That design solves one side of the balance sheet. The natural next question is what happens on the other side: once ETH is accumulated, how should it be used?

Holding treasury ETH passively is the safest option, but it leaves value on the table. Deploying it aggressively introduces counterparty risk and undermines the protocol’s debt obligations. ETH Strategy needs a mechanism that allows treasury assets to become productive without weakening the protocol’s promises to CDT holders.

This article introduces that mechanism.

Credit Facility

The ETH Strategy Credit Facility allows STRAT holders to access treasury-backed ETH liquidity directly from the protocol. Rather than relying on external lending markets or discretionary governance, the protocol offers fixed-term ETH loans against its own capital structure. Crucially, this requires both equity and debt to participate, enforcing financial discipline through design rather than liquidation.

Borrowers bring both equity (STRAT) and debt (CDT) to the table. In return, the protocol advances ETH for a fixed term and charges a predetermined interest rate. That interest flows to STRAT stakers as protocol revenue. The trade is straightforward: borrowers believe they can deploy ETH more productively than the cost of borrowing, while STRAT stakers capture the spread as yield.

Crucially, CDT does not appear from thin air. It is minted by permissionless bonders, who receive long-dated ETH optionality. CDT represents the protocol’s outstanding liabilities. When CDT circulates in the market, it becomes a scarce resource that directly limits how much treasury ETH can be advanced (through loans or conversions). Borrow capacity is therefore anchored to real protocol debt, not synthetic leverage.

Requiring both STRAT and CDT as collateral is what keeps the system balanced. Posting STRAT aligns borrowers with the long-term success of the protocol: they retain exposure to ETH accumulation and staking yield. Posting CDT acknowledges the protocol’s debt obligations: borrowers cannot extract ETH without also holding a claim on the liabilities side of the ledger.

This dual requirement prevents free-riding and enforces symmetry between equity and debt. Anyone drawing liquidity from the treasury must participate in both sides of the balance sheet.

Loans are fixed-rate and fixed-term. Terms are locked in at origination, giving borrowers predictability and removing the risk of interest rate spikes. Positions are non-liquidatable until expiry. If a borrower chooses not to repay, the protocol keeps the collateral and releases the reserved interest to STRAT stakers.

The result is a loan facility that behaves less like a typical DeFi lending market and more like a structured treasury instrument. Liquidity flows out of the protocol in a controlled, term-based way. Debt holders remain protected. Equity holders are compensated. And the treasury remains solvent by design.

How it Works

To understand ETH Loans in practice, it helps to walk through their lifecycle from the borrower’s perspective:

1. Dual-collateral deposit
   Borrowers supply both STRAT and CDT in a predefined ratio. This requirement ties each loan to both sides of the balance sheet at issuance: STRAT for equity exposure and CDT for outstanding protocol debt.

2. Loan issuance
   Once collateral is posted, the protocol issues a fixed-term loan (ex: 6-months). The borrower receives liquidity upfront and the loan parameters are locked at origination: principal, term, and interest rate. There are no margin calls or liquidation risk during the life of the loan.

3. Prepaid interest
   Each loan includes a fixed interest payment which is set aside at origination. The interest compensates the protocol for providing liquidity, while setting a clear hurdle rate for tokenholders. The Credit Facility also reserves an amount to cover unpaid loans, the delinquent fee.

4. Early repayment or rollover
   At any time before maturity, borrowers may repay principal to close the loan and recover their collateral. Alternatively, they may “roll” their loan to extend the term by providing additional collateral.

5. Expiry and settlement
   If the loan reaches maturity unpaid, the position settles automatically. The protocol retains the collateral and routes the reserved interest (including a delinquent fee) to STRAT stakers. No liquidation or cascading risk required.

esETH

All ETH Loans are issued in esETH, the internal accounting unit of ETH Strategy.

Borrowers receive esETH, which can be unwrapped 1:1 for an equivalent amount of treasury reserves. In practice, esETH represents a claim on treasury ETH and approved equivalent assets such as stETH, rETH, or other liquid staking tokens. It is the ledger by which the protocol measures how much ETH sits on the balance sheet at any moment.

This intermediate layer provides two important benefits.

First, it standardizes settlement. The protocol may hold reserves across multiple ETH-denominated assets, but esETH abstracts those differences away. Borrowers interact with a single unit of account, while protocol custodians retain flexibility over how reserves are allocated underneath.

Second, it isolates operational risk. By separating user-facing balances from the underlying assets, esETH creates a controlled boundary between protocol accounting and reserve management. Users transact against a stable interface, while the protocol can evolve behind it. This design reduces friction between systems and makes upgrades safer over time.

Parameters

Like any lending market, ETH Strategy operates within a defined set of risk. These parameters are set by custodians and can evolve over time, but they are designed to be simple and predictable for borrowers. The three parameters that impact borrowers are:

Term

Loans are issued with a fixed maturity. At launch, ETH Loans will use a six-month term. This duration is long enough to support meaningful capital deployment while remaining short enough to keep the balance sheet responsive to changing market conditions.

Interest Rate

Each loan carries a fixed interest locked at origination, so borrowers know their financing cost upfront. Initial rates are expected to launch in the 4-6% APR range. Borrowing ETH from the protocol should require productive deployment, where the cost of capital acts as a hurdle rate for strategies expected to outperform passive staking.

Delinquent Fee

Each loan also includes a built-in reserve that acts as a safety buffer for unpaid principal. This reserve compensates STRAT holders for tail risk and ensures that expired positions settle cleanly without cascading failures. At launch, the delinquent fee will be set at 10% of collateral.

Other internal safeguards exist to protect solvency, but these operate as guardrails rather than user-facing variables. From a participant’s perspective, the system behaves like a fixed-term credit instrument with transparent costs and deterministic outcomes.

Next Steps

ETH Loans complete the other half of ETH Strategy’s balance sheet.

Permissionless Bonds define how the protocol issues debt and accumulates ETH. The Credit Facility defines how that ETH becomes productive without breaking the promises enshrined in CDT. Together, they form a productive closed loop.

The smart contracts implementing the full protocol design are currently under audit. We expect to spend some time hardening the codebase, validating edge cases, and ensuring that the security model matches the economic intent. This system sits at the core of ETH Strategy, and will launch only when we are confident it meets that standard.

Some of this will feel familiar. Some is intentionally different. The design has evolved based on our experience since launch. If you want to see the original blueprint, start with the initial whitepaper.

This post focuses on what changed, and why.

Ultrasound Convertibles

Originally, long bonds were framed as debt with an embedded convertible note for STRAT. Capital in today, STRAT exposure over time. That abstraction was useful for bootstrapping TVL, but it also blurred the core trade: ETH Strategy is willing to sell volatility to stack more ETH.

Long bonds now come with dual conversion rights: ETH or STRAT. You choose.

