Ethereum is for Defipunk

Hello everyone. So I'm Xiaowei, I'm the Co-Executive Director of the Ethereum Foundation. So today I'm going to talk about Ethereum is for DeFi Punk. So DeFi Punk is something we made up here. It's like the decentralized finance led champions for privacy, decentralization, open source collaboration, and user surveillance.

And then DeFi Punk, at least kind of cyberpunk values that apply to the DeFi protocols. And we believe that this is the path that Ethereum should take going forward. So on June 4th, we published this Ethereum Foundation Treasury Policy. In this document, we explain how we think about the micro policy and then how to rebalance our ETH. And then also we visited our CR denominated policy and then the unchanged assets policy.

So this document clearly aligns our financial strategies with Ethereum core values. The EF manages this substantial treasury and they wanted to support Ethereum's long-term success and health. So instead of trading for very high yield or doing nothing in a traditional way, we decided to use our investment. We decided that our investment should reflect what Ethereum stands for. So in this document, we visited what are the important considerations when we think about the treasury management.

So first, security and safety is the most fundamental basic requirements. We wanted to choose the strategy that has been battle-tested, it's immutable, and then it's permissionless as possible. And then we're also financially responsible to reduce the risk. So we will only look at the more conservative and the more safer strategies. Okay.

Yeah. But we also, when the EF look into like the grant allocations or like resource allocations, we also ask ourselves like, does this use of funds advance Ethereum's core values? We wanted to support the – so we added this Ethereum's deeper goals into our considerations. We want to support maximal, secure, decentralized, open-source cyberpunk applications. And then we want to advocate the ideal DeFi protocols that are trust-minimized, composable, and privacy-friendly.

So we will not just invest in the financial upside, we also invest Ethereum's value. Okay. So if we compare the today's DeFi ecosystem and then the cyberpunk ideals that we wanted, there is still a gap between it. So first, the privacy features, it usually take higher cost. And then most of them, you will need extra steps to interact with the smart contracts.

So yeah, there's still some challenge in the UX and the cost. And then on the other hand, there was also the challenges from the external threats, like if there will be political or social challenges, pressures that push against builders to build the privacy tools or the more decentralized tools. So given these challenges, many DeFi protocols, they would probably chose the shortcuts that we will use more KYCs, it will use more like multi-sig in their protocols. So these shortcuts usually lead to the more centralized system. So one thing to challenge these shortcuts, one thing to let users to think more about, are you really using the decentralized system, or are you using DeFi instead?

So when the EF are looking to our cash rate deployments and integration, it will be a continuous interactive journey. We will start it from the internal operations, and then from there we advocate our core values, which is the cross, like centralized experience and open source and privacy and security. So in the way we advocate these core values, we would also deploy the tertiary strategies to support these initiatives. And then this is not just one year strategy, I think we will iterate the process over years, and I think when we finish the loop more and more times, EF will also grow and learn from the community a lot. Okay, so in terms of core values, it leads us to define some basic DeFi properties that we want to use in DeFi.

And those properties translate into some practical criteria. So these are the DeFi properties. So first, security first. It's the most important thing, which is that we need the system to be robust and beta-tested. And second, of course, open source in the DeFi is required.

But moreover, we want it to be the most free and labor open source software license. And then also, we wanted users to be able to self-calculate their assets. And then fourth, if there's a technical solution that could replace the trust-based solutions, for example, if you can use the cryptography over trusting in some other people's smart PCs or MPCs, overused MPCs. And with this technical solution, that could also be used in the privacy tools and the crypto tools that we can advocate and support DeFi features. And then sixth is, sorry, let's repeat it again, but privacy is normal.

We should take it by default. So yes, we want to lead it by setting the examples. And we know that privacy is often overlooked in DeFi. So yes, we wanted to step up to encourage it more and then advocate. I think we believe that if community, the current metro projects, if they also move forward to the more cyberpunk, DeFi-punk values, it will also be good for their business in the long run.

