Main Points
- Introduction of a formal asset-liability framework linking operational spending to a multi-year reserve runway.
- Shift from passive ETH holdings to active deployments in staking, DeFi protocols, and future integration of tokenized Real-World Assets (RWA).
- Establishment of “Defipunk” criteria to ensure DeFi engagements align with privacy, security, and decentralization ideals.
- Gradual reduction of annual expenses from 15% to 5% by 2030 through an endowment-style model.
- Quarterly and annual transparent reporting on asset allocations, investment performance, and ETH sale triggers.
- ETH sales governed by a counter-cyclical strategy, balancing market conditions with fiat reserve needs.
- Integration of stablecoin holdings, low-risk fiat instruments, and tokenized RWA into the treasury mix.
- Emphasis on supporting critical ecosystem deliverables during the pivotal 2025-2026 period.
- Strengthening of the Ethereum ecosystem’s resilience by funding key research, development, and community initiatives.
Introduction
On June 4, 2025, the Ethereum Foundation (EF) published a comprehensive treasury policy aimed at reinforcing its long-term sustainability and expanding its role as a steward of the Ethereum ecosystem. The EF, a not-for-profit organization dedicated to supporting the development of Ethereum, recognized that the rapidly evolving decentralized finance (DeFi) landscape and heightened community expectations necessitated a shift from a passive holding strategy to active capital deployments. This newly released framework outlines how the Foundation intends to manage its ETH reserves, deploy capital in DeFi protocols, ensure transparency, and uphold Ethereum’s core principles of decentralization, neutrality, and permissionless innovation.
Central to this announcement is the Foundation’s acknowledgment that 2025–2026 will be pivotal years for Ethereum’s growth trajectory. The policy underscores the need for a robust financial management approach to sustain critical research, development, and community projects throughout this transitional period. By formalizing guidelines for ETH sales, staking, DeFi engagements, and future integration of tokenized Real-World Assets (RWA), the EF aims to strike a balance between earning acceptable returns on treasury assets and advancing the ecosystem’s long-term mission.
Strategic Imperative: A Pivotal Moment for Ethereum
Since Ethereum’s Merge to Proof-of-Stake in September 2022, the network has witnessed accelerated innovation at the application layer, fueled further by the approval of U.S.-listed Ethereum ETFs in January 2024. These developments have ushered in substantial capital inflows and heightened demand for DeFi solutions, but they have also introduced new complexities, market volatility, and increased scrutiny on the Foundation’s stewardship of its treasury. Against this backdrop, the EF’s new treasury policy arrives at a critical juncture, seeking to restore community trust following concerns over unexpected ETH sales in recent months.
In particular, community backlash over mid-2025 ETH sales highlighted the need for clearer guidelines and transparent reporting. The EF’s updated policy explicitly identifies 2025–2026 as a period requiring heightened focus on critical deliverables—ranging from scaling Layer 2 solutions and zkEVMs to expanding core protocol features and supporting ecosystem security measures. By codifying a strategic approach to treasury management, the Foundation aims to ensure it retains sufficient runway to fund essential initiatives without undermining market confidence.
Formalizing an Asset-Liability Framework
A cornerstone of the new policy is the introduction of a formal asset-liability management (ALM) model that ties operational spending directly to a fixed percentage of the EF’s total treasury and maintains a multi-year reserve runway. Specifically, the EF has set its annual operating expense (Opex) target at 15% of its treasury, paired with a 2.5-year reserve buffer denominated in fiat. This buffer ensures that, even in prolonged down markets, the Foundation can meet its obligations to fund grants, developer bounties, and core protocol research without depleting critical ETH reserves.
Under this ALM framework, the Foundation periodically calculates its fiat reserve needs by multiplying the annual Opex target by the runway period. The result defines a threshold for how much ETH can be converted into fiat or stablecoin over the coming quarter. If the fiat holdings dip below the runway target, the EF will execute ETH-for-fiat sales according to pre-established triggers. Conversely, in bull markets with ample fiat reserves, ETH sales will be tempered or paused, reflecting a counter-cyclical approach designed to minimize market disruptions.
Balancing Returns and Ecosystem Stewardship
While maintaining a 2.5-year fiat runway addresses short-term obligations, the EF emphasized that capital deployments must not solely chase maximum yield. Instead, the policy highlights a dual objective: achieving acceptable returns above benchmark rates while bolstering the Foundation’s role as a steward of the Ethereum ecosystem. This balance reflects the EF’s commitment to preserving Ethereum’s foundational ideals—ensuring that funding decisions align with network security, decentralization, and censorship-resistance.