This mirrors our approach to STRAT staking rewards. When the protocol owns its liquidity, issuing STRAT while retaining treasury assets is largely an internal accounting choice, shifting ETH between buckets on the balance sheet. For users, however, ETH’s liquidity is the point. Converting into a blue-chip asset with the deepest onchain markets makes the product simpler, more portable, and easier to price.

Our goal is straightforward: ETH Strategy will be the premier source of cheap, long-dated call options on ETH.

Mechanically, bonders deposit stablecoins and receive two assets:

1. CDT, a token representing the bond’s principal (“debt”), and

2. a long-dated, out-of-the-money call option issued by the protocol.

Settlement is flexible. Anytime before expiry, bonders may redeem by paying back CDT to retrieve the underlying ETH (or its equivalent in STRAT). After expiry, redemption settles to the underlying dollar value of the bond.

Protocol Debt

With Long Bonds positioned as ETH-denominated obligations, CDT (Convertible Debt Token) becomes the protocol's natural unit of account. CDT is:

• A fungible claim on protocol debt

• Backed by the treasury’s balance sheet

• Freely tradable, permissionless, and transparent

Think of CDT as a protocol-wide principal token (PT). It doesn't promise yield, it promises repayment under defined conditions.

By stripping convertibles into separate debt and option components, DeFi enjoyooors can monetize each leg indendently: hold the upside optionality, sell the principal, or redeploy both as they see fit.

Crucially, CDT is scarce and valuable. It represents the protocol’s current liabilities, and as ETH Strategy grows, CDT becomes a core primitive for pricing risk, settlement, and redemption.

Redemption

In our initial design, we proposed a separate mechanic (Short Bonds) to facilitate debt redemption. Essentially a debt-for-equity conversion. While we’re still bullish on this approach, it requires too many leaps of faith for early market participants.

So the initial permissionless phase will launch with something simpler: direct debt redemption.

From the protocol’s perspective, there is a price below which it makes sense to buy and burn CDT. That threshold depends primarily on ETH’s market price relative to the total debt outstanding. Under the right conditions, debt buybacks can be immediately accretive to STRAT holders

ETH Strategy’s buyback facility isn’t infinite. It will have a defined budget and (most likely) a daily limit, similar in spirit to bounded facilities like MakerDAO's original PSM. Beyond the defined buyback price, the protocol will provide concentrated liquidity in the $0-1 price range for CDT. This liquidity will be intentionally thin at launch, as we expect market actors to deepen liquidity over time as confidence in CDT’s floating peg is established.

Strategies Unlocked

These core primitives open up a new design space in DeFi. Some use cases include:

• Liquidity Without Liquidation: bonders can treat the protocol as a debt facility: deposit capital, receive immediate liquidity via CDT, and retain ETH upside via the long-dated call option. This is the trade if you believe ETH is headed higher over time, but need liquidity today without the risk of forced liquidation.

• Convertible Looping: speculators can created levered ETH exposure by bonding, selling CDT, and repeating the process. Effectively looping their position to stack more long-dated ETH options (or STRAT for that matter).

• Volatility Harvesting: sophisticated traders can harvest volatility from the embedded call option, dynamically managing delta and monetizing the option's convexity. This is essentially what we productised with ESPN, but individual actors can deploy their own volatility strategies directly on top of our convertibles.

• CDT Basis Trade: traders seeking dollar-denominated returns can buy CDT below face value and earn the spread as CDT converges toward redemption value. When CDT trades at a discount, it creates a straightforward credit/basis trade.

These primitives also enable a new generation of structured products. Think: a stablecoin whose yield is powered by ETH volatility; an onchain “vol index” that gives direct exposure to ETH vol without getting farmed by carry; and even degen experiments that recycle trading fees into bonding and use in-the-money settlement proceeds to buy and burn supply.

Looking Ahead

We’ve talked about these primitives for over a year, so this article is more of a refresher. A few small tweaks make the system easier to understand, easier to bootstrap, and more directly aligned with the core trade.

With ETH-denominated convertibles and CDT mechanics locked in, the remaining pieces fall naturally into place:

• STRAT captures the convex upside of protocol leverage

• CDT pricing expresses the market cost of leverage

• STRAT staking distributes protocol revenue

The result is a system where debt, optionality, and redemption are cleanly separated (and composable) from day one. Long Bonds give users long-dated ETH upside, CDT makes protocol debt liquid and tradable, and ETH settlement removes unnecessary abstraction while anchoring the product to the deepest liquidity in crypto.

Next, we’ll move one layer down the stack: how to make treasury assets productive without compromising the protocol’s debt obligations. The next article will introduce our updated lending design, a mechanism that lets STRAT holders access treasury-backed liquidity while keeping CDT holders protected and the balance sheet intact.

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.

Returning to Our Edge

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.

Core Mechanics

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.

What This Enables

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.

Positive-Sum Value

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.

Governance at the Edges

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.

From Product to Protocol

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:

1. 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.

2. Open Treasury Lending
   Enable STRAT holders to borrow ETH for fixed periods. Interest rate curves will adjust dynamically based on supply and demand.

3. 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.

4. Activate ATM Issuance
   Implement a mechanism that allows STRAT to be minted through CDT redemption, ensuring issuance occurs only when accretive to existing holders.

5. 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

The Rallying Call

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.

These early supporters, the "PreSaylors", provided the initial treasury foundation that allowed us to pursue our goal of delivering long-term, high-quality exposure to ETH. Their allocations now begin a two-month linear unlock.

Key Details

Start date: 29 November 2025

Vesting: Linear unlock over two months

Our Approach

Since launch, ETH Strategy has shipped a sequence of meaningful releases: ESPNv1 & LP Staking, ESPN v2, and Staked STRAT. Even in a difficult, down-only market, EPS has continued to grow and the long-term economics of STRAT have strengthened. ESPN’s structured debt has also begun to coil the spring of leverage, positioning STRAT to benefit when ETH resumes its upward trajectory.

We’re entering unlock season with a clear focus: to support the long-term health of STRAT and the holders who believed in the vision from the beginning.

Our unlock plan is grounded in three priorities:

1. Reward holders who remain on the journey toward generational ETH exposure.

2. Protect and reinforce core protocol metrics: TVL and EPS.

3. Ensure that PreSaylors who choose to exit may do so smoothly, fairly, and without destabilizing the protocol or long-term participants.

Liquidity Operations

ETH Strategy has not deployed treasury ETH into the current STRAT liquidity pool. All liquidity to-date has been organically bootstrapped by market participants. As a result, the current LP depth is modest relative to the amount of STRAT scheduled to unlock over the next two months.

This creates an opportunity as much as a risk, if selling pressure becomes sustained and STRAT trades below NAV, the protocol can step in as a disciplined buyer of last resort. Our plan is straightforward: 

We will deploy treasury ETH to buy back STRAT and burn it.

Only below NAV. Never above.

Indicative buyback range: 0.5x to 0.9x NAV, depending on market conditions and liquidity.

