Original Title: Ethereum Foundation Treasury Policy

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, aiming to maintain a 2.5-year spending buffer in fiat currency, after which the spending ratio will gradually decrease, ultimately approaching a sustainable level (possibly 5% per year).

2. Cryptocurrency Asset Policy: Core considerations for the on-chain portfolio 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 regularly calculate the deviation of fiat-valued assets in the treasury from the operational spending "runway" target and determine whether to sell ETH and the amount 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-Valued Asset Policy: EF will allocate its fiat assets to the following areas: immediate liquidity assets (cash and other highly liquid fiat instruments), liability-matching reserves (time deposits, investment-grade bonds, and other low-risk instruments that match long-term debt), and tokenized RWAs.

4. Transparency Policy: The finance team provides quarterly reports and annual reports. The annual report will include more treasury-related information, including an overview of major treasury allocations (such as the percentage of fiat currency, idle ETH, and deployed ETH).

5. Cypherpunk Goals: EF will promote the establishment of a "Defipunk" evaluation framework based on cypherpunk principles through research, advocacy, and capital allocation, characterized by: security, open-source, financial sovereignty, prioritizing technical solutions over trust solutions, and actively using cryptographic tools to protect civil liberties and privacy.

The original translation is as follows:

The mission of the Ethereum Foundation (EF) is to solidify the Ethereum ecosystem and adhere to its long-term goal: to ensure that "applications run completely as programmed, avoiding 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 that exceed benchmarks with fulfilling the role of a guardian of the Ethereum ecosystem, with particular attention to the DeFi sector. This document outlines the policy framework for EF treasury management and elaborates on key indicators and considerations.

Macroeconomic Policy

To achieve its goals, EF will develop and regularly optimize asset-liability management policies and high-level capital allocation strategies, managing assets under risk management, term, and liquidity considerations, while always adhering to Ethereum's core principles. Focus on two variables:

A: Annual operational spending (percentage of the current total treasury)

B: Operational buffer years (the number of years the reserve operational funds can cover)

Where:

A × B: Determines the target value of fiat-valued (off-chain or on-chain) reserves, directly affecting the scale and frequency of ETH sales. (Total treasury - A × B): Defines the value of ETH reserves, divided by the ETH price to obtain the number of ETH in the core holdings.

The board and management will regularly reassess these two variables, weighing market dynamics and community opinions to ensure short-term operations align with long-term strategies. Additional focus during assessments includes: (1) identifying key years that require enhanced ecosystem participation; (2) maintaining a counter-cyclical stance—intensifying support during bear markets and moderately retracting during bull markets.

The current target values are A=15% (annual operational spending accounts for 15% of treasury funds) and B=2.5 years (buffer period). This policy reflects the Ethereum Foundation's recognition that 2025-2026 is a critical period for Ethereum, necessitating a concentration of resources to advance important deliverables.

EF plans to fulfill its role as a steward in the long term but intends to gradually narrow its scope of responsibilities, aiming to linearly reduce annual operational spending over the next five years, ultimately maintaining a long-term benchmark of 5% (in line with practices of donor organizations). This path and benchmark will be adjusted as circumstances change.

Cryptocurrency Asset Policy

EF will manage treasury assets in a manner consistent with Ethereum's fundamental principles, pursuing reasonable returns.

Core considerations for the on-chain portfolio include but are not limited to:

· Security and Reliability: Prioritize well-established, immutable, audited permissionless protocols; support positive-sum participants in the Ethereum DeFi ecosystem; avoid exacerbating systemic risks; continuously assess projects' attack vectors and risks, such as smart contracts, governance, custodial risks (e.g., stablecoins), oracle risks, etc.

· Balance of Returns and Risks: Choose conservative options with higher liquidity rather than solely pursuing high returns. Not only prevent the risk of capital loss but also guard against liquidity and overall portfolio flexibility risks. Riskier allocations may be made, but they will be limited in scale and managed separately. In any case, the goal is to maintain a moderate proportion of the total value locked (TVL) of individual projects.

· Ethereum's Deeper Goals: Support highly secure, decentralized, open-source cypherpunk applications. Ideal protocols should minimize trust dependencies, possess composability, and maximize support for privacy.

We will frequently adjust capital allocation in response to market changes, diversify risks, or seize new yield opportunities. Withdrawal actions should not be interpreted as negative evaluations.

ETH Sales

EF will regularly calculate the deviation of fiat-valued assets in the treasury from the operational spending buffer ("B") target and determine whether to sell ETH and the amount to sell in the next three months. These sales are typically conducted through fiat exit channels or on-chain exchanges for fiat-valued assets. EF will regularly calculate the deviation of fiat reserves from the buffer target (B) and decide on the amount of ETH to sell in 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, decoupling risks, and other factors. As the DeFi ecosystem matures, EF plans to incorporate some on-chain allocations (including rigorously vetted pools and tokenized RWAs) into its fiat reserves.

