The Defipunk era begins? Speed ​​reading of Ethereum Foundation’s treasury policy

**Author:** Hsiao-Wei Wang  

**Compiled by:** KarenZ, Foresight News  

### TL;DR  

1. In 2025, the Ethereum Foundation (EF) will allocate approximately 15% of its treasury funds, aiming to maintain a 2.5-year buffer of fiat-denominated operating expenses. The spending ratio will gradually decrease afterward, eventually trending toward a sustainable level (potentially 5% annually).  

2. **Cryptocurrency Asset Policy**: Core considerations for on-chain portfolios include, but are not limited to, security and reliability, balance of returns and risks, and Ethereum’s deeper goals (supporting highly secure, decentralized, open-source cypherpunk applications).  

  - **ETH Sales**: EF will periodically calculate deviations between fiat-denominated assets in the treasury and the "runway" target of operating expenses to determine whether and how much ETH to sell over the next three months.  

  - **ETH Deployment**: Current strategies include solo staking and providing wETH to mature lending protocols, subject to continuous re-evaluation. EF may also borrow stablecoins to seek higher on-chain yields.  

3. **Fiat-Denominated Asset Policy**: EF will allocate its fiat assets to three areas: immediate liquidity assets (cash and other highly liquid fiat instruments), liability-matching reserves (time deposits, investment-grade bonds, and other low-risk tools matching long-term liabilities), and tokenized real-world assets (RWAs).  

4. **Transparency Policy**: The finance team will provide quarterly and annual reports. Annual reports will include more treasury-related information, such as an overview of major treasury allocations (e.g., percentages of fiat currency, idle ETH, and deployed ETH).  

5. **Cypherpunk Goals**: Through research, advocacy, and capital allocation, EF will promote the establishment of a "Defipunk" evaluation framework based on cypherpunk principles, featuring security, open-source nature, financial sovereignty, prioritization of technical solutions over trust-based ones, and active use of cryptographic tools to protect civil liberties and privacy.  

### Full Translation  

The mission of the Ethereum Foundation (EF) is to strengthen the Ethereum ecosystem and uphold its long-term goal: ensuring that "applications run exactly as programmed, free from the possibility of downtime, censorship, fraud, or third-party interference." The EF treasury aims to maintain the foundation’s long-term autonomy, sustainability, and legitimacy. Capital allocation must balance the pursuit of returns beyond benchmarks with EF’s role as a guardian of the Ethereum ecosystem, with a particular focus on the DeFi sector.  

This document outlines the policy framework for EF treasury management and elaborates on key metrics and considerations.  

### Macro Policy  

To achieve its objectives, EF will formulate and periodically optimize asset-liability management policies and high-level capital allocation strategies, managing assets with regard to risk management, duration, and liquidity, while always adhering to Ethereum’s core principles.  

**Two key variables are prioritized**:  

- **A**: Annual operating expenses (as a percentage of the current total treasury)  

- **B**: Years of operating buffer (the number of years that reserved operating funds can cover)  

Where:  

- **A × B**: Determines the target value of fiat-denominated (off-chain or on-chain) reserves, directly influencing the scale and frequency of ETH sales.  

- **(Total Treasury - A × B)**: Defines the value of ETH reserves, from which the core holding of ETH can be calculated by dividing by the ETH price.  

The board and management will periodically reassess these two variables, weighing market dynamics and community feedback to ensure alignment between short-term operations and long-term strategy. Additional considerations during evaluations include: (1) identifying critical years requiring enhanced ecosystem engagement; (2) maintaining a countercyclical stance—increasing support during bear markets and moderating during bull markets.  

**Current target values**: A = 15% (annual operating expenses as a percentage of the treasury), B = 2.5 years (buffer duration). This policy reflects EF’s recognition that 2025–2026 is a critical period for Ethereum, requiring concentrated resources to advance key deliverables.  

EF plans to fulfill its role as a steward long-term but intends to gradually reduce its scope of responsibilities, aiming to linearly decrease annual operating expenses over the next five years and ultimately maintain a long-term benchmark of 5% (consistent with practices of endowment institutions). This path and benchmark will be adjusted as circumstances evolve.  