Repurchased STRAT will be burned, permanently reducing circulating supply. This concentrates EPS in the hands of long-term holders and reinforces the economic flywheel. It also creates a natural exit fee and channels that value directly to those who stay aligned with the protocol’s long-term mission.

Design Principals

A purely free-market unlock creates a predictable coordination problem: each participant is individually incentivized to sell early, even though collective early selling leaves everyone with worse execution. With two months of continuous unlocks, sellers are effectively placed in a prisoner’s dilemma. That dynamic serves no one.

Instead of putting everyone in this dynamic over the next 2 months , our unlock plan is designed to avoid that dilemma. By operating buybacks below NAV and creating an orderly exit path, the optimal individual strategy becomes the one that also supports the protocol’s long-term health. All while channeling value to holders who remain holding STRAT and avoiding the destructive dynamics of typical token unlocks.

The unlock plan is structured to align incentives and achieve our goals of protecting long-term STRAT holders, reinforcing TVL & EPS, and maintaining healthy investor relations with all our presaylors. It also reduces unnecessary PvP behaviour and gives token holders a cleaner, more orderly set of choices. We are proposing a set of choices for Presaylors to balance liquidity demands:

1) Begin Unlocking to Receive Liquid STRAT

To begin unlocking to liquid STRAT, you will burn your Presaylor NFT for a Hedgey NFT that will stream liquid STRAT linearly over 2 months. 

Holders can claim unlocked STRAT daily, weekly, at any interval, or all at once at the end of the vest

For those Presaylors that stay on our bullish journey of turning financial alchemy to generational ETH exposure, the best course of action is to unlock and stake your STRAT.

2) Burn Presaylor NFT and receive 80% of the ETH they originally committed. (Exit the system)

For one week, Presaylors have the option to burn their NFT and receive 80% of the ETH originally committed. This may go live later in the first week, not on the first day, if you are considering this option, keep your Presaylor NFT and wait for this to go live.

Redemption rate: 10,000 STRAT → 0.8 ETH (for Presaylor NFTs ONLY, not liquid STRAT)

This is a one-time offer only, for those in urgent need of liquidity. It reflects the reality that ETH price is down, our balance sheet now carries structured debt via ESPN, and that all exits must be accretive to holders who remain.

Ensuring accretive dilution is essential to compounding returns for long-term STRAT holders.

Remaining STRAT holders can view this as a TVL-for-EPS swap, it facilitates exits for those who want to leave, while rewarding long-term participants with a higher ETH-per-STRAT.

Again it is important to note, if you don't vouch for this option, you can always redeem for liquid STRAT and exit in the LP, however we will not be prioritizing the liquidity as an immediate requirement but slightly later down the track, and we will still be buying and burning STRAT from LP as mentioned above. This option allows you to skip the 2 month linear vest, and have a guaranteed rate of exit.

Product Announcement: Treasury Lending

ETH Strategy will also be rolling out Treasury Lending for STRAT holders.

This will not be available on the first week of unlocks. It is slated for launch within 2 weeks from the unlock date. This feature is a great utility for STRAT holders who want to access liquidity against their STRAT while maintaining upside exposure. This is a great alternative to selling STRAT in the LP or opting for the once off redemption offered at unlock.

Treasury lending unlocks the next stage of our protocol, where we allow users access to the underlying ETH, providing an important market signal for what the productive hurdle rate on treasury ETH should be. 

It allows liquid STRAT holders to borrow ETH in treasury against their STRAT. The design of the system will be such that STRAT holders will be able to borrow at a small discount to NAV, with all interest earned will be paid out to STRAT Stakers.

TLDR

You should read the full explanation above to understand all the details, but here is the short summary:

• Unlocks are beginning.

• Our goal is to balance three priorities: happy STRAT holders, strong metrics (TVL and EPS), and a graceful exit path for any supporters who wish to leave.

• If the LP experiences sell pressure, the treasury will buy back and burn STRAT. This is extremely bullish for long-term accumulation of ETH per STRAT.

• Exiting through the LP is unpredictable, so to provide a low slippage exit for PreSaylors who need liquidity, and reduce STRAT sell pressure, we are offering a one-time, one-week window to burn the Presaylor NFT and redeem 80 per cent of the original ETH commitment.

• This is very bullish for remaining STRAT holders due to accretive dilution.

• We are launching treasury lending, allowing liquid STRAT to borrow treasury ETH at gross asset value through a “semi-non-liquidatable” loan structure.

• We are excited about the future and remain focused on providing STRAT holders with the strongest long-term, generational exposure to ETH.

ETH has become boring and institutionalized. 

Nothing is happening natively onchain, all we have is scaling infrastructure efforts or tokenized real-world assets, mainly US treasuries (the most boring RWA of them all).

DeFi has taken a back seat; you simply swap, lend or borrow, no speculation, just risk-adverse utility. You know it's true when even Vitalik starts writing that vanilla DeFi has become too docile.

When it comes to holding ETH or ETH exposure, the only options are LSTs, or Lending ETH in AAVE. There is no new asset that can provide asymmetric ETH returns. 

To conquer this we need to embrace Wartime Ethereum. We need to go to War.

Thus, ETH Strategy declares the War Games.

To make Ethereum mainnet great again and to push the bounds of financial engineering onchain.

Why do we need to go to War?

Ethereum is under attack, and no one seems to care. 

Institutions are gobbling up all our ETH, and everyone is cheering them on because they think it's the only way to impact price. The most bullish thing that can ever be done is using the chain itself to create financial alchemy that does the same thing, however democratizes the power of holding that ETH to anyone permissionlessly onchain vs having it all behind a board of directors.

STRAT does this for ETH. War games do this for STRAT. 

Markets are driven by attention; stochastic rewards release more dopamine and hold people’s attention for longer. ETH Strategy’s War Games creates a prediction-trading game with leverage-like exposure to ETH. New participants will come to bet on a buyback and stay for the best long-term leverage exposure to ETH. 

Why should you enlist in the War Games?

Right now, there is an ongoing fight to accumulate Ethereum. Although support from DATs and ETFs is welcome, Ethereum's value as a neutral settlement layer depends on distributed ownership. The only way to ensure the network's distribution and the survival of the cypherpunk principles on which it was built is to buy as much ETH as possible and demand it.

Are you going to let Wall Street buy all of your ETH?

What are the War Games?

ETH Strategy War Games weaponise the treasury to increase STRAT volatility, which the treasury can farm to accumulate ETH for STRAT holders.

The First War Game is STRAT staking, staking revenue from the treasury will be paid out to STRAT stakers. Rewards are paid out through Merkl. Buying and staking STRAT is ETH staking with leverage.

Why is it bullish for STRAT holders:

A key metric of success is trading volume and sell depth. Everything becomes easier with volume and TVL. Creating disproportiate staking rewards for STRAT makes it difficult to price. The price discovery will drive volume.

