# Treasury Transparency Most DeFi protocols publish a TVL number and call it transparency. We publish the full balance sheet — assets, liabilities, allocation ratios, and the on-chain methods to verify every number yourself. This page is modeled after [MakerDAO/Sky's budget transparency approach](https://fusion.skyeco.com), adapted for ETH Strategy's convertible-note treasury structure. Every metric below is either directly readable on-chain or derivable from on-chain state. {% hint style="info" %} Core protocol contracts (esETH, CDT, EthStrategyConvertibleNote) are deploying soon. This page defines the transparency framework and will be populated with live data once contracts are deployed. Post-launch, metrics will be updated quarterly with realized values. All data will be verifiable on-chain. {% endhint %} *** ## Balance Sheet The protocol's financial position at any point in time, expressed as a balance sheet. ### Assets | Asset | Description | On-Chain Source | | ------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------ | | **Total esETH in treasury** | All ETH-denominated assets held by the protocol, wrapped as esETH | `esETH.balanceOf(treasury)` | | **Underlying LST breakdown** | Composition of esETH backing: wstETH, rETH, cbETH, weETH, aWETH | `esETH.tokenBalances()` per token config | | **Unencumbered esETH** | "Free" capital available for lending operations and backing STRAT | Total esETH minus encumbered holdings | | **Encumbered esETH** | Reserved to honor outstanding conversion rights (NFT options) | Sum of esETH conversion entitlements across all active notes | | **Accrued interest receivable** | Interest owed by active Treasury Lending borrowers | Sum of `accruedInterest()` across active loan NFTs | | **Protocol-owned liquidity** | LP positions managed by the Liquidity Multisig | Arrakis vault shares, Uniswap V3 positions | ### Liabilities | Liability | Description | On-Chain Source | | --------------------------------- | ------------------------------------------------------------------ | ---------------------------------------------------------- | | **CDT supply (total debt)** | Total outstanding protocol debt obligations at face value | `CDT.totalSupply()` | | **USD notional owed at maturity** | Dollar-denominated settlement obligations for all unexpired notes | Sum of `settlementEntitlement` across active NFTs | | **Conversion obligations** | Maximum STRAT + esETH mintable if all active options are exercised | Sum of `conversionEntitlement` across active NFTs | | **ESPN vault liabilities** | Obligations to ESPN depositors | `ESPN.totalAssets()` | | **Active loan principal** | Outstanding Treasury Lending principal to be repaid | Sum of principal across active `StratETHTreasuryLend` NFTs | ### Equity (Net Asset Value) ``` Net Asset Value (NAV) = Total esETH in treasury − Encumbered esETH ETH per STRAT (EPS) = Total esETH in treasury / STRAT totalSupply ``` EPS is the single most important metric for STRAT holders. See [STRAT Economics](/tokenomics/strat-economics.md#how-eth-per-strat-eps-grows) for how it grows. *** ## Treasury Allocation How the treasury's capital is deployed across functions. This breakdown shows what the protocol's assets are doing at any given moment. ### Capital Allocation Framework ``` Total Treasury (esETH) ├── Encumbered Holdings (conversion reserve) │ └── Cannot be lent or withdrawn — backs outstanding conversion rights │ └── Unencumbered Holdings (operational capital) ├── Actively Lent (Treasury Lending) │ └── Fixed-rate loans to STRAT holders → interest flows to StakedStrat │ ├── Available for Lending (idle capacity) │ └── Earning base staking yield only (~3% via underlying LSTs) │ └── Protocol-Owned Liquidity └── LP positions managed by Liquidity Multisig ``` ### Key Allocation Ratios | Metric | Formula | What It Tells You | | ------------------------- | ------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | | **Encumbrance Ratio** | Encumbered esETH / Total esETH | How much of the treasury is reserved for conversion obligations. Higher = more capital locked | | **Lending Utilization** | Actively Lent / Unencumbered esETH | How much free capital is deployed as loans. Higher = more interest revenue but less liquidity buffer | | **Debt-to-Asset Ratio** | CDT Supply (USD) / Total esETH (USD) | Protocol leverage. Higher = more aggressive growth, more maturity risk | | **Coverage Ratio** | Total esETH (USD) / CDT Supply (USD) | Inverse of debt-to-asset. Must remain >1 for the protocol to be fully solvent at maturity | | **Interest Revenue Rate** | Quarterly interest earned / Average unencumbered esETH | Annualized yield on deployed capital | | **EPS Growth Rate** | (EPS\_end − EPS\_start) / EPS\_start | Quarter-over-quarter growth in ETH backing per STRAT | *** ## Revenue & Expense Tracking ### Revenue Sources (Quarterly) | Source | Accrues To | Verification | | ------------------------------------------------------ | ---------------------------------- | ----------------------------------------------------------------- | | **ETH staking yield** (harvested from underlying LSTs) | Treasury (EPS growth) | `YieldHarvested` events on esETH contract | | **Treasury Lending interest** | StakedStrat → STRAT stakers | `InterestPaid` events on StratETHTreasuryLend | | **Implied option premium** | Treasury (EPS growth) | Difference between ETH bonded and conversion entitlements granted | | **ESPN fee share** | StakedStrat → STRAT stakers | Merkle distribution events | | **Delinquent fee forfeitures** | Unencumbered holdings (EPS growth) | `LoanDefaulted` events on