### Cryptocurrency Asset Policy  

EF will manage treasury assets in a manner consistent with Ethereum’s fundamental principles, pursuing reasonable returns. Core considerations for on-chain portfolios include:  

1. **Security and Reliability**: Prioritizing time-tested, tamper-proof, audited permissionless protocols; supporting "positive-sum" participants in the Ethereum DeFi ecosystem; avoiding exacerbating systemic risks; continuously evaluating project attack vectors and risks, such as smart contract, governance, custodial (e.g., stablecoins), and oracle risks.  

2. **Return-Risk Balance**: Choosing conservative, high-liquidity options over pure high-return pursuits. Preventing not only capital loss risks but also liquidity and overall portfolio flexibility risks. Moderate allocations to higher-risk configurations may occur but in limited scale and with separate management. In all cases, the goal is to hold a moderate percentage of a project’s total value locked (TVL).  

3. **Ethereum’s Deeper Goals**: Supporting highly secure, decentralized, open-source cypherpunk applications. Ideal protocols should minimize trust dependencies, be composable, and maximize privacy support.  

EF will frequently adjust capital allocations in response to market changes, risk diversification needs, or new yield opportunities. Withdrawals should not be interpreted as negative evaluations.  

### ETH Sales  

EF will periodically calculate deviations between fiat-denominated assets in the treasury and the operating expense buffer target ("B") to determine whether and how much ETH to sell over the next three months. These sales will typically occur through fiat exit channels or on-chain conversions to fiat assets.  

EF will regularly assess deviations between fiat reserves and the buffer target (B) to decide on ETH sales (if any) for the next three months, completed via fiat channels or on-chain swaps.  

### ETH Deployment  

Current strategies include solo staking and providing wETH to mature lending protocols. Core deployments will undergo continuous re-evaluation with a long-term development focus. 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, depegging risks, and other factors. As the DeFi ecosystem matures, EF plans to incorporate part of its 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:  

1. **Immediate Liquidity Assets**: Cash and other highly liquid fiat instruments to meet real-time operational needs;  

2. **Liability-Matching Reserves**: Time deposits, investment-grade bonds, and other low-risk tools matching long-term liabilities;  

3. **Tokenized RWAs**: Following the same strategic objectives and risk criteria as native crypto assets.  

### Transparency Policy  

EF’s Co-Executive Directors are responsible for treasury management to the board.  

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 according to scope and sensitivity.  

#### Quarterly Reports  

The finance team provides quarterly reports to the board and management, covering:  

- Performance (absolute values and benchmark comparisons)  

- All positions (openings and closings since the last report)  

- Summaries of major events (operations: processes, infrastructure, security updates/events; ecosystem engagement: meetings, partnerships, etc.)  

#### Annual Reports  

EF’s annual reports will include more treasury-related information, such as an overview of major treasury allocations (e.g., percentages of fiat currency, idle ETH, and deployed ETH).  

### Cypherpunk Goals  

Through research, advocacy, and capital allocation, EF will promote the establishment of a "Defipunk" evaluation framework based on cypherpunk principles, characterized by:  

- Security  

- Open-source nature  

- Financial sovereignty  

- Prioritization of technical solutions over trust-based mechanisms (e.g., multi-signature)  

- Active use of cryptographic tools to protect civil liberties  

- Privacy  

**Privacy**, long overlooked in DeFi, is critical. It protects market participants from digital surveillance (e.g., front-running, sandwich attacks, liquidation sniping, targeted phishing, user profiling, and data-driven coercion) and physical threats.  

#### EF’s Support for Defipunk Transformation  

Ethereum is poised to attract exponentially growing capital, talent, and innovation. However, growth is often path-dependent: standards adopted during chaotic rapid growth can solidify into legacy constraints, while transparency-first designs may inadvertently lock in surveillance mechanisms. Existing systems often exert 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 maintains an "open society in the electronic age" at scale.  

Translating this vision into practical infrastructure requires effort. Today, building cypherpunk DeFi protocols faces challenges: higher privacy-related gas fees, user experience friction, difficulty launching liquidity, stricter audit requirements due to technical complexity and immutability, and opposition to privacy. As a result, many DeFi ecosystems rely on centralized elements: backdoor shutdown mechanisms or fund extraction functions, 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—all of which expose DeFi markets and participants to systemic vulnerabilities.  

