In brief
- Following community feedback, the policy seeks to normalize the foundation’s approach to selling ETH.
- The foundation plans to reduce annual expenses from 15% to 5% over the next five years.
- It’s also adopting a set of “Defipunk” principles to screen DeFi protocols before deploying its treasury assets.
The Ethereum Foundation has published a new treasury policy that aims to reshape how its reserves are held and invested, seeking to rewrite the playbook in a way better suited to the on-chain world it helped create.
The new set of treasury policies marks two key moves from the non-profit organization that stewards development for the Ethereum ecosystem.
It aims to reduce annual spending from 15% of assets to just 5% by 2030 and will also seek to utilize its treasury for DeFi protocols.
Those prospects are projected to “earn acceptable returns on treasury assets” while staying “consistent with Ethereum’s underlying principles,” Hsiao-Wei Wang, co-executive director at the foundation, wrote Wednesday.
The new policies formalize a lower spending trajectory and a rule-based approach for converting the foundation’s Ethereum reserves into cash.
It plans to achieve this by committing to reduced annual operating expenses and creating a predictable “glide path and baseline” toward spending, Wang explained.
The foundation “expects to remain a long-term steward, but envisions its scope gradually narrowing,” Wang claimed.
The rule-based conversion, meanwhile, works by automatically selling Ethereum (ETH) only when cash reserves fall below the 2.5-year expense buffer (approximately 37.5% of the treasury), Wang wrote.
For every quarter, the Ethereum Foundation will sell a portion of its Ethereum reserves based on the amount of cash required, converting the Ethereum to fiat through exchanges or on-chain swaps.
The target cash reserve, calculated as annual operating spend, multiplied by the desired runway, “directly informs the size and the cadence of ETH sales,” Wang noted.
Decrypt approached the Ethereum Foundation to learn more.
Ethereum goes ‘Defipunk’
In the note, the foundation introduced “Defipunk,” a new term that describes how “cypherpunk” values can be applied to DeFi (decentralized finance) and the broader Ethereum ecosystem.
The term is derived from and borrows core ideas in the Cypherpunk Manifesto, written by American programmer and mathematician Eric Hughes in 1993.
In the manifesto, Hughes argues that privacy is essential for a free and open society. To keep it, individuals need to build practical defenses through cryptography and code, rather than relying on the authority of governments or corporations.
The foundation has established criteria for projects it seeks to support, aligning with the vision.
“For privacy to be widespread, it must be part of a social contract,” Hughes wrote.
The Ethereum Foundation echoes this, with Wang noting that privacy has “inherent network effects,” and yet has received “very little attention so far.”
“Strong, early institutional support” from entities such as the Ethereum Foundation could be “uniquely valuable in flipping the equilibrium” for privacy in the decentralized finance sector, Wang wrote.
Edited by Sebastian Sinclair
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