To this end, the policy mandates that any DeFi or staking engagement adhere to rigorous safety, security, and risk-management standards. The Foundation will assess counterparty risk, protocol audit history, and overall alignment with “Defipunk” principles (discussed below) before allocating treasury assets. By doing so, the EF aims to mitigate systemic risks while maintaining the flexibility to support emerging innovations that enhance network resilience and user sovereignty.
Defipunk: Privacy, Security, and Decentralization in DeFi Deployments
A notable innovation in the EF’s policy is the formalization of “Defipunk” criteria to guide DeFi investments. Coined by the Foundation, “Defipunk” represents a set of core principles rooted in the cypherpunk ethos: privacy-minimization, trustlessness, open-source code, and permissionless access. Under this framework, the EF will prioritize protocols that satisfy the following attributes:
- Immutable, Audited Smart Contracts: Only protocols with publicly available audits, minimal upgradeable dependencies, and a track record of security best practices.
- Self-Custody by Default: Platforms that do not require users to relinquish control of private keys or rely on centralized custody solutions.
- Oracle Minimalism: Protocols that minimize reliance on centralized oracles, leveraging decentralized data feeds or on-chain proofs wherever possible.
- User Privacy Protections: Engagements that respect user confidentiality, limit KYC requirements, and avoid exposing sensitive transactional data.
- Community Governance: Preference for protocols with robust on-chain governance models, enabling decentralized decision-making and iterative risk management.
By codifying these criteria, the EF seeks to signal to the broader ecosystem its dedication to preserving Ethereum’s cypherpunk heritage while responsibly stewarding treasury assets. In practice, “Defipunk” will serve as both a philosophical compass and a concrete screening tool, ensuring that treasury deployments do not inadvertently introduce centralized points of failure or compromise user autonomy.
Active Deployment in Staking and DeFi Protocols
Historically, the EF adopted a conservative stance, primarily holding its ETH reserves without active yield generation. However, the new policy acknowledges that passive stewardship is no longer sufficient in a rapidly maturing DeFi landscape. Accordingly, the Foundation is ramping up deployments into staking, lending, and other DeFi avenues to bolster financial sustainability and network security.
Solo and Liquid Staking
The EF will allocate a portion of its ETH to solo staking on Ethereum’s Beacon Chain, securing the network and earning staking rewards. Additionally, a tranche of ETH will be tokenized into wrapped ETH (wETH) and supplied to liquid staking protocols, such as Lido and Rocket Pool, to maintain liquidity while capturing yield. These deployments will be closely monitored to ensure sufficient validator decentralization and to avoid overexposure to any single staking provider.
Lending Platforms
Another pillar of the EF’s active yield strategy involves deploying wETH to reputable lending platforms. By supplying liquidity to markets on protocols like Aave and Compound, the Foundation can earn variable interest while contributing to overall DeFi market depth. All prospective lending engagements will undergo thorough risk assessments, including smart-contract audits and counterparty risk reviews, in line with “Defipunk” standards.
On-Chain Swaps and Stablecoin Conversions
When fiat reserves dip below the runway target, the EF may perform on-chain swaps—converting ETH directly into stablecoins such as USDC or DAI. These swaps leverage decentralized exchanges (DEXs) with deep liquidity pools to minimize price slippage and maintain transparency. The resulting stablecoins will serve as temporary fiat surrogates until withdrawn into bank accounts or low-risk fiat instruments. By conducting swaps on-chain, the Foundation avoids centralized exchange risk and upholds transparency to the community.
Integrating Tokenized Real-World Assets
Looking beyond traditional DeFi engagements, the EF’s policy outlines a future phase in which tokenized Real-World Assets (RWA) play a role in the treasury’s diversified asset mix. As DeFi protocols mature and regulatory clarity around tokenized assets improves, the Foundation plans to incorporate RWA—such as tokenized real estate, art, or investment-grade bonds—into its fiat reserve strategy.
This prospective integration hinges on robust legal and custodial frameworks. The EF intends to partner with reputable tokenization platforms that employ insured custodial solutions, adhere to relevant securities regulations, and offer transparent governance mechanisms. By allocating a portion of its reserves to tokenized RWA, the Foundation can potentially achieve yield stability while diversifying counterparty and smart-contract risk. However, any RWA engagement will remain subordinate to core objectives: supporting Ethereum’s decentralization, maintaining user sovereignty, and preserving capital safety.
