Proposal Type: Sequencer ETH: Passive Management (see Operating Manual)
Note: Yield estimates are subject to change based on market conditions and other factors. Estimates in this proposal are as of writing.
Executive Summary
Roughly 16 months ago, the Collective approved a proposal to enable the Foundation to stake the Collective’s Sequencer ETH. The initial period of the original proposal has now concluded and, according to the process outlined therein, the Optimism Foundation is requesting a renewal of the program for another 12 months. This renewal proposal also introduces three updates to the program based on practical realities and market conditions. This proposal would enable the Foundation to:
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Continue staking (native and liquid) the Collective ETH for another 12 months
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Consolidate institutional ETH staking from three custodians to two qualified custody service providers, split evenly at 33% each, with the remaining 33% in liquid-staked weETH via EtherFi — selected through the community-run Liquid Staking RFP process — can be held in custody with one of the above providers or MPC self-custody.
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Authorize yield strategies — including, but not limited to, covered calls and collars — on up to two-thirds of the total ETH treasury, executed with custodians and regulated counterparties using tri-party and other account structures.
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Redeploy cash proceeds generated by strategies into RWAs on OP Mainnet with sub-T+90 liquidity, putting idle converted capital to productive use within the ecosystem.
Together, these updates are expected to generate a blended yield materially above the ~2.5% expected staking yield (lower than expected due to changing market conditions), targeting 5-10% APY, while maintaining institutional-grade risk controls.
Current State
The Optimism Collective currently holds approximately ~19.3K ETH in treasury, deployed as follows:
| Venue | Amount | % of Treasury | Type |
|---|---|---|---|
| BitGo | ~4K ETH | ~20% | Institutional staking (L1) |
| Anchorage | ~4K ETH | ~20% | Institutional staking (L1) |
| Coinbase Prime | ~4K ETH | ~20% | Institutional staking (L1) |
| Porto – EtherFi (weETH) | ~6.5K ETH | ~35% | Liquid staking (OP Mainnet) |
| Fireblocks | ~0.8K ETH | ~4% | Unstaked |
| Total | ~19.3K ETH | 100% |
The institutional staking allocation (~60% of treasury) currently earns approximately 2.5% APY across three custodians. The liquid staking allocation via EtherFi (~35%) earns staking + restaking yield in the 3.0% APR range.
This proposal seeks to renew this program while optimizing program structure along three dimensions: operational efficiency (custodian consolidation), yield enhancement strategies, and capital recycling (RWA deployment on OP Mainnet).
Motivation
The initial ETH staking program has clearly generated value for the Collective, bringing in an additional 218 ETH for the treasury. We wish to continue this program with a few updates that optimize the structure, to generate meaningfully more value for the Collective while remaining conservative.
There are three main opportunities to further optimize the ETH staking program:
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Operational efficiency is improved by consolidating custodians, reducing operational overhead, simplifying reporting, and updating providers to reflect current partnerships.
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Yield enhancement strategies allow the Foundation to earn additional premiums on staked ETH using covered calls and collars — the most conservative structured products available. Tri-party arrangements ensure ETH never leaves qualified custody.
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Capital recycling via RWA deployment of cash proceeds turns additional yield into productive capital. We not only enhance yields, we deploy the additional premiums into short-duration RWAs on OP Mainnet, strengthening Optimism’s on-chain financial ecosystem.
Specifications
1. Renew authorization of the Foundation to stake a portion of sequencer ETH for another 12 months
2. Operational Efficiency: Custodian Consolidation
Current: ~12K ETH staked across BitGo, Anchorage, and Coinbase Prime (~4K ETH each).
Proposed: Consolidate to two qualified custody service providers, split evenly at approximately 33% of total available ETH treasury each (~6.4K ETH per qualified custodian at current size). The remaining ~33% stays in liquid-staked weETH via EtherFi with a custodial setup of our choosing, consistent with the Liquid Staking RFP outcome. Both custodians must meet the Foundation’s existing qualified custody criteria: regulated status, institutional-grade insurance, documented slashing protections, and existing partnership with the Foundation.