Privacy, in particular, requires deliberate attention. As the *Cypherpunk’s Manifesto* states: "For privacy to be universal, it must be part of the social contract." Privacy has inherent network effects but has received little attention until now. This suggests that strong early institutional support from entities like EF is uniquely valuable for shifting the balance toward a more privacy-centric DeFi landscape.  

EF can help guide DeFi toward these goals, for example by:  

- Supporting privacy feature development in emerging DeFi protocols.  

- Encouraging mature protocols to strengthen Defipunk attributes through research collaboration, liquidity support, legitimacy, and other resources.  

- Promoting the development of decentralized user interfaces (UIs).  

#### Starting with Defipunk Internally  

Advocating for open-source, privacy, and other Defipunk goals extends beyond EF’s external activities to its internal operations. Applying Defipunk principles to EF’s own treasury management is a critical 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 otherwise improve its security and privacy practices. This will help EF adhere to its principles and enhance its strength, stability, and resolve.  

#### Defipunk Standards  

The following are specific criteria for internal evaluation of protocols and UIs, designed to encourage new project launches and improvements to existing projects. These standards will apply to all future on-chain allocations by EF. While some criteria (e.g., permissionless access, self-custody, and free/libre open-source software) are direct binary determinants for allocation, others are more complex. Currently, projects need not achieve "ideal" status in every dimension. We seek credible progress and improvement roadmaps rather than perfection from day one. We publicly share this framework to clarify EF’s decision-making, build consensus on these dimensions, and allow the community to consider, adapt, or apply these standards.  

- **Permissionless Access**: Can anyone interact with core smart contracts without KYC or whitelisting?  

- **Self-Custody**: Does the protocol allow users to maintain self-custody as the default?  

- **Free/Libre and Open-Source Software (FLOSS)**: Is the contract code FLOSS, licensed under copyleft (e.g., AGPL) or permissive (e.g., MIT, Apache) licenses? Providing source code alone (e.g., BSL) does not qualify.  

**Privacy**:  

- **Transactions**: Are options available to mask transaction sources/destinations/amounts?  

- **State**: Are user/personal data and/or position information masked on-chain?  

- **Data**: Does the protocol (and its typical UI) avoid collecting unnecessary user data (e.g., user agents) and personal data (e.g., IP addresses)?  

**Open Development Process**:  

- Is the development process reasonably transparent?  

- Are code repositories publicly accessible and actively maintained?  

- Are protocol changes clearly documented with version history?  

- Is the decision-making process for upgrades, parameters, and roadmaps visible?  

**Maximally Trustless Core Logic**:  

- **Immutability**: Is the protocol’s basic logic unupgradable, or governed through highly decentralized, time-locked, and transparent processes? (Avoid administrator keys with broad powers.)  

- **Maximal Feasible Cryptoeconomics**: Does the protocol rely maximally on cryptographic guarantees and economic incentives, minimizing the use of legal wrappers (e.g., collateral guarantees) or off-chain execution to the lowest level necessary for core functions?  

- **Oracle Dependence**:  

 - Is reliance on oracles minimized, and losses maximized in the event of oracle attacks?  

 - When oracles are needed, are robust, decentralized, minimally governed, and tamper-resistant oracles used?  

**Overall Security**:  

- Have contracts been audited, with processes to track audit submission hashes against the last deployed hashes, ideally including monitoring/alerts for discrepancies?  

- Are contract properties formally verified or at least bytecode-verified on blockchain explorers?  

**Distributed User Interfaces**:  

- Are there multiple independent UIs?  

- Is the main UI open-source and hosted in a decentralized manner?  

- Can users interact directly with the contracts?  

### Long-Term Mission  

EF will exist long-term and therefore requires a robust long-term treasury management policy. Having long held only ETH, EF is now gradually shifting toward staking and DeFi, both to enhance financial sustainability and to support a critical application category that promises users permissionless, secure access to foundational civil infrastructure.  

**Acknowledgements**: Thanks to EF members 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 for their valuable feedback on the draft document.  

Thanks also to kpk, Steakhouse Financial, and pcaversaccio for their insights and final review.  

**Disclaimer**: The views in this article are solely those of the author and do not constitute investment advice on this platform. The platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the information and shall not be liable for any losses arising from the use of or reliance on the article’s content.