ETH Sales Strategy: Counter-Cyclical and Rule-Based Triggers
Under the new policy, ETH sales are governed by a strictly defined rule set to avoid ad hoc or market-distorting liquidations. Each quarter, the EF will conduct a “treasury health check” to compare its fiat holdings against the runway target derived from the ALM formula (15% Opex × 2.5-year buffer). If fiat reserves fall short, the Foundation will calculate the ETH volume necessary to bridge the gap and execute sales accordingly—either by converting to stablecoins on DEXs or by off-chain fiat conversions through established banking partners.
This counter-cyclical approach mandates more aggressive support during market downturns—selling ETH to shore up fiat reserves when prices are low, thereby smoothing out funding requirements—and moderating ETH sales during bull runs to avoid exacerbating price appreciation. Moreover, sale volume caps and timing windows are codified to ensure that each quarter’s potential sales do not exceed a predetermined percentage of on-chain liquidity, reducing slippage and preserving market integrity. These mechanisms are designed to engender predictability and rebuild trust following mid-2025 controversies over unscheduled ETH liquidations.
Gradual Reduction of Operating Expenses: Toward a Sustainable 5%
Recognizing the need for long-term sustainability, the EF has mapped out a plan to gradually reduce its annual operating expenses from 15% of total treasury to 5% by 2030. This trajectory mirrors an endowment-style model commonly employed by leading academic and philanthropic institutions, where a stable, lower expense ratio ensures perpetual capital preservation without compromising mission-critical funding.
To achieve this reduction, the EF will implement cost-optimization measures across grant programs, developer incentives, and administrative overhead. The policy stipulates that any incremental increase in treasury size attributable to successful DeFi deployments or favorable market conditions should primarily reinforce the reserve runway, with only a fraction allocated to operational expansions. By decoupling short-term research grants from the long-term expense baseline, the Foundation aims to safeguard against overextension during bull markets, thereby maintaining a leaner footprint while still supporting high-impact ecosystem initiatives.
Transparency and Reporting: Quarterly and Annual Disclosures
Persistent concerns regarding opaque treasury activities prompted the EF to commit to enhanced transparency through rigorous reporting protocols. Effective immediately, the Foundation will publish:
- Quarterly Treasury Reports: These will disclose asset holdings (ETH, stablecoins, tokenized RWA, and fiat), yield performance from staking and DeFi engagements, any ETH sales executed during the period, and deviations from projected runway targets.
- Annual Financial Statements: The EF will issue a comprehensive annual report outlining detailed asset allocation breakdowns, year-over-year changes in asset mix, performance benchmarks compared to relevant indices (e.g., ETH price, DeFi protocol yields), and an overview of governance decisions affecting treasury operations.
By standardizing these disclosures, the EF aims to foster community trust, provide accountability to stakeholders (including grant recipients and protocol partners), and enable third-party auditors to verify adherence to the treasury policy. Transparency will extend to public forums, with dedicated sections on the official Ethereum blog and community call presentations, ensuring that developers, researchers, and investors can track Treasury activities in near real time.
Supporting Research and Development: zkEVMs and Layer 2 Restructuring
Concurrently with the treasury policy release, the EF’s Protocol division announced a strategic restructuring of its R&D arm to focus intensively on zero-knowledge Ethereum Virtual Machines (zkEVMs), Layer 2 scaling solutions, and protocol hardening. The alignment of treasury management and R&D initiatives underscores the Foundation’s holistic approach to ensuring that financial resources are directly channeled toward critical technological milestones.
zkEVM Acceleration
Recent advances in zkEVM technology promise to combine Ethereum’s security with significantly higher throughput and lower transaction costs. Projects like Polygon zkEVM, zkSync, and Scroll have demonstrated fully native zkEVM implementations, enabling seamless developer migration without sacrificing compatibility. The EF plans to allocate grants and bounties to developer teams building and auditing zkEVMs, ensuring that the network is equipped to handle the burgeoning demand for decentralized applications (dApps) in gaming, decentralized social, and financial services.
Layer 2 Optimization
In parallel, Layer 2 rollups—such as Optimism, Arbitrum, and StarkNet—remain pivotal to Ethereum’s scaling roadmap. The Foundation will fund research into cross-rollup messaging, security proofs, and incentive structures that bolster user adoption while minimizing reliance on centralized sequencers. Treasury allocations will support grants for cross-collaboration between competing rollups to foster interoperability and shared security assumptions, further cementing Ethereum’s position as a preeminent settlement layer for DeFi.