We have to think longer. And then the third is often the most centralized piece of decentralized protocol is the front-end website. So when we think about the web UIs, you have to check if it's distributed front-end software and then can you set host data and then are there multiple independent UIs available? And then moreover, for the powerful users, is there COI tools for them to use? So to make sure that the access isn't controlled just by one single domain.

So I think EF is not doing this alone. Of course, I think many of you, like the builders, the users, the auditors, we're pushing these values in their own projects. So for the EF, our role is to amplify and to back up their work. So the next, I wanted to share the framework that we use to think about the DeFi projects or the decisions we make internally. So the reason we share these criteria is we want a wider community to consider, to adopt, to apply, and then forming your own views.

Then we wanted to, we're looking forward to the more credible process and then a longer roadmap improvement to get the project toward these criteria, rather than just like perfection on the day one. So these are like eight criteria here. So if a protocol that checks all these boxes, well, that's a DeFi punk superstar. But even if like it only meets him like most of them, it is still something that we will, is very great and we wanted to encourage. So I think it's eight.

And I will explain them one by one. So first is the permissionless access. This is over repeated fundamental requirements. Like there should not be no gatekeepers prevent you from using the smart contract. And then whether you are like a developer in San Francisco or like a day-to-day user in Vietnam or like a enthusiast in Nigeria, then the door should be open for everyone because Ethereum is open for everyone.

So the DeFi punk must open to everyone as well. And the second value here is, the second criteria here is the self-custody. So are the users able to maintain their custody, maintain the custody of their own assets? And also, like in other words, does the protocol provide and empower the users to hold their own keys and control the assets by default? So since it's safe, I also wanted to shout out to SafeWallet.

I think that's a very fantastic product to promote the self-custody. And then the third value here is the free, library, and open source software for both. So like it's the contract code and then also like if it's better that the UIs are free, library, open source software. Like CopyLab, AGPL, or like the permissive MIT or Apache license. We understand like some projects chose business source license like BSL or like delayed the open source to take their IP.

We get the reason. But just for cyberpunk's perspective, I think that we could do better together. Like we would like to like coordinate it to see the world could be more like collaborative and innovative with source software. And then privacy. Yeah, so privacy is often treated as a luxury feature or like afterthought in design.

But here we wanted to put it to the first class value. Like for privacy to WordPress, it must be part of the social contract. So like when you're using an app, you can ask yourself like are these translations visible to everyone? And can your use in this protocol like actually review your IP address, review your identity on chain? Okay, so next, the open source requirement criteria.

All those lead us to the open development process. So like I think the most important thing is like if the contract has been, I mean the protocol has been launched, and then there's potentially some upgrades there, and then the users have to know like how's the decision-making process. And then it's the process, like how they set the upgrade, how they set the parameters, how they set the roadmap. Yeah, that should be transparent. Next is the maximally useless, sorry, maximally trustless core logic.

It's like how we evaluate it, how trustless this project is. Like is it immutable or like is it, if it's immutable, it means like it's not upgradable. So usually it would be more secure. Or like if the upgrade process is governed by a very, very decentralized governance system. Yeah, so also like when design a system, could you design it with minimal Oracle usage?

Next is the general security. So some of the basics is like has the contract been audited? Has the contract been formal verified? Or like is there use some framework to at least mathematically like prove that some critical components are correct? So like or at least like to make sure that the contract by code on GitHub is the same as what you see on the Etherscan also.

So like you should make sure that the contract you're using was not like, there were no sneaky changes on the layer. And then also like if you are a DeFi agent, then you can try to do some homework about like if there's an attack or a bug to the protocol. And how did the team fix this bug? What's their like responsive time? What's their retrospective report look like?

So this homework, you can use some criteria that you can choose for security. And the EF, we also have this one trillion security program that Patrick introduced in the morning. And we wanted to support, to advocate security in certain community more and more. And then last one is the distributed UIs. Like we don't want this censorship.

