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The original vision for ETH Strategy was simple but radical: build a fully-autonomous, onchain protocol that accumulates ETH for its holders. During the vault meta we tried to productise this idea, bundling risk and yield into a single managed offering. Our thesis (in hindsight) was a classic mistake. The onchain market for TVL providers is measured in the billions, and we assumed they would be our marginal buyer... if we can just attract a small percentage of that market we'll be killing it, right?
The market, however, had different tastes. Most vault products deliver high yields by ignoring tail risk or by subsidizing returns with token incentives. We believed that sophisticated capital would prefer illiquidity risk in exchange for higher, more durable returns. At the height of the vault meta, however, TVL providers had access to near-risk-free yield with their principal fully liquid. Our productised version, built around disciplined risk management and long-term horizons, was misaligned with that environment. It was a square peg in a round hole.
Meanwhile, DeFi itself was evolving. The spread between onchain yields and U.S. Treasury rates collapsed. Variable stablecoin yields on Aave now hover only slightly above the roughly 4% available on the 10-year. At those levels, a single bad month can erase years of excess returns. When yields become a marketing tool, capital is no longer simply earning yield; it's paying customer acquisition costs. This dynamic is well understood and, from the perspective of TVL providers, often rational. Free money while it lasts. It's also structurally unsustainable, a game of musical chairs.
It's safe to say the music in the high‑yield era has stopped. Stablecoin yields that once reached double digits have fallen toward zero as token prices declined and liquidity exited the system. This reinforces a basic truth: high returns always embed additional risk. In traditional finance, investors accept duration, credit, or liquidity risk to earn higher returns. In DeFi, high yields have too often been the result of token subsidies that transfer fat-tail risk to the last depositor standing.
Rather than chase incentives that obscure risk, our strategy embraces illiquidity as the explicit cost of high returns. We believe DeFi is entering a new phase, one grounded in autonomy, transparency and genuine value creation. The question is no longer whether DeFi can generate returns, but how to design systems that compound sustainably without relying on skewed incentives or hidden tail risk.
Share Dialog
The original vision for ETH Strategy was simple but radical: build a fully-autonomous, onchain protocol that accumulates ETH for its holders. During the vault meta we tried to productise this idea, bundling risk and yield into a single managed offering. Our thesis (in hindsight) was a classic mistake. The onchain market for TVL providers is measured in the billions, and we assumed they would be our marginal buyer... if we can just attract a small percentage of that market we'll be killing it, right?
The market, however, had different tastes. Most vault products deliver high yields by ignoring tail risk or by subsidizing returns with token incentives. We believed that sophisticated capital would prefer illiquidity risk in exchange for higher, more durable returns. At the height of the vault meta, however, TVL providers had access to near-risk-free yield with their principal fully liquid. Our productised version, built around disciplined risk management and long-term horizons, was misaligned with that environment. It was a square peg in a round hole.
Meanwhile, DeFi itself was evolving. The spread between onchain yields and U.S. Treasury rates collapsed. Variable stablecoin yields on Aave now hover only slightly above the roughly 4% available on the 10-year. At those levels, a single bad month can erase years of excess returns. When yields become a marketing tool, capital is no longer simply earning yield; it's paying customer acquisition costs. This dynamic is well understood and, from the perspective of TVL providers, often rational. Free money while it lasts. It's also structurally unsustainable, a game of musical chairs.
It's safe to say the music in the high‑yield era has stopped. Stablecoin yields that once reached double digits have fallen toward zero as token prices declined and liquidity exited the system. This reinforces a basic truth: high returns always embed additional risk. In traditional finance, investors accept duration, credit, or liquidity risk to earn higher returns. In DeFi, high yields have too often been the result of token subsidies that transfer fat-tail risk to the last depositor standing.
Rather than chase incentives that obscure risk, our strategy embraces illiquidity as the explicit cost of high returns. We believe DeFi is entering a new phase, one grounded in autonomy, transparency and genuine value creation. The question is no longer whether DeFi can generate returns, but how to design systems that compound sustainably without relying on skewed incentives or hidden tail risk.