Protocol Hardening
Beyond scaling, the EF is doubling down on protocol hardening efforts, including improvements to fee market mechanisms (EIP-1559 enhancements), MEV (maximal extractable value) resistance measures, and smart-contract safety tooling. A portion of the treasury will be earmarked for sponsoring bug bounties, formal verification audits, and infrastructure grants that reinforce the network’s resilience against emerging threats, such as MEV-related front-running and cross-chain bridges vulnerabilities.
Implications for Investors: Opportunities and Risks
For investors and ecosystem participants, the EF’s new treasury policy presents a multifaceted set of opportunities and considerations. On one hand, the Foundation’s active deployment into staking and DeFi protocols may expand total value locked (TVL) metrics across leading platforms, potentially creating a more robust yield environment for market participants. By allocating substantial portions of its assets to audited, high-security DeFi protocols, the EF catalyzes network effects that could boost adoption of best-in-class projects.
Furthermore, the gradual integration of tokenized RWA promises to introduce novel cross-asset yield streams within Ethereum’s financial ecosystem. Should tokenized real estate or investment-grade bonds gain regulatory clarity, investors can anticipate an influx of institutional capital seeking yield diversification, thereby bridging traditional finance with on-chain liquidity pools. This integration may also pave the way for hybrid DeFi-CeFi structures, where investors hold on-chain tokens backed by real-world collateral, blending transparency with regulatory compliance.
However, investors should remain cognizant of associated risks. The EF’s decision to deploy ETH into DeFi protocols introduces protocol-level smart-contract risk, counterparty risk from staking providers, and potential regulatory scrutiny around tokenized assets. While “Defipunk” criteria mitigate many systemic concerns, the dynamic nature of DeFi means that unforeseen vulnerabilities or governance token controversies could ripple through the ecosystem. Additionally, ETH sales triggered by the ALM framework may contribute to short-term price pressure during market downturns—even if the counter-cyclical design aims to soften the impact. As such, investors are advised to monitor EF treasury disclosures closely and adjust strategies in response to announced ETH sale volumes, staking allocations, and RWA pilot programs.
Future Outlook: Aligning Finance with Vision
Looking forward, the EF’s treasury policy establishes a blueprint for how large-scale protocol stewards can responsibly manage resources in an on-chain world. By embedding “Defipunk” principles into its decision-making, the Foundation reaffirms its commitment to Ethereum’s original ethos of censorship-resistance, open-source collaboration, and user sovereignty. Moreover, the policy’s emphasis on transparent reporting and community accountability sets a new standard for organizational governance within the crypto ecosystem.
As the Foundation approaches the end of its 2.5-year fiat runway in late 2027, the gradual reduction of operating expenses to 5% by 2030 will become increasingly vital. Maintaining this lean expense ratio will require disciplined budget management, streamlined grant processes, and continual prioritization of high-impact R&D initiatives. If executed effectively, the EF’s endowment-style approach could serve as a model for other blockchain-centric non-profits and DAOs (Decentralized Autonomous Organizations) that rely on native tokens for funding. By demonstrating that responsible treasury stewardship and active ecosystem engagement are not mutually exclusive, the EF strengthens Ethereum’s narrative as a sustainable, long-term platform for decentralized innovation.
Conclusion
The Ethereum Foundation’s newly unveiled treasury policy marks a significant evolution in how protocol stewards can sustainably manage native token reserves while upholding ideological commitments. By instituting a formal asset-liability framework, embracing “Defipunk” principles, and transparently reporting on quarterly and annual operations, the EF aims to navigate the pivotal 2025–2026 period with a balanced approach to growth and conservatism. Active deployments in staking, lending, and future tokenized RWA not only secure network stability but also generate yield to support critical R&D and community initiatives—ultimately reinforcing Ethereum’s position as the premier platform for decentralized applications.
For investors, developers, and ecosystem participants, the policy’s counter-cyclical ETH sale triggers, reduced operating expense trajectory, and “Defipunk” criteria offer both clarity and caution: they demarcate a path toward sustainable growth while acknowledging the inherent risks of a rapidly maturing DeFi landscape. As the global financial system increasingly converges with on-chain solutions, the EF’s treasury policy provides a foundational blueprint for aligning financial stewardship with a vision of censorship-resistant, open-source innovation. By carefully executing this strategy, the Foundation can ensure that Ethereum’s ecosystem remains resilient, sovereign, and capable of delivering groundbreaking applications for years to come.