The censorship happen if it has done very good in protocol layer, but it break in user layer, then that point of it. So think UIs were mostly be overlooked, then that needs to be observed when you choose the protocols. Also like you can look into their monitor system if that's also like, can you self-host the monitor system? Yeah. So I think that's all the criteria.

And I, so today this talk, I think at least hope people can try to remember a couple of these criteria that resonated with you most. And then try to use this as the lens when you look at the protocol, when you build the protocol. And then ask yourself, like, is this protocol, is project actually decentralized? Is this actually permissionless? And then does it protect its user?

And then the more we ask these questions, the more the market will bring rewards to these projects. That fits the criteria. So I think that's a small changes that we can start from ourselves. Yeah. So Ethereum's destiny is to be stronghold of the cyberpunk values in finance.

I think Ethereum is for DeFi punk, it's more than just a slogan. It's a commitment and that built the crypto futures that we believe in. So it's for the users that is our, that in the political or like economically oppressed regions who need the uncensored finance tools. And it's also for the dreamers that believe in the vision of an open, borderless, and world-class finance social system, not only by its participants. So the yes is committing to this path.

And then if you can choose the uncensored, no cyberpunk solutions, then you are also contributing to make Ethereum and the world better. So yeah. So we welcome the people who are like building protocols or tools or research initiatives that match these values or like to help reflect these values. EF wants to hear from you. So thank you.

And remember Ethereum is for DeFi punk. Thank you. Yes, we have time for some questions. Yeah, Ani. One question I have is Ethereum has a lot of influence and resources, Ethereum Foundation specifically.

And you are now signaling that the way you deploy those resources is going to be in a DeFi punk manner, right? Do you think other enterprises, other institutions are going to look at the EF playbook and kind of be inspired to deploy their large resources with the same values as DeFi punk? I think for the EF, it has a spatial role in Ethereum ecosystem at least. Like we wanted to, the EF moves are observed or also like being, not saying censored, but like being watched. So I think some attentions like sometimes make EF like we want, we will make the moves more carefully and more thoughtfully.

And then this, sometimes it's, the over-attention is bad sometimes for us to operate it. But we wanted to transfer this energy, this attention to do something good, which is this DeFi protocol of deployment. Question from the back right of the room. How does DeFi punk look like as a meme for you? Yeah, I saw some meme coin, I think they are scam, but not quite sure.

I saw a token somewhere, but I like this, it's a good event. We don't need to make a token, but I think I like this as a meme. Are there any more questions? So, okay, if I have a project that I apply, I use the form to register and you're going to look over it. What if, for example, not that I'm planning to do this, don't arrest me immediately, but what if someone wants to do a second Silk Road?

You know, it matches Silk Road, right? Selling drugs on the dark web. Would the EF uphold the values this far in the sense that it can go against some legislation and things like this? How far are you willing to go to support the DeFi punk? How far you mean, like how much energy?

Against a potential state, for example. Oh, you mean like, well, it's still hard to say. Like, I think we are increasing, like right now we put like 50,000 ETH into the DeFi wallet. And then we still have like 5,000 ETH that has not been deployed. And then I think the total amount will be increased.

And if you fill the form today and then we review it and give you some feedback later, I think if the project keeps growing and maybe there is a v2, v3 version and becoming more and more DeFi punk-ish, then we will also revisit this again if you are willing to submit again over time. I think this form is like maybe a temporary solution if the Google document is not ideal. Yeah, just to make sure, the EF will not try to break the law, is my question. You will not try to break the law? Break the law, no.

Are there any more questions? This one. So the EF was quite public about how they've deployed the funds so far. And going forward, if there is more useful privacy preserving methods, will you still maintain the same transparency if you're using a privacy-focused protocol? They're like both good things, but how do they mesh together in terms of transparency versus privacy?

I think at least for now, at the moment, we will do everything transparently. We were thinking about using some privacy tools, but I think if we use it but we still want to tell everyone this is us, then that was a bit strange. But I think sometimes for the supporting, it's also part of it with signaling, not for the yielding. More questions from the audience?