As volumes increase, we attract third-party liquidity providers, which naturally increases depth, which is required to support a premium to nav, which in turn is required to generate any form of EPS growth via protocol mechanics, which sustainably harvest the speculative premium into treasury growth for all STRAT holders (more on this later).

STRAT staking rewards are funded from ETH Staking rewards, and, in our opinion, is the best use of staking revenue for all STRAT holders. The guiding principle is to convert short-term volatility into EPS growth. We don’t care about the path, we all know ETH is going to 100k. Anyone can stake their yield, only STRAT can convert that into harvestable volatility. 

We’ve raised 12,273 ETH (~$50M USD) to date, the next phase was to raise the debt required.

What our initial equity raise unlocks for all STRAT holders is a coordination game of long-term ETH bulls ‘pooling’ their ETH together to demand better debt terms from the market that are not available individually. This is protocolised and done 100% onchain.

ESPN Journey to Date

Our initial proposal was to sell convertible notes directly to the market [whitepaper], and let market participants execute the convertible arbitrage trade themselves. We got strong feedback that this needed to be abstracted for DeFi natives to adopt (most degens don’t understand options).

Our first iteration of abstracting this trade, and thus getting better terms on our debt than any holder could individually was to wrap it up as a perpetual note issued by the STRAT protocol [ESPN Announcement].

The USD raised through it is deployed into an automated calendar-spread options strategy. This allows STRAT to keep exposure to ETH upside while debt holders receive sustainably high interest funded by the strategy itself.

By all metrics the trade worked. We generated ~30% real yield on average over the last 4 weeks. However, we struggled to scale past the initial 5m TVL. Why? We didn’t pattern match to what DeFi investors are expecting (vaults with redemption). Our idea was to pattern match with TradFi preference shares, where participants would enter and exit via the secondary market. Our professional investors were more than happy to keep their capital deployed, however, if and when they decide to withdraw, they needed certainty on their redemption price.

Our latest iteration is pushing towards this, having a redemption buffer mechanism, a classic yield bearing ERC4626. As far as STRAT and debt holders are concerned, perpetual bonds and (basically) exit fees via an LP are semantically the same as paying out interest along a curve and incentivising users to lock (for greater yield). By controlling the yield paid out and incentive to lock, ESPN can encourage debt holders to remain in the system when it’s beneficial to STRAT, and target a given redemption liquidity to ensure those who want to exit can do so. ETH Strategy’s $50M (and growing) balance sheet underwrites this.

What’s changed?

At a high level:

1. No more LP rewards. All debt holders can redeem directly for their principal + yield.

2. All yield is paid out to debt holders by steadily increasing the asset base. This will be redeemable as per the standard erc4626 interface.

3. The interest rate model is decoupled from the strategy itself. This makes yield predictable (for debt holders) and it is a crucial lever (along with locks) for STRAT to manage redemption liquidity.

4. ESPN holders can lock for a greater share of the total yield

Yield Generation

We’ll share more details on the interest rate model in the days to come. At a high level, it will be similar to Aave or Morpho (yield increasing as utilisation increases), Crucially, the yield ESPN pays out is no longer directly connected to how it generates revenue by deploying its balance sheet. That said, we are still targeting high average yields over long time horizons (~20% APY based on backtested and Monte Carlo simulations).

The mental model here is the protocol has taken on debt at some rate, it will then use all assets on its balance sheet to generate revenue to pay down its interest expense. This will be split between lindy, deterministically liquid strategies (eg. eth staking) and stochastically liquid strategies (e.g. selling covered calls). The split between the two will be guided by our target liquidity buffer. 

The protocol will generate revenue (using all assets on its balance sheet) ESPN will now, on this debt, generate revenue via a mixture of lindy liquid strategies alongside the convertible note arbitrage trade which underpinned ESPN.

V2 Staking

In order to manage and incentivize the correct liquidity ratio, we’re introducing a locking model for ESPN. This should be familiar to DeFi users of Curve gauges or (more accurately) FRAX liquidity gauges. This allows ESPN to autonomously allocate capital between deterministically liquid holdings, and the stochastically liquid convertible note strategy.

The proportion of deterministic to stochastic liquidity is determined by the lockup period. At the maximum lockup (initially set to 1 year), 100% of funds is deployed in the convertible note strategy. At no lockup, 60% of funds are deployed in fully liquid strategies, while 40% are deployed in the convertible note strategy.

Conclusion

This iteration on ESPN solves our problem space, most importantly, the product pattern matches with what the industry is after, all investor feedback to date has been very positive.

After hundreds of conversations, we don’t see any other major roadblocks to unlock deca-millions in TVL, coiling the spring for the unliquidatable generational long which is undoubtedly the greatest trade of the generation.

This week marks the next step: staking incentives for ESPN liquidity providers (LPs). Rewards are powered by ETH Strategy underwriting ESPN with long-dated call options on treasury ETH. By pairing those with selling shorter-dated options, ESPN is able to generate yield well above standard covered call strategies and create a steady stream of incentives for LP stakers.

How are option premiums distributed?

In the introductory post we outlined how premiums would be split. Now that the first option cycle has completed, we can use real numbers to illustrate how value flows through ESPN. (As always, past results are not indicative of future performance; full details can be verified on Ethereum and Derive Chain.)

Last week, ESPN raised $1M and bonded to ETH Strategy with a long-term strike price of $4,687 which allows covered calls to be sold at Derive’s $4,700 strike. This capital was used to purchase 223 ETH at an average price of $4,485. Of this, 10 ETH was transferred to the treasury in return for long-dated calls (increasing EPS for STRAT holders), while the remaining 213 ETH was used to sell the first cycle of covered calls.

Cycle Results:

• Option Premiums: $13,000

• Derive Fees: $280

• Protocol Reserve Fee: $1,275

• ESPN Remainder: $11,500

In other words, ESPN generated 1.15% of deposits in one week (equivalent to an annualized return of 60% APR). This is real yield received in USDS. Now that we have a clear view of the value captured by ESPN, let’s break down how premiums are allocated between different stakeholders in the system.

Recall that ESPN targets a 12% annual base rate. From the first cycle’s $11.5k remaining, around $2.3k is used to buy ETH and expand the asset base, increasing the number of options ESPN can sell in future cycles. That leaves $9.2k available for distribution to liquidity providers as staking incentives.

Incentives are distributed to stakers as LP tokens. To accomplish this, half of those incentives ($4.6k) are used to buy back ESPN on the open market, a direct benefit to all holders (even those not staking). The purchased ESPN is then paired with the remaining USDS ($4.6k) to create new LP tokens, which are finally distributed via the staking contract.

Staking ESPN

To stake ESPN, participants provide liquidity for the ESPN-USDS pair and then stake the resulting LP tokens.
Before walking through the process, let's review our design choices.

