Author: Hsiao-Wei Wang
Translated by: TechFlow
We thank the following EF members for their valuable opinions and feedback on the draft of this 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.
[The rest of the translation follows the same professional and accurate approach, maintaining the original structure and technical terminology]Technical solutions are superior to trust-based solutions (such as multi-signature mechanisms, solutions that rely more on legal enforcement)
Privacy protection
Privacy has historically been overlooked in the broader DeFi field, but it remains crucial. Privacy not only protects market participants from digital surveillance (such as front-running trades, sandwich attacks, liquidation sniping, targeted phishing, profile analysis, and data-based coercion) but also defends against physical threats in reality (like face-to-face coercion).
5.1 EF Should Actively Support Projects Realizing the Defipunk Concept
Ethereum is attracting exponential growth in capital, talent, and innovative energy. However, growth often has path dependency: standards adopted during rapid and chaotic growth periods may solidify into future legacy constraints; designs prioritizing transparency might default to surveillance mode. Existing systems often subtly narrow the design space for new DeFi primitives and limit privacy-centric innovation. The Ethereum Foundation will be committed to resisting these pressures.
Through research, advocacy, and strategic capital deployment, EF can help cultivate an Ethereum-native financial ecosystem that can defend financial autonomy while scaling, and maintain an open society in the "electronic age".
Transforming this vision into actual infrastructure requires significant effort. Currently, building cypherpunk DeFi protocols faces numerous challenges, including higher gas fees due to privacy features, user experience friction, liquidity launch difficulties, technical complexity, stricter audit requirements due to immutability, and opposing forces related to privacy. Therefore, today's DeFi ecosystem largely depends on centralized elements, such as backdoor closure mechanisms or fund withdrawal functions, over-reliance on multi-signature or multi-party computation (MPC), widespread whitelisting, 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 Manifesto points out, "For privacy to be widespread, it must be part of a social contract." Privacy has inherent network effects but has received little attention so far. This suggests that strong early support from institutions like EF can play a unique value in shaping a more privacy-focused DeFi ecosystem.
EF has unique advantages in guiding DeFi towards these goals. For example:
Supporting early DeFi protocol development of privacy features;
Encouraging mature protocols to enhance Defipunk attributes through research collaboration, liquidity support, and legitimacy enablement;
Promoting research and development of decentralized user interfaces.
For a more comprehensive standard of project support, please refer to §5.3.
5.2 Defipunk Starts with Itself
Advocating for open-source, privacy protection, and other Defipunk goals applies not only to external entities but also to the Ethereum Foundation's (EF) internal operations. Practicing Defipunk principles in EF's Treasury management is an important first step towards this goal. More broadly, EF can use security tools to build an operational structure that supports all qualified contributors (including anonymous and pseudonymous participants) and further improve its security and privacy practices. This will help EF stay true to its principles while enhancing its strength, stability, and resolute stance.
Employees involved in Treasury management should use and/or contribute to open-source privacy-protecting tools, especially when using these tools requires skill enhancement. By genuinely implementing Defipunk principles in its own activities, EF will maintain clear objectives and gain the ability to support the entire ecosystem in practicing these principles.
5.3 Defipunk Assessment Standards
The following are specific standards for evaluating protocols and user interfaces (UI), aimed at encouraging new project launches and improvements to existing projects. These standards will apply to all future on-chain deployments by EF. While some standards (such as permissionless access, self-custody, and free open-source software) are clear binary judgments, others are more complex. Currently, projects do not need to reach an "ideal" state in every dimension. We value credible progress and improvement roadmaps more than initial perfection. We share this framework openly to increase the transparency of EF's decision-making, establish consistency across these dimensions, and hope that the broader community will consider, adjust, or apply these standards when forming their own perspectives.
6. Ongoing Management Responsibility
The Ethereum Foundation (EF) is committed to long-term development and requires a robust long-term Treasury management policy. In the past, EF held ETH long-term, but now is gradually shifting towards Staking and DeFi, which is not only to enhance financial sustainability but also to support a critical application area that currently promises permissionless, secure access to fundamental infrastructure for millions of people. EF's involvement in these areas sets a good precedent for responsible and goal-aligned tool usage.
To achieve this goal, EF will invest significantly in enhancing its own capabilities over time.
If you have ideas that can contribute to EF's integration with DeFi, please fill out this form.