Fiat-Valued Asset Policy

EF will allocate its fiat assets to the following areas:

• Immediate liquidity assets: cash and other highly liquid fiat instruments 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: following the same strategic goals 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 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)

Summary of significant events (operations: processes, infrastructure, security updates/events; ecosystem participation: meetings, partnerships, etc.)

Annual Reports

EF's annual report will include more treasury-related information, including an overview of major treasury allocations (such as the percentage of fiat currency, idle ETH, and deployed ETH).

Cypherpunk Goals

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

• Security

• Open-source

• Financial sovereignty

• Prioritizing technical solutions over trust solutions (e.g., multi-signature, etc.)

• Actively using cryptographic tools to protect civil liberties and privacy

• Privacy

Long overlooked in DeFi, yet crucial. Privacy can protect 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 projects' Defipunk transformation

Ethereum is poised to attract exponential growth in capital, talent, and innovative vitality. However, growth often has path dependencies: standards adopted during chaotic rapid growth periods can solidify into legacy constraints, while designs prioritizing transparency may inadvertently lock in surveillance mechanisms. Existing systems often exert subtle pressures that narrow the design space for new DeFi primitives and limit innovations focused on privacy. 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 of the electronic age" at scale.

Turning this vision into practical infrastructure requires effort. Today, building cypherpunk DeFi protocols faces numerous challenges: higher gas fees related to privacy, user experience friction, difficulties in launching liquidity, stricter audit requirements associated with technical complexity and immutability, and the presence of privacy opponents. Consequently, many current DeFi ecosystems rely on centralized elements: backdoor closure mechanisms or fund withdrawal features, 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 the DeFi market and participants to systemic vulnerabilities.

Privacy especially needs to be treated correctly. As the "Cypherpunk's Manifesto" states: "Privacy must be a part of the social contract to be widespread." Privacy has inherent network effects, but has received little attention to date. This indicates that strong early institutional support from entities like EF has unique value in shifting the balance toward a more privacy-focused DeFi landscape.

EF has the capacity to help guide DeFi toward 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 the development of decentralized user interfaces (UIs).

Defipunk starts from within

Advocating for open-source, privacy, and other Defipunk goals is not limited to external entities 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 utilize 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 user interfaces, aimed at encouraging the launch of new projects and the improvement of existing ones. These criteria will apply to all future on-chain configurations by EF. While certain criteria (such as permissionless access, self-custody, and free open-source software) are direct binary determinants of configuration, other criteria are more complex. Currently, projects are not required to achieve "ideal" status on every dimension. We seek credible progress and improvement roadmaps rather than perfection from day one. We make this framework public to provide clarity for EF decision-making and to reach consensus on these dimensions, while allowing the community to consider, adjust, or apply these standards.

• 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 set it as the default option?

• Free Open-Source Software (FLOSS): Is the contract code free open-source software, using a copyleft license (such as AGPL) or a permissive license (such as MIT, Apache)? Merely providing source code (such as BSL) does not qualify.

Privacy:

• Transactions: Is there an option to obscure transaction source/destination/amount?

• Status: Are user/personal data and/or position information obscured on-chain?

• Data: Does the protocol (and its typical UI) avoid collecting unnecessary user data (such as user agents) and personal data (such as IP addresses)?

Open Development Process:

Is the development process reasonably transparent?

Is the code repository 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 core logic of the protocol immutable, or governed through a highly decentralized, time-locked, and transparent process? (Avoid having admin keys with broad powers.)

· Maximum Viable Cryptoeconomics: Does the protocol maximally rely on cryptographic guarantees and economic incentives, minimizing the use of legal wrappers (such as collateral) or off-chain execution to the bare minimum required for core functionality?

· Oracle Dependence:

1. Is the reliance on oracles minimized, and are losses minimized when oracles are attacked?

2. In cases where oracles are needed, are robust, decentralized, minimally governed, and manipulation-resistant oracles used?

Overall Security:

• Are contracts audited, and is there a process to track the audit submission hash against the final deployment hash, ideally including monitoring/alerts for differential changes?

• Are contract attributes formally verified or at least bytecode verified on blockchain explorers?

Distributed User Interface:

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, thus requiring a robust set of treasury long-term management policies. We have long simply held ETH, but are now gradually shifting towards staking and DeFi, both to enhance financial sustainability and to support a critical category of applications—this category is committed to providing users with permissionless secure access to foundational civilizational infrastructure.

Thanks to the following Ethereum Foundation (EF) members for their valuable insights 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 profound insights and final review of this document.

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