Implementation

We selected Uniswap v3 to concentrate liquidity and provide deeper markets for ESPN. Because UniV3 positions are non-fungible, we partnered with Arrakis to wrap these positions into fungible ERC20 tokens using their vault standard. This enables standardized liquidity ranges for all participants and unlocks staking functionality.

Liquidity is provided at the 0.05% fee tier, balancing market depth with trading costs for a stable(ish) asset like ESPN. At launch, the vault will concentrate liquidity between $10 and $1,000 per ESPN, a 10x range in both directions around the initial $100 par value. ETH Strategy may adjust this range over time to ensure healthy liquidity as the market evolves.

Staking Walkthrough

Staking ESPN takes just a few steps within the ETH Strategy app.

Select the Stake tab
Begin in ESPN’s Stake section. Enter the amount of ESPN you’d like to use for liquidity provision. You’ll need an equal amount of USDS to pair with your ESPN. A link is provided to acquire USDS via CoW Swap, though any DEX can be used.

Token Approvals
Before providing liquidity, both ESPN and USDS must be approved for the Arrakis vault contract. All contracts are verified onchain, but as always “don’t trust, verify.”

Provide Liquidity
Once approvals are complete, the app will display the target liquidity supplied. After confirming, click Provide Liquidity. This step pairs your ESPN and USDS in the Arrakis vault.

Receive LP tokens and Stake
After providing liquidity, you’ll receive “Arrakis Vault V2 ESPN/USDS” tokens representing your position. These LP tokens can then be staked directly in the ESPN staking contract, which distributes weekly incentives to depositors.

Incentives Begin

Option premiums are generated weekly on Derive, typically when the sold options expire each Friday. Incentives for ESPN stakers will follow the same rhythm, with rewards distributed on a weekly cadence. Distribution schedule may evolve over time as we optimize liquidity conditions. Any changes will be communicated clearly in advance.

After staking launches today (Friday, September 12), participants have until early next week to provide and stake ESPN liquidity before the first round of incentives is distributed.

ESPN Staking completes the design of the Perpetual Note, transforming harvested volatility into compounding growth, price support, and weekly rewards for liquidity providers. With incentives now live, the flywheel between depositors, LPs, and STRAT holders begins to accelerate. Join us by staking ESPN and take part in the next phase of ETH Strategy.

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Instead of paying interest, ETH Strategy rewards lenders with long-dated call options, a more powerful form of ETH exposure. When combined with selling shorter-dated options, this creates a steady stream of yield. ESPN takes this complex options trade and distills it into a single token. Just as Ethena productized the basis trade, ESPN transforms the volatility trade into a perpetual, compounding yield product.

How does ESPN harness volatility?

Users start by depositing stablecoins (USDS) into the vault, receiving ESPN tokens in return. Behind the scenes, these deposits are bonded into ETH Strategy, which issues a convertible note representing a debt claim paired with a long-dated call option on ETH.

With this note in hand, ESPN systematically sells shorter-dated call options on Derive. The symmetry between the long-dated convertibles acquired and short-dated calls sold keeps the strategy balanced in USD terms, while option premiums earned provide two key benefits:

• Pay rewards to ESPN liquidity providers (more on that below)

• Reinvest back into the vault, compounding the asset base over time

If options expire out-of-the-money (OTM), the vault simply rolls them forward and harvests premiums again. If they expire in-the-money (ITM), ESPN exercises its long-dated convertible to cover the position, ensuring the vault remains delta-neutral while restarting the cycle.

The result is a structure with the durability of a perpetual bond and the growth dynamics of equity. Each cycle compounds the base, allowing more options to be sold and more revenue to accrue. And for the finance bros in the back, yes, this follows the familiar v=cr/g formula, the infinite sum of a geometric series valid so long as r>g. In other words, ESPN is a product that compounds by design, Ethereum’s perpetual preferred share if you will.

The Perpetual Note

An explicit design choice of ESPN is that it has no redemptions. Unlike typical DeFi vaults where capital can be withdrawn at any time, ESPN is built as a perpetual product. Exits happen through the ESPN liquidity pool, not by redeeming against the vault itself.

Why? Because redemptions would tie ESPN’s value to short-term market conditions. Any unwind would hinge on current ETH price, introducing bottlenecks and exit queues. Worse, allowing redemptions at net asset value (NAV) could suppress ESPN price given expectations of future revenue growth.

Instead, ESPN channels yield into rewarding LPs and reinvesting back into the vault. This structure ensures that liquidity is market-driven and supported by real yield. Unlike typical incentive schemes with token inflation and decreasing reward schedules, our LP rewards are funded by exogenous revenue from continually-increasing option premiums. Over time, this makes ESPN more robust as yield grows, liquidity deepens, and holders benefit from perpetual compounding.

ESPN Flywheel

ESPN turns option premiums into a self-reinforcing feedback loop, channeling yield from options sold into market liquidity and compounding. Concretely, premiums are felt by liquidity providers as incentives and by holders as increasing ESPN price.

At launch, premiums harvested will be split as follows:

1. Fixed portion targeting 12% growth rate on ESPN’s capital base

2. Protocol reserve fee (10% of premiums generated)

3. Remainder to LP incentives

Note: this split is subject to change as we optimize incentives to balance the overall system.

Vault Compounding

ESPN has bond-like qualities, but with a twist: if the rate at which its yield grows is faster than the risk-free rate, it breaks the perpetuity formula as it no longer converges to a finite number.

Put differently, because part of every cycle’s yield is reinvested, the asset base grows over time. That larger base generates more option premiums, which in turn funds greater rewards and further compounding. Instead of converging neatly, ESPN’s revenue flows behave more like a high-growth yield stream, which markets typically value at revenue multiples.

As long as ETH continues to be volatile, ESPN revenue is truly perpetual. In practice, this means ESPN isn’t just worth the assets sitting in the vault. Even conservative models suggest strong upside from the $100 starting price, in expectation of future revenue. And as the market grows more comfortable with consistent harvesting of option premiums, that multiple can expand, further accelerating the flywheel.

LP Incentives

Liquidity providers are central to how ESPN distributes yield. Rewards are paid out in ESPN-USDS LP tokens, ensuring that payouts strengthen market depth instead of weakening it through emissions.

Here’s the key point: to make these payouts, the vault must first buy ESPN on the open market to pair with USDS. That means every yield cycle introduces natural buy pressure, reinforcing ESPN’s price over time. Unlike many tokens where rewards dilute value, ESPN is designed to turn yield distribution into a direct driver of price support.

Not every ESPN holder will also stake as an LP. This dynamic amplifies returns for those who do participate, since the same pool of rewards is shared across fewer LPs. We expect the market to find the right equilibrium, while incentives can be adjusted over time if needed.

STRAT Holders

ESPN isn’t possible without ETH Strategy underwriting the options trade. By issuing convertibles backed by treasury assets, STRAT holders take on leverage to acquire even more ETH and increase EPS. Every time ESPN rebonds, the equity layer deepens and allows ETH Strategy to expand future bonding capacity.