StratETHTreasuryLend | ### Operating Costs ETH Strategy has no protocol-level fee extraction today. There are no: * Management fees on treasury assets * Performance fees on yield * Bonding fees * Staking/unstaking fees for STRAT The protocol's only "costs" are the conversion obligations embedded in issued notes — these are structural, not operational expenses. When the team introduces fees in the future, they will be documented here with the governance proposal that authorized them. *** ## On-Chain Verification Every metric on this page can be independently verified. You don't need to trust us — you can read the contracts directly. ### Core Queries | Metric | How to Verify | | --------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | | **Total esETH in treasury** | Call `esETH.balanceOf(treasuryAddress)` on Etherscan | | **STRAT total supply** | Call `STRAT.totalSupply()` → [0x14cF…A2f](https://etherscan.io/address/0x14cF922aa1512Adfc34409b63e18D391e4a86A2f#readContract) | | **CDT total supply** | Call `CDT.totalSupply()` on the CDT contract (address TBD) | | **EPS** | Divide total treasury esETH by STRAT total supply | | **ESPN TVL** | Call `ESPN.totalAssets()` → [0xb250…5fE](https://etherscan.io/address/0xb250C9E0F7bE4cfF13F94374C993aC445A1385fE#readContract) | | **Active loans** | Query `LoanOriginated` / `LoanRepaid` events on StratETHTreasuryLend | | **Parameter changes** | Monitor `OwnerChangedPCF`, `OwnerChangedGCF`, `BorrowRateUpdated` events (see [Governance](/governance-and-alignment.md#transparency)) | | **Multisig transactions** | View on [Safe Dashboard](https://app.safe.global/home?safe=eth:0xC53CCed6332D06972A7eaEDc64FDF6d4aF5220b8) | ### Indexing & Dashboards For automated monitoring, all key state changes emit indexed events. A Dune, Flipside, or custom subgraph dashboard can track: * Treasury balance over time (esETH balance snapshots) * Bonding volume per period (`NoteBonded` events) * Conversion activity (`NoteConverted` events with STRAT minted / CDT burned) * Lending utilization (`LoanOriginated` / `LoanRepaid` flow) * Staking reward distributions (`syncRewards` calls on StakedStrat) * ESPN deposits and redemptions We intend to publish a public dashboards once core contracts are live, making all metrics accessible without requiring direct contract queries. *** ## Solvency Framework The protocol's solvency — its ability to honor CDT redemptions at maturity — is the most important long-term health metric. We will report on it explicitly. ### What "Solvent" Means The protocol is solvent when the USD value of total treasury esETH exceeds the USD notional of outstanding CDT. In simpler terms: there's enough ETH to pay back all the debt at face value. ``` Coverage Ratio = Total esETH (in USD) / Total CDT Supply (in USD) ``` * **Coverage > 1.0x** — Fully solvent. All CDT can be redeemed at face value at maturity. * **Coverage = 1.0x** — Breakeven. No margin of safety. * **Coverage < 1.0x** — Undercollateralized. At maturity, CDT holders would receive pro-rata esETH (less than face value). See [Conversion of Notes — Post-Expiry Redemption](/core-mechanics/conversion-of-notes.md). ### Stress Scenarios (Illustrative) | Scenario | ETH Price Change | Effect on Coverage Ratio | | ----------------- | ---------------- | ---------------------------------------------------------------------------------- | | Base case | 0% | Coverage stays at current level | | Moderate drawdown | −30% | Coverage drops \~30% (CDT is USD-denominated, treasury is ETH-denominated) | | Severe drawdown | −60% | Coverage drops \~60% — protocol remains operational but may be undercollateralized | | Sustained bull | +50% | Coverage improves \~50% — treasury appreciates in USD terms | {% hint style="info" %} ETH Strategy cannot be liquidated regardless of coverage ratio. There are no margin calls, no forced selling. The coverage ratio matters at note maturity (\~4.2 years from bonding), not day-to-day. A temporary drop below 1.0x does not trigger any protocol action — it simply means that if all notes matured *today*, some CDT holders would receive less than face value. See [Risks](/security-and-risk/risks.md) for full analysis. {% endhint %} *** ## What We Don't (Yet) Report Transparency means being honest about gaps too. The following are not yet tracked but are planned: | Metric | Why It's Missing | Target | | ------------------------- | ---------------------------------------------- | --------------- | | **Realized EPS growth** | Core contracts not yet deployed | Q3 2026 | | **Lending utilization** | Treasury Lending launches Q2 2026 | Q3 2026 | | **Granular team budget** | Pre-launch; spending is development-focused | H2 2026 | | **Public Dune dashboard** | Requires deployed contracts with event history | Q3 2026 | | **Maturity schedule** | No notes issued yet | Post-first-bond | We will update this section as gaps are closed. *** ## Further Reading * [STRAT Economics](/tokenomics/strat-economics.md) — how EPS grows and the revenue flywheel * [Yield Performance](/tokenomics/yield-performance.md) — historical yield data and projections * [How Treasury Accumulation Works](/academy/treasury-accumulation-model.md) — educational walkthrough of the treasury model * [Governance & Alignment](/governance-and-alignment.md) — who controls what and parameter transparency * [Contracts](/references/contracts.md) — all deployed addresses for on-chain verification * [Risks](/security-and-risk/risks.md) — comprehensive risk analysis including solvency scenarios *Last updated: March 2026. 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