Our next phase returns to our founding conviction. Building a fully autonomous, onchain ETH accumulation engine. We aren't sunsetting managed products like ESPN. Over the coming quarter, however, our focus shifts toward our true marginal user - DeFi nerds.
Onchain data suggests there is still hundreds of millions in notional value held by participants onboarded during DeFi summer. Many of these actors did not enter the space for the extractive or nihilistic dynamics that have since taken hold. They came because they (like us) believe in the power of decentralised finance. Our goal isn't to capture a narrow slice of that audience, but to capture all of it and then grow it by onboarding others to the magic of DeFi.
We will lean hard into autonomy and the fundamental insight that illiquidity is the appropriate risk premium for outsized return. Sustainable value creation in DeFi requires transforming risk, not shifting it between participants. We aim to achieve this by rolling out a small set of core mechanics that work in concert, allowing users to express market views and capture endogenous yield without relying on hidden subsidies.
Our edge isn't to just be another proxy for corporate balance-sheet leverage like MSTR, SBET or BMNR - but something more.
ETH Bonds
Long‑dated call options issued by the protocol in exchange for debt. The protocol borrows stablecoins and grants a long‑dated call option on ETH. In effect, the protocol sells volatility to accumulate more ETH over time.
STRAT Staking
Yield from protocol‑owned ETH. All treasury holdings are deployed into low‑risk, transparent DeFi strategies. The proceeds flow to STRAT stakers, paid in ETH. Because the protocol owns ETH outright and layers debt against it (and because not all STRAT holders will stake) real yields for stakers can exceed standard LST returns. All easily and transparently verifiable onchain.
Treasury Lending
Borrow protocol ETH for fixed periods. STRAT holders who believe they can deploy ETH more profitably than the protocol may borrow ETH for a non‑liquidatable tenor. Borrowers pay a predetermined interest rate that flows back to STRAT stakers while retaining their upside, aligning incentives across the system.
CDT (Convertible Debt Token)
Fungible unit of account for protocol debt. CDT functions similarly to a principal token and is freely tradable. Its price reflects the market's view of protocol solvency and establishes a longer-tenor reference rate within DeFi.
At‑the‑Market Issuance and Debt Redemption
STRAT issuance through debt redemption. When CDT trades below par, the protocol can purchase and redeem it for STRAT. If debt levels are low and yields are attractive, this creates a +EV opportunity for market participants to extinguish protocol debt. STRAT supply expands only when issuance is accretive to existing holders.
These components are autonomous yet interdependent. Market actors can choose where to play to maximise returns. Importantly, yield is not ouroboros. Participants aren't extracting value from each other. The value comes from risk transformation.
Together, these core mechanics enable several compelling use cases:
Non‑liquidatable long‑term debt: Bonders can borrow against collateral without liquidation risk. For example, a user may bond, sell CDT and retain long-dated ETH upside. For someone who believes ETH is going to 10k but need liquidity over a multi-year horizon, this is a clear +EV play.
Gamma scalping: Sophisticated traders can capture the spread between realised and implied volatility, harvesting variance without directional exposure. This is the same trade we productised in ESPN, but individual actors can potentially make meaningfully higher returns by executing it directly.
Leveraged ETH exposure: Speculators can obtain levered ETH exposure without liquidation risk by bonding, selling CDT, and rebonding iteratively.
Our design ensures that every participant captures real value without relying on hidden player‑versus‑player dynamics.
Bonders receive long‑dated ETH options, allowing them to borrow capital, scalp volatility, or speculate without liquidation risk.
Borrowers access ETH for a fixed tenor to pursue higher returns, paying an interest rate that compensates stakers for duration risk.
Debt holders receive a transparent, market-priced instrument to assess and trade the protocol's outstanding obligations.
STRAT holders benefit from increasing ETH per STRAT as leverage is added through bonding, whether they are staking, borrowing, or simply holding.