ESPN is the first concrete example of what can be built atop ETH Strategy’s convertibles. Vault depositors are after consistent USD returns, while STRAT holders seek increased ETH exposure. Hence, there is a great symbiotic relationship between the two. Without convertibles, this would be just another covered-call vault with returns in DeFi of 5% (or less). By contrast, the structural link to ETH Strategy transforms it into a compounding, perpetual note capable of much higher returns.

In the future, we plan to expose the underlying convertible primitive in a permissionless way. Once the market recognizes the power built into ESPN, it will unlock more innovative products built upon harvesting volatility.

Risks & Edge Cases

No DeFi product is risk-free. ESPN depends on smart contracts and integrations with external platforms like Derive. As with all protocols, there is always a baseline of smart contract and counterparty risk, even when the underlying mechanics are sound.

Beyond those general considerations, ESPN’s performance fundamentally depends on market conditions. The two main edge case scenarios to consider are:

ETH Price Falling

Significant drops in ETH price over long periods of time can undermine ESPN’s option strategy. The vault MUST sell options on Derive at the same strike price as convertibles acquired from ETH Strategy (otherwise the strategy isn’t delta-neutral). In the event that ESPN strike prices are significantly OTM, premiums received from selling calls will be much lower, thereby lowering ESPN revenue.

ETH Volatility Collapsing

Volatility is a natural feature of digital assets. In a world where ETH becomes so ubiquitous that it behaved like a reserve currency with little volatility (ETH is money), option premiums would shrink and ESPN’s yield would fall. In practice, we view this scenario as highly unlikely. Even as ETH matures into a money-like asset, volatility would likely persist at levels sufficient to sustain option markets and ongoing yield streams for ESPN.

Wen Launch

The Perpetual Note goes live September 3rd at 23:00 UTC (7pm ET, 1am CET)

Vault deposits will open with an initial cap of $1 million, which will scale up over time.

This new product is the first stepping stone for ETH Strategy, proof that volatility can be harnessed as a structural yield source. ESPN completes the flywheel between depositors seeking USD yield and STRAT holders acquiring ETH leverage.

The flywheel starts turning tomorrow.
Be there when it begins.

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This new deployment enriches ETH Strategy’s liquid staking operations with a protocol deeply aligned to Ethereum’s decentralisation values and broad DeFi composability.

Why Rocket Pool

Rocket Pool enables liquid staking through rETH, its composable token that represents staked ETH and accumulates rewards through an increasing exchange rate. Its minipools lower the threshold to stake ETH (requiring as little as 8 ETH), fostering decentralisation and reducing single-point-of-failure risk. Rocket Pool also operates as a DAO, ensuring community-aligned decision-making and protocol transparency.

What this means for STRAT holders

• Support Decentralisation: By staking via Rocket Pool, ETH Strategy aligns itself with a permissionless, distributed network of node operators and strengthens Ethereum’s decentralised infrastructure.

• Composable Yield: Holding rETH keeps treasury assets active and deployable across DeFi, allowing STRAT holders to benefit from staking rewards without sacrificing liquidity.

• Transparent & Autonomous: Rocket Pool operates on transparent smart contracts, reducing reliance on centralized intermediaries.

ETH Strategy’s collaboration with Rocket Pool supports Ethereum’s broader network resilience, while enhancing treasury operations and EPS growth for STRAT holders.

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Why Derive

At ETH Strategy, we are unabashed options nerds, which makes our strategic partnership with Derive a natural fit.

Derive is a decentralized derivatives venue purpose-built for programmable onchain options, perpetuals, and structured products, precisely the tooling needed to monetize volatility in a transparent, self-custodial way.

The partnership works because each side provides what the other needs at scale. ETH Strategy generates a steady stream of option flow from its treasury operations. Derive supplies the execution venue and settlement needed to price and clear that flow reliably onchain. Our quants design covered call and gamma scalping strategies; Derive makes them composable, liquid, and fully auditable from order to settlement.

ETH Strategy as a natural volatility supplier uses Derive’s market quality to drive measurable outcomes for holders. Option premiums captured on Derive feed ETH-per-STRAT (EPS) growth for tokenholders and USD yield for the vault, while Derive benefits from consistent, informed flow that deepens liquidity and tightens markets. Shared culture matters too. Both teams are quant-led, crypto-native, and focused on designing from first principles, which keeps the feedback loop fast and the roadmap aligned.

What we are building together

The ETH Strategy Perpetual Note Vault is designed for users who want USD-denominated yield derived from ETH's inherent volatility.

How it works at a high level:

1. Users deposit stablecoins (ex: USDS) to the vault and receives Vault tokens.

2. Vault bonds those stablecoins to ETH Strategy, receiving a convertible note.

3. Funds are used to buy ETH which is held in ETH Strategy's vault contract on Ethereum.

4. Vault bridges ETH to Derive Chain and sells OTM weekly (or monthly) covered calls on ETH, capturing option premiums.

5. a. If calls expire in the money (ITM), the vault exercises the STRAT convertible to settle, then re-bonds for the next cycle.
   b. If calls expire out of the money (OTM), the vault keeps the premium and repeats.

6. ETH Strategy’s “bond-and-buy-ETH” flow continues underneath, supporting EPS growth for STRAT holders.

7. Vault value increases over time as assets grow, fueled by option premiums and STRAT converts.

Backtesting based on Derive market data:

Daily data from Jul 1, 2022 → Jun 1, 2025 using deltas 10–25 and expiries 30–90 days:

• Gross returns of 8.5 to 24.3% (ex-fees)

• Net USD-denominated yields of 6 to 22% (after fees)

Results are model-based and not guaranteed. Live performance will vary with volatility, spreads, and transaction costs.

Why it matters for STRAT holders

By underwriting the covered call strategy, ETH Strategy increases EPS as the calls settle in the money and the vault converts. This provides leverage for STRAT holders based on the difference between option and convertible spreads.

Value created for Vault participants

The Perpetual Note Vault receives a steady stream of USD-denominated yield from continually selling call options on Derive. The vault's asset base expands from this yield, leading to compounding returns over time. As long as ETH remains volatile, the Vault can harvest outsized returns by executing this strategy underpinned by STRAT converts.

Market impact

Crypto options markets currently lack natural option sellers at scale. As a volatility supplier, ETH Strategy can sell options at institutional cadence while still returning attractive yields to users. This adds depth to DeFi’s derivatives stack and creates new building blocks atop STRAT convertible notes.

Unlike many yield strategies that rely on shorting ETH in size, ETH Strategy’s approach preserves ETH on balance sheets. This removes constant sell pressure on the market, ensuring healthier liquidity dynamics while still generating real yield. Our treasury model strengthens ETH’s role as collateral, while harvesting its volatility.

