Ethereum Foundation's formulates new strategy for income increase

The Ethereum Foundation (EF) disclosed a significant change in its financial management practices.

On June 4, the foundation unveiled a new plan outlining how to invest its reserves, fund DeFi protocols, and develop privacy standards that align with Ethereum’s core principles of neutrality and self-sovereignty.

The more influence it has globally, the more attention it receives from institutions, and this change is encouraging a more stable and organized way for capital to engage with ETH.

The foundation’s treasury and multi-year reserve spending policy are linked to operating expenses through a prescribed formula.

The foundation has taken a big step away from its historically more laissez-faire approach to capital by introducing specific rules regarding the sale of Ethereum, the holding of stablecoins, and how on-chain investments will be made.

EF’s new strategy allows for exposure to on-chain opportunities, increasing income

Ethereum Foundation’s new strategy is pushing for more direct treasury management, which needs to balance yield generation, risk, and ideological mandates.

At the same time, the growth has led to additional complexity, volatility, and management responsibility. It is expected that there will be a big impact not only on Ethereum itself but also on the network community due to the security vulnerability to which the network was recently vulnerable.

The Foundation has created a 2-variable treasury function for risk, reckoning fiat reserves, which are 2.5 years of the runway by a 15% stable annual cost.

That gives an amount of ETH that can be safely sold to fiat or stable assets. Treasury operations will become more counter-cyclical, with stronger help during market declines and a balanced approach during rising markets.

Although Ethereum is still the main part of the treasury, the new guidelines from EF allow for increased exposure to on-chain opportunities like staking, lending, tokenized real-world assets, and select DeFi protocols.

EF describes privacy as “a critical civil liberty” in an increasingly surveilled financial space

One of the policy’s most shaping features is the codified determination towards privacy, which the Foundation characterizes as “a critical civil liberty” in a more and more surveilled financial environment.

The guidance demonstrates a growing concern among the Ethereum community at the emergence of KYC-gated apps, centrally controlled user interfaces, and an overly heavy reliance on off-chain legal cushions.

Using a new internal system named “Defipunk,” EF will assess possible DeFi partners based on several factors: open access, self-storage of assets, open-source licenses, and technical privacy features such as transaction protection. 

Protocols that do not fully meet the standards can still be accepted, but they must show real progress toward those goals. This is a unique attempt by institutions to introduce ethical guidelines into decentralized finance, an industry that usually focuses more on incentives than on moral principles. 

However, it could also leave EF at odds with US and European regulation trends, where authorities have increasingly turned toward a preference for transparency and adherence to the law over priority given to the availability of cryptographic privacy.

The same standards will apply to EF’s internal operations. Treasury deployment-focused staff are anticipated to work with privacy-preserving technology solutions and contribute to open-source infrastructure, partly to shield them from ideological alignment.

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