Ethereum Foundation commits $16M to Morpho yield-bearing vaults

The Ethereum Foundation (EF) announced a fresh treasury deployment of 2,400 ETH (approximately $9.6 million at current prices) and about $6 million in stablecoins into Morpho’s yield-bearing vaults. 

The move comes as the EF attempts to drop its reputation for spending more than it generates by optimizing its treasury with the various DeFi protocols, and generating passive yield while supporting open-source Ethereum ecosystem projects. 

Ethereum Foundation increases exposure to DeFi 

As earlier stated, the EF’s plan to expand its DeFi-focused treasury management strategy will involve the fresh deployment of 2,400 ETH and about $6 million worth of stablecoins in a yield-bearing Morpho vault. 

“Morpho is a pioneer in permissionless DeFi protocols and consistently demonstrates a commitment to Free/Libre Open Source Software (FLOSS) principles,” the foundation’s X post read, before explaining that both Morpho Vault v2 and Morpho Blue v1 were released under an open GPL2.0 license.

The EF has been facing criticism since the beginning of this year over its routine sales of ETH to fund its operations. In response to that, the non-profit announced a plan to transfer a portion of its treasury into DeFi protocols, beginning with 50,000 ETH.

Since then, millions of funds have been moved onto platforms like Compound, an OG lending protocol, and Spark, a member of the Sky (formerly MakerDAO) ecosystem. However, it has also continued to sell crypto assets for fiat on centralized exchanges to fund its blockchain research and development.

Arkham Intelligence now claims the Ethereum Foundation holds over $820 million worth of crypto assets, including $735 million worth of ETH. 

Plans for sustainability 

According to a report released on its site, the Ethereum Foundation (EF) will aim to balance capital deployment for returns while supporting Ethereum’s ecosystem, with a focus on DeFi. Current targets are set at 15% of treasury for annual operating expenses and a 2.5-year operating runway, the report states.  

Since the EF prioritizes safety and security in its on-chain portfolio, it will favor audited and permissionless protocols. The strategy will include periodic Ether sales based on treasury asset evaluations and long-term staking and lending deployments.

Also, to ensure a diversified and low-risk approach, the EF plans to allocate fiat assets into immediate liquidity for operational needs, liability-matched reserves for long-term obligations, and tokenized real-world assets. It promises transparency via structured internal reporting, while encouraging cypherpunk principles in DeFi, with a focus on security, privacy, and self-sovereignty. 

As it supports projects like Morpho that align with these values and improve privacy features in the DeFi landscape, the EF envisions a gradual reduction in annual operating expenses to a long-term baseline of 5%. Still, its strategy will enhance its role in staking and DeFi to ascertain financial sustainability and support for Ethereum’s infrastructure.