Target allocation:
| Venue | % of Treasury | Approximate ETH |
|---|---|---|
| Custodian A | 33% | ~6.4K ETH |
| Custodian B | 33% | ~6.4K ETH |
| EtherFi (weETH) | 33% | ~6.5K ETH |
| Total | 100% | ~19.3K ETH |
Rationale: Three custodians at ~20% each creates administrative complexity for marginal diversification benefit. A two-custodian structure at 33% (max 50% if weETH is moved to qualified custody from self-custody) each preserves the counterparty cap discipline established in Season 8 while reducing the number of active agreements, audit surfaces, and fee relationships to manage.
Implementation:
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Unstaking and migration will be executed in tranches to minimize withdrawal queue exposure.
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The Foundation may unstake and rebalance in response to security events, material counterparty changes, or operational needs.
3. Yield Enhancement Strategies
Current: Staked ETH earns staking yield of ~2.5%
Proposed Execute yield enhancement strategies, including but not limited to, covered call and collar strategies on up to two-thirds of available ETH treasury (~12.7K ETH at current size). No more than two-thirds of the treasury may be used for yield enhancement strategies which we expect to generate ~5-10% APY.
Structure: All strategies will be conducted through tri-party account arrangements with custodians and regulated counterparties. Under this structure, ETH collateral remains in qualified institutional custody at all times — it does not transfer to a counterparty. The custodian acts as collateral agent, with the counterparty holding only the contractual position.
Strategy overview:
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Covered calls: The Foundation sells upside exposure above a strike price in exchange for premium income. ETH is retained unless the option is exercised at or above strike, in which case a portion of the position is called away at a price above the current market. The Foundation thinks this strategy is prudent given current market conditions and the opportunity to generate additional yield during a bear market.
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Collars: The Foundation simultaneously sells a covered call (generating premium) and buys a protective put (limiting downside exposure) for a defined period. Net premium cost or income depends on the specific strikes selected. Collars are appropriate for periods when the Foundation wants to limit drawdown risk on the treasury without selling the underlying assets.
Rationale: The community raised the question of DeFi and yield-enhancing strategies in response to the original staking proposal. We believe covered calls and collars are an institutional-grade solution to generate yield on staked ETH without requiring DeFi smart contract exposure, leverage, or relinquishing custody. At two-thirds of the available treasury, the Foundation retains a meaningful unencumbered buffer for operational needs and market dislocations.
Tradeoffs: Covered calls generate premium income but cap upside — if ETH rallies above the strike during a contract, the Foundation receives the strike price rather than spot. Collars add downside protection at the cost of some premium. Both strategies are most effective in range-bound or moderately volatile markets and least favorable during sharp ETH rallies. The two-thirds ceiling ensures an unencumbered buffer is always maintained. Delegates should weigh whether the incremental yield is worth foregoing potential ETH upside during active contract windows — the Foundation believes it is, given the treasury’s mandate to generate sustainable yield rather than maximize price exposure.
Implementation:
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Instruments permitted: includes, but not limited to, covered calls, collars (long put + short call on collateralized ETH)
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Instruments not permitted: naked options, leveraged structures, any strategy that increases ETH delta exposure beyond 1x
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Counterparties must be regulated dealers with institutional ISDA agreements in place with the Foundation
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If ETH is called away through option exercise, proceeds are treated as cash and subject to the RWA deployment framework in Section 3 below, or held as a reserve at Foundation discretion. Note that this is a possibility in the covered call and collar strategies acknowledged in the tradeoffs section above.
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Maximum tenor: 3 months per contract
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The Foundation may close or roll positions early in response to material market conditions
3. RWA Deployment of Cash Proceeds on OP Mainnet
Current: No additional yield is earned and therefore there is no additional yield to deploy
Proposed: Redeploy ETH generated via yield enhancement strategies (option premiums received, ETH called away at exercise) into RWAs on OP Mainnet with sub-T+90 liquidity, up to the total cash amount generated through yield enhancement strategies.
Rationale: If yield enhancement strategies are successful they will result in additional cash holdings — either from premium income on covered calls or from ETH being called away at exercise. Leaving this cash idle is a wasted opportunity to invest in our ecosystem. Short-duration RWAs on OP Mainnet are liquid, low-risk, and directly benefit the OP Mainnet financial ecosystem the Collective is cultivating.This proposal only covers cash generated by the approved yield enhancement strategies but does not authorize any independent allocation of the ETH treasury.
Implementation:
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For the purposes of this proposal, eligible RWAs are tokenized short-duration instruments deployed on OP Mainnet, including but not limited to tokenized money market funds, tokenized T-bills, short-duration bