The Ethereum Foundation (EF) recently disclosed a fresh financial approach intended to safeguard its ETH holdings, providing a 2.5-year financial buffer and a spending cap of 5%. This innovative plan accentuates the need for transparency, operational efficiency, and consistency with the blockchain’s enduring principles.
On June 4, the Foundation disclosed in a blog post its intention to annually set aside 15% of its treasury for operational costs, whilst maintaining a fiscal safety net large enough to sustain two and a half years of expenditure. According to this strategy, ETH would only be liquidated if the liquid reserves fell below the specified limit. The Foundation plans to conduct quarterly assessments of reserve levels to decide if asset sales are necessary, thus helping to retain treasury robustness amidst market volatility.
The post stated, “Our goal is to gradually decrease annual operating expenses over the next five years, reaching a long-term 5% baseline typical of endowment-based entities.” The Foundation believes that the years 2025-26 will be a critical period for Ethereum, necessitating targeted investment in key areas.
In response to factors such as fluctuating market conditions, diversification needs, and new yield opportunities, the Foundation will frequently shift funds between protocols. It highlighted that these withdrawals should be viewed in this context, and not as signs of non-support.
The non-profit plans to cultivate and manage its treasury using secure, auditable, and permissionless DeFi protocols. This includes independently staking ETH and lending wrapped ETH (wETH) via established DeFi platforms. Moreover, it intends to periodically diversify its portfolio by converting some assets into traditional currencies.
A new fundamental principle named “Defipunk”, inspired by the early cypherpunk movement, is also incorporated into the financial strategy. This principle underscores the significance of decentralization, financial privacy, and open-source innovation.
The Ethereum Foundation, in its commitment to transparency, has also restructured its internal operations. A specialized finance team will now release quarterly reports highlighting performance, asset distribution, and strategic actions. Annual reports will offer deeper insights into ETH deployment and fiat-crypto conversions.
The non-profit also recently renamed its research and development unit to “Protocol”. This team will prioritize improving Ethereum’s core infrastructure, increasing blob space, and enhancing user experience.