There are no token emissions or hidden subsidies. Value is created through explicit risk transformation, not through extracting liquidity from other participants.
We've demonstrated these mechanics can generate high yields through ESPN. The next step is to release the autonomous primitives themselves, allowing anyone to participate directly and build strategies on top of the core engine. The risk premium is clear: participants accept illiquidity, and in return earn yield in ETH or USD terms.
While the engine is designed to operate autonomously, no system is static. Iteration is necessary, particularly around parameters, integrations, and security. To support this, fees generated by protocol activity accrue to an operational treasury overseen by custodians with a narrowly defined mandate including:
Adjusting system parameters such as treasury lending rates or strike prices for new bond series.
Proposing and approving additional bond types or integrations with new yield strategies.
Funding audits, infrastructure, user support, and marketing to evangelise STRAT.
Executing emergency pauses or security interventions when required.
Custodians operate within explicit constraints, and governance authority is intentionally limited. Contributors who materially improve the protocol may be compensated on an ongoing basis, aligning incentives toward long-term resilience. This meta-governance layer may ultimately be formalised with its own token.
ESPN remains a productised version of permissionless bonding. It validates our debt model in production and has attracted users who value transparent, onchain debt issuance. But ESPN is not the endpoint. It is one product built on top of a broader set of primitives. As those mechanisms are released, we expect additional products to emerge around the same core engine. Contributors with innovative ideas for new strategies or integrations are encouraged to engage with custodians as the system evolves.
Our focus for the coming quarter is to coil the spring: build a durable debt base and accumulate as much ETH as possible before the next major market phase.
To that end, we will prioritise the following milestones:
Launch ETH Bonds
Deploy the first series of long‑dated call options. Initial parameters (strike price, tenor, and discount) will be set to attract capital while preserving protocol solvency.
Open Treasury Lending
Enable STRAT holders to borrow ETH for fixed periods. Interest rate curves will adjust dynamically based on supply and demand.
Issue CDT and Launch Secondary Markets
Mint CDT to represent outstanding protocol debt and bootstrap secondary markets on decentralised exchanges, laying the foundation for a long-term liquidity strategy.
Activate ATM Issuance
Implement a mechanism that allows STRAT to be minted through CDT redemption, ensuring issuance occurs only when accretive to existing holders.
Grow the Community
Publish detailed technical and educational resources explaining the system architecture, host community discussions, and actively onboard DeFi enjoyoors.
Early on, we viewed treasury lending as the primary next step. With hindsight, it's clear the system only functions as intended when all components are live and interacting. Execution must therefore be coherent, not incremental.
Current status and timeline
Live now: STRAT Staking and ESPN
Early January: Publish articles on core mechanics and nerd snipe early adopters
Late January: ETH Bonds, Treasury Lending, and CDT Issuance
February: Activate ATM Issuance and CDT Redemption
This article lays out the grand plan for ETH Strategy: the philosophy, architecture, and conviction behind what we are building. High yields have too often been used as marketing, shifting fat‑tail risk onto participants. It's a lesson relearned every cycle. The collapse of stablecoin yields show once again that the party is over. We believe it's time for a second coming of DeFi, one where value creation is driven by duration risk rather than hidden subsidies.
Our strategy returns to what first excited us: a fully autonomous engine that accumulates ETH for long‑term believers.
We reject the yield games of the past. We firmly believe illiquidity is the explicit cost of high returns, and that systems should be designed so every participant benefits. ETH is the sound money of the internet, and building an onchain accumulation machine is the highest‑impact contribution we can make.
In the articles that follow, we will go deeper. We will break down each component in detail, explain protocol debt and CDT pricing, and show how treasury lending, staking, and issuance work mechanically. We will also outline the trades we see and how independent actors can build strategies on top of the core engine.
To every DeFi nerd who feels the space has lost its way:
Welcome home.
Join us as we build an enduring, transparent and autonomous ETH engine. Together, we can write the next chapter of ETH Strategy and DeFi writ large. Low-risk DeFi is not the end. It is merely the beginning. We believe in somETHing. Join us.
Our next phase returns to our founding conviction. Building a fully autonomous, onchain ETH accumulation engine. We aren't sunsetting managed products like ESPN. Over the coming quarter, however, our focus shifts toward our true marginal user - DeFi nerds.
Onchain data suggests there is still hundreds of millions in notional value held by participants onboarded during DeFi summer. Many of these actors did not enter the space for the extractive or nihilistic dynamics that have since taken hold. They came because they (like us) believe in the power of decentralised finance. Our goal isn't to capture a narrow slice of that audience, but to capture all of it and then grow it by onboarding others to the magic of DeFi.
We will lean hard into autonomy and the fundamental insight that illiquidity is the appropriate risk premium for outsized return. Sustainable value creation in DeFi requires transforming risk, not shifting it between participants. We aim to achieve this by rolling out a small set of core mechanics that work in concert, allowing users to express market views and capture endogenous yield without relying on hidden subsidies.
Our edge isn't to just be another proxy for corporate balance-sheet leverage like MSTR, SBET or BMNR - but something more.
ETH Bonds
Long‑dated call options issued by the protocol in exchange for debt. The protocol borrows stablecoins and grants a long‑dated call option on ETH. In effect, the protocol sells volatility to accumulate more ETH over time.
STRAT Staking
Yield from protocol‑owned ETH. All treasury holdings are deployed into low‑risk, transparent DeFi strategies. The proceeds flow to STRAT stakers, paid in ETH. Because the protocol owns ETH outright and layers debt against it (and because not all STRAT holders will stake) real yields for stakers can exceed standard LST returns. All easily and transparently verifiable onchain.
Treasury Lending
Borrow protocol ETH for fixed periods. STRAT holders who believe they can deploy ETH more profitably than the protocol may borrow ETH for a non‑liquidatable tenor. Borrowers pay a predetermined interest rate that flows back to STRAT stakers while retaining their upside, aligning incentives across the system.
CDT (Convertible Debt Token)
Fungible unit of account for protocol debt. CDT functions similarly to a principal token and is freely tradable. Its price reflects the market's view of protocol solvency and establishes a longer-tenor reference rate within DeFi.
At‑the‑Market Issuance and Debt Redemption
STRAT issuance through debt redemption. When CDT trades below par, the protocol can purchase and redeem it for STRAT. If debt levels are low and yields are attractive, this creates a +EV opportunity for market participants to extinguish protocol debt. STRAT supply expands only when issuance is accretive to existing holders.
These components are autonomous yet interdependent. Market actors can choose where to play to maximise returns. Importantly, yield is not ouroboros. Participants aren't extracting value from each other. The value comes from risk transformation.
Together, these core mechanics enable several compelling use cases:
Non‑liquidatable long‑term debt: Bonders can borrow against collateral without liquidation risk. For example, a user may bond, sell CDT and retain long-dated ETH upside. For someone who believes ETH is going to 10k but need liquidity over a multi-year horizon, this is a clear +EV play.
Gamma scalping: Sophisticated traders can capture the spread between realised and implied volatility, harvesting variance without directional exposure. This is the same trade we productised in ESPN, but individual actors can potentially make meaningfully higher returns by executing it directly.
Leveraged ETH exposure: Speculators can obtain levered ETH exposure without liquidation risk by bonding, selling CDT, and rebonding iteratively.
Our design ensures that every participant captures real value without relying on hidden player‑versus‑player dynamics.
Bonders receive long‑dated ETH options, allowing them to borrow capital, scalp volatility, or speculate without liquidation risk.
Borrowers access ETH for a fixed tenor to pursue higher returns, paying an interest rate that compensates stakers for duration risk.
Debt holders receive a transparent, market-priced instrument to assess and trade the protocol's outstanding obligations.
STRAT holders benefit from increasing ETH per STRAT as leverage is added through bonding, whether they are staking, borrowing, or simply holding.
There are no token emissions or hidden subsidies. Value is created through explicit risk transformation, not through extracting liquidity from other participants.
