where possible. Applying Defipunk principles to the EF’s own treasury management is a critical first step. More broadly, the EF can use secure software tools, establish prudent operational structures to support all eligible contributors (including anonymous and pseudonymous participants), and otherwise improve its security and privacy practices. This will help the EF adhere to its principles and increase its strength, stability, and steadfastness.
Defipunk Standard
Below are specific criteria for internal evaluation of protocols and user interfaces, intended to encourage new projects to start and existing projects to improve. These criteria will apply to all future on-chain configurations of EF. While some criteria (such as permissionless access, self-custody, and free and open source software) are straightforward binary determinants of configuration, others are more complex. At this time, projects do not need to achieve an ideal state on every dimension. We seek credible progress and improvement roadmaps, not perfection on day one. We make this framework public to provide clarity for EF decision-making and reach consensus on these dimensions, while allowing the community to consider, adjust, or apply these criteria.
Permissionless access: Can anyone interact with the core smart contracts without KYC or whitelisting?
Self-custody: Does the protocol allow users to maintain self-custody and make it the default option?
Free and Open Source Software (FLOSS): Is the contract code free and open source software, using a copyleft license (such as AGPL) or a permissive license (such as MIT, Apache)? Providing only source code (such as BSL) does not qualify.
privacy:
Transactions: Is there an option to mask the source/destination/amount of a transaction?
Status: Is user/personal data and/or position information shielded on-chain?
Data: Does the protocol (and its representative UI) avoid collecting unnecessary user data (such as user agent) and personal data (such as IP address)?
Open development process:
Is the development process reasonable and transparent?
Is the code repository publicly accessible and actively maintained?
Are changes to the protocol clearly documented and have a version history?
Is the decision-making process for upgrades, parameters, and roadmaps visible?
The core logic of maximum trustlessness:
Immutability: Is the underlying logic of the protocol not upgradeable, or governed through a highly decentralized, time-locked, and transparent process? (Avoiding admin keys with broad powers.)
Maximum Viable Cryptoeconomics: Does the protocol maximize its reliance on cryptographic guarantees and economic incentives, and reduce the use of legal wrappers (such as collateral) or off-chain execution to the minimum required for core functionality?
Oracle dependencies:
Do you try to reduce your reliance on oracles and minimize losses when oracles are attacked?
In cases where oracles are needed, are they powerful, decentralized, minimally governed, and manipulation-resistant oracles used?
Overall Security:
Are contracts audited and is there a process in place to track audit commit hashes vs. last deployed hashes, ideally including monitoring/alerting when differences change?
Are contract properties formally verified or at least bytecode verified on a blockchain explorer?
Distributed User Interface:
Are there multiple independent UIs?
Is the main UI open source and hosted in a decentralized manner?
Can users interact with the contract directly?
Long-term mission
EF will exist for a long time, so a robust long-term treasury management policy is needed. We have long held ETH, but are now gradually turning to staking and DeFi, both to enhance financial sustainability and to support a key application category that is providing users with the promise of secure, permissionless access to basic civilization infrastructure.
Thanks to the following Ethereum Foundation (EF) members for their comments and feedback on the draft 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 to kpk, Steakhouse Financial, and pcaversaccio for their insights and final review of this document.