What’s next

This Perpetual Note Vault is a whole new product atop ETH Strategy and Derive, so we will publish additional educational content for the community. We will release: 

• Technical documentation on how the Vault works

• Community documentation with FAQs

• Risk assessments for the Vault and options strategy

• Timeline for Vault release and trade execution

• dApp UI with dedicated Vault page

• Announcements for Vault launch sequence

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This is the latest treasury allocation, deploying ETH into Origin’s high-yield liquid staking token (OETH) and reinforcing treasury yield with high-performance assets.

Why Origin

OETH stands out in the LST space by delivering enhanced yield through protocol-owned liquidity and automated market operations (AMO). These dynamics not only sustain a tight 1:1 peg to ETH, but also significantly boost capital efficiency and yield for holders. These mechanics are familiar to STRAT holders, including Origin as an early backer and participant in the STRAT presale, showcasing their long-term commitment to ETH Strategy.

What this means for STRAT holders

• Superior Yield: OETH’s AMO deploys protocol-owned liquidity into Curve pools, capturing staking, trading fee, and reward incentives, resulting in yields higher than standard LSTs.

• Tight ETH Peg: Thanks to AMO rebalancing and redemption features, OETH maintains a stable 1:1 peg with ETH and supports instant redemptions, minimizing slippage or hidden exit costs for treasury positions.

• Strategic Alignment: Origin’s participation in the STRAT presale underscores their early belief and alignment with ETH Strategy’s mission, reinforcing mutual conviction in long-term value growth.

ETH Strategy’s collaboration with Origin Protocol marks the beginning of a strategic partnership that benefits treasury growth and EPS growth for STRAT holders.

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This allocation is the latest in a sequence of ETH deployments to enhance ETH Strategy’s treasury yield with a streamlined, high-yield restaking solution.

Why Renzo

Renzo’s ezETH is a liquid restaking token built on EigenLayer, issued in exchange for deposited ETH or LSTs (like stETH). It automatically compounds staking and restaking rewards through “Actively Validated Services” (AVSs), offering consistently higher yields than standard staking. Renzo maintains a high proportion of delegated TVL over prolonged periods, enhancing yield while mitigating risk.

What this means for STRAT holders

• Simplified ETH Yield: ezETH automatically combines Ethereum staking rewards with EigenLayer restaking incentives, layering auto-compounded returns with no manual claiming or management required.

• Onchain Transparency: ezETH positions are easily verifiable onchain and instantly tradable or usable as collateral across leading DeFi protocols.

• Optimized Strategies: By restaking with a curated set of high-performing AVSs, Renzo intelligently balances risk and reward to drive returns for STRAT holders. Renzo is actively pursuing new risk-managed DeFi strategies across the Ethereum ecosystem to create new opportunities for STRAT holders at scale.

This allocation to Renzo underscores ETH Strategy’s commitment to deploying treasury into transparent, high-value DeFi instruments. The treasury continues to advance ETH Strategy’s EPS flywheel with a consistent focus on yield opportunities. 

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This is the latest in a series of staking partnerships designed to earn yield on treasury ETH, while diversifying staking providers and combining institutional-grade security with onchain transparency.

Why Liquid Collective

Liquid Collective offers a liquid staking solution purpose-built for institutional clients, with LsETH as its composable liquid staking token. The protocol is powered by a consortium of trusted industry players (ex: Coinbase, Galaxy, Kraken, Figment), offering compliant and enterprise-grade liquid staking infrastructure.

ETH Strategy staked through its partnership with Pier Two, joining other ETH treasuries like SharpLink. Liquid Collective takes a security-first approach to staking and safeguards LsETH holders with a comprehensive, three-tiered slashing coverage program. 

What this means for STRAT holders

• Institutional-grade yield: ETH staked through Liquid Collective delivers consistent rewards, safeguarded by built-in slashing coverage from Nexus Mutual, the protocol’s slashing coverage treasury, and node operator commitments.

• Enterprise-grade security: LsETH is backed by a network of enterprise-grade node operators, with safeguards designed to meet institutional standards.

• Automated compounding: Rewards accumulate automatically and are auto-staked through the protocol’s River contract, distributing it across a broad set of validators.

This deployment continues ETH Strategy’s disciplined treasury rollout, prioritizing onchain staking allocations that deliver unique features while driving EPS growth for STRAT holders.

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This is the second in a series of liquid staking partnerships designed to make ETH Strategy's treasury productive, earning yield from battle-tested protocols while providing onchain transparency.

Why Lido

Lido is the most widely adopted liquid staking protocol for Ethereum, providing stETH, a composable receipt token with deep onchain liquidity and broad DeFi integration. The protocol operates with a curated, geographically-distributed set of professional node operators and an extensive security posture. Integrating Lido enables ETH Strategy to direct a portion of its treasury into stETH to compound ETH while maintaining custody and verifiability fully onchain. The depth of stETH liquidity and collateral routes also improves capital efficiency for future treasury operations.

What this means for STRAT holders

• Sustainable staking yield: Deployments to Lido are designed to generate consistent ETH-denominated returns as part of the treasury program.

• Onchain proof: stETH positions are visible in treasury wallets, serving as a verifiable, real-time proof of reserves.

• Composability unlocked: Lido integrations across DeFi allow the treasury to layer additional yield strategies on top of staking while preserving flexibility for rebalancing.

This collaboration with Lido builds on ETH Strategy’s broader initiative to diversify treasury allocations across leading staking and DeFi platforms, each chosen for security, transparency, and contribution to the STRAT flywheel.

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This is the first in a series of staking partnerships designed to deploy ETH into battle-tested protocols while preserving real-time, onchain transparency.

Why Ether.Fi

Ether.Fi is one of DeFi’s fastest-growing staking protocols with over $12B TVL. They made an early bet on restaking and launched the first liquid restaking token (eETH) on top of EigenLayer. Since, the protocol has become a leading player in the wider staking landscape, consistently increasing market share over the previous year. This growth has been credited to its higher yields and sterling reputation. Integrating Ether.Fi enables ETH Strategy to direct a portion of its treasury into liquid restaking flows that compound ETH while keeping custody and verification fully onchain.

What this means for STRAT holders

• Yield-bearing treasury: Allocations to Ether.Fi are intended to generate sustainable ETH-denominated returns as part of the ETH Strategy treasury program.

• Onchain proof: Positions are held on-chain with receipt tokens in treasury wallets, providing a live, verifiable “proof of reserves.”

• Composability first: Ether.Fi itegrations are designed to sit alongside other DeFi venues as we roll out additional partners, diversifying sources of yield while preserving liquidity and control.

This Ether.Fi collaboration is the first of several we will announce in the coming weeks as we continue allocating the ETH Strategy treasury across high-quality DeFi venues. 

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Crypto Leverage and Liquidations

Liquidation-based leverage is the default in crypto. Borrow against collateral, let the system set a threshold, and if the market dips you are forcibly unwound. Liquidators step in, seize and sell collateral, and collect penalties. Users pay the bill and often watch the asset rebound after they are sidelined.