We've demonstrated these mechanics can generate high yields through ESPN. The next step is to release the autonomous primitives themselves, allowing anyone to participate directly and build strategies on top of the core engine. The risk premium is clear: participants accept illiquidity, and in return earn yield in ETH or USD terms.
While the engine is designed to operate autonomously, no system is static. Iteration is necessary, particularly around parameters, integrations, and security. To support this, fees generated by protocol activity accrue to an operational treasury overseen by custodians with a narrowly defined mandate including:
Adjusting system parameters such as treasury lending rates or strike prices for new bond series.
Proposing and approving additional bond types or integrations with new yield strategies.
Funding audits, infrastructure, user support, and marketing to evangelise STRAT.
Executing emergency pauses or security interventions when required.
Custodians operate within explicit constraints, and governance authority is intentionally limited. Contributors who materially improve the protocol may be compensated on an ongoing basis, aligning incentives toward long-term resilience. This meta-governance layer may ultimately be formalised with its own token.
ESPN remains a productised version of permissionless bonding. It validates our debt model in production and has attracted users who value transparent, onchain debt issuance. But ESPN is not the endpoint. It is one product built on top of a broader set of primitives. As those mechanisms are released, we expect additional products to emerge around the same core engine. Contributors with innovative ideas for new strategies or integrations are encouraged to engage with custodians as the system evolves.
Our focus for the coming quarter is to coil the spring: build a durable debt base and accumulate as much ETH as possible before the next major market phase.
To that end, we will prioritise the following milestones:
Launch ETH Bonds
Deploy the first series of long‑dated call options. Initial parameters (strike price, tenor, and discount) will be set to attract capital while preserving protocol solvency.
Open Treasury Lending
Enable STRAT holders to borrow ETH for fixed periods. Interest rate curves will adjust dynamically based on supply and demand.
Issue CDT and Launch Secondary Markets
Mint CDT to represent outstanding protocol debt and bootstrap secondary markets on decentralised exchanges, laying the foundation for a long-term liquidity strategy.
Activate ATM Issuance
Implement a mechanism that allows STRAT to be minted through CDT redemption, ensuring issuance occurs only when accretive to existing holders.
Grow the Community
Publish detailed technical and educational resources explaining the system architecture, host community discussions, and actively onboard DeFi enjoyoors.
Early on, we viewed treasury lending as the primary next step. With hindsight, it's clear the system only functions as intended when all components are live and interacting. Execution must therefore be coherent, not incremental.
Current status and timeline
Live now: STRAT Staking and ESPN
Early January: Publish articles on core mechanics and nerd snipe early adopters
Late January: ETH Bonds, Treasury Lending, and CDT Issuance
February: Activate ATM Issuance and CDT Redemption
This article lays out the grand plan for ETH Strategy: the philosophy, architecture, and conviction behind what we are building. High yields have too often been used as marketing, shifting fat‑tail risk onto participants. It's a lesson relearned every cycle. The collapse of stablecoin yields show once again that the party is over. We believe it's time for a second coming of DeFi, one where value creation is driven by duration risk rather than hidden subsidies.
Our strategy returns to what first excited us: a fully autonomous engine that accumulates ETH for long‑term believers.
We reject the yield games of the past. We firmly believe illiquidity is the explicit cost of high returns, and that systems should be designed so every participant benefits. ETH is the sound money of the internet, and building an onchain accumulation machine is the highest‑impact contribution we can make.
In the articles that follow, we will go deeper. We will break down each component in detail, explain protocol debt and CDT pricing, and show how treasury lending, staking, and issuance work mechanically. We will also outline the trades we see and how independent actors can build strategies on top of the core engine.
To every DeFi nerd who feels the space has lost its way:
Welcome home.
Join us as we build an enduring, transparent and autonomous ETH engine. Together, we can write the next chapter of ETH Strategy and DeFi writ large. Low-risk DeFi is not the end. It is merely the beginning. We believe in somETHing. Join us.
ETH Strategy
ETH Strategy
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