The incentives around this model are strong. Liquidators, market makers, and risk vendors all earn reliable revenue from penalties, spreads, and funding. Protocols value the simplicity because it keeps them solvent and liquidations are easy to reason about, so fees and penalty levels rarely change. In DeFi, penalties on major assets often sit around five percent or more, while CeFi may be closer to two percent but with opaque processes and internalized risk.

For borrowers, that gap matters. Over-collateralized loans still carry meaningful tail risk onchain, not to mention constant anxiety about being liquidated. Perpetual futures introduce their own costs through funding and slippage. The entire stack is optimized for enforcement, not for user outcomes.

Clear risk limits and solvent protocols are good. We like them. They should remain. But users also deserve alternatives that do not rely on forced sales as the core mechanism. We believe the next wave of DeFi should convert price swings into yield, shift risk into time rather than cliff events, and create new forms of value instead of recycling the same penalty-driven playbook.

ETH Strategy Origins

The idea behind ETH Strategy began to solve exactly these problems. Many astute Twitter sleuths have discovered that prior to @eth_strategy our Twitter account was @oncredxyz. Instead of taking loans against over-collateralized positions, eligible users would obtain a line of credit to purchase ETH. Gone would be the days of losing upside after liquidations, credit-worthy users could repay a line of credit over time while maintaining exposure to ETH’s upside. The problem, high upfront costs for verifying creditworthiness and limited lender appetite in high interest rate environments.

Our founders are something of ETH maxis (sorry not sorry), so paid little attention to Michael Saylor’s antics in 2021. But by late 2024, MicroStrategy’s… strategy… was undeniable. It was time to peer under the hood to see what this Bitcoin Treasury Company was really doing. What we discovered was shocking, MSTR’s financial alchemy was the solution we were seeking all along, long-term leverage exposure without short-term liquidation risk.

But it’s not obvious at first glance. Many notice the access play: institutions want exposure to the emerging crypto market. Fewer understand the complex financial instruments that Saylor offers, and why. Digital asset treasury (DAT) convertibles are all about the embedded option and volatility. Suffice to say that convertible debt offers buyers a uniquely valuable instrument, one with both downside protection and upside exposure. We’ll save the deep-dive for office hours with our quant.

Assembling the Team

Having been thoroughly DAT-pilled, the next obvious step was to bring this strategy onchain. After all, Ethereum smart contracts are the perfect vehicle to construct and automate digital asset treasuries. No gatekeepers, no middlemen.

So the founders kept poking at the idea, specifically working to design it in a DeFi-native way. We knew early on that mimicking the exact TradFi implementation would not work onchain.

After extensive conversations with DeFi founders and drawing on insights from proven models, the idea crystallized into a whitepaper. ETH Strategy was first announced in January 2025. The early draft was published on Clouted’s personal blog and sent to a bunch of ETH bulls and friends. Within weeks we had a strong, high-signal group from the Ethereum ecosystem exploring the idea, notably at a time when the timeline shifted bearish on ETH.

The founders decided we had enough validation and excitement to give it a proper crack, and went on to assemble a team of crypto-natives from various backgrounds and skills. We have DeFi veterans, PhD quants, top-tier investors, and trusted ETH-aligned voices in community building.

Building the Protocol 

The journey of building ETH Strategy started with a whitepaper and became a full-blown protocol in early 2025. That was the easy part for a team of gifted quants and engineers. The real work began in the next months of relentless market validation, speaking to hundreds of funds, trading desks, and high-net-worth managers. At this time, most conversations began with convincing people that ETH was the right asset for the first onchain strategy (not SOL or BTC). 

The biggest objection we heard was that this strategy only works in TradFi, since many only viewed it as an access play for DATs to capitalize on TradFi’s untapped crypto demand. Grinding through this phase made one thing very clear: many crypto investors simply do not care to do anything onchain. While it was frustrating that not everyone shared our vision, it was encouraging that a strong subset did.

Building an onchain treasury strategy has a few distinct advantages. First, blockchains enable full transparency for treasury reserves (something that can’t be said for TradFi equivalents). Second, by existing onchain the protocol’s token is globally accessible and not limited to a specific market. We believe in democratized access, censorship resistance, and autonomous protocols. Third, building it entirely onchain emphasizes what makes Ethereum so special, smart contracts make it possible to build in a way that’s not possible with Bitcoin.

Over those early months we did the hard work explaining the volatility trade, how MSTR works, and yes, even reminding why ETH is the perfect asset to run this on. We’ll say it again, Ethereum’s existence is the only reason this structure can be encoded entirely onchain. Near the end of this process, SharpLink announced their massive raise to purchase ETH, which made selling the onchain equivalent easier (thanks Joe). We had already been working on this for months. Now we just had to find a group bold enough to believe that onchain is the right way to showcase it. After a solid round of market validation, distribution, and attention, we were ready to move into the first step of our launch.

Raising the Round

The next phase of validation and distribution was to get the community involved through a very fair presale. This was the optimal path, raising ETH from a high-signal and long-term aligned community, allowing us to build a strong social layer as well as a strong treasury layer to absorb bonding demand. 

We also realized we needed to automate the gamma trade (“vaultify” it, if you will) for it to really gain adoption. However to capture this bonding demand we first needed a strong equity layer, because unlike TradFi, when you build onchain you must bootstrap liquidity yourself.

Within two months, the team raised 6,900 ETH in a private presale. We then opened the same terms to anyone, consistent with our DeFi values of democratized access, and closed another 1,242 ETH in a one-hour public presale. The team then secured a very strategic investor who committed an additional 4,200 ETH as a puttable warrant on slightly worse terms than the presaylors. This solidified our equity layer. Just as ETH began to heat up, we had our equity layer in place, a very high signal community of backers, and we were ready to hit the scene.

Where we are Now

On July 29th, ETH Strategy launched the STRAT token, which brought us to the starting line after 6 long months of headaches and heartbreaks.

We have now taken ETH Strategy from idea to: 

1. Building the entire protocol 

2. Completing a private and public raise

3. Bootstrapping a treasury of Bootstrapping a treasury of over 11k ETH

4. Launching the STRAT token

5. Forming a strong community of STRAT bulls

From here, we will roll out the protocol in phases. This will include:

1. Deploying the treasury in DeFi, increasing EPS for STRAT holders

2. Lending ETH to STRAT holders, giving the token utility and a soft floor price

3. Launching the Perpetual Bonding Vault, a new volatility vault primitive for DeFi

4. Growing the equity layer via At-the-Market (ATM) programs 

5. Rolling out permissionless convertible notes (CDT + Options)

Conclusion

Watch us innovate in DeFi. 
Watch us kickstart the flywheel and turbo-long ETH. 
Watch us showcase the power of smart contracts against TradFi.

Get Involved

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Follow us on Twitter: https://x.com/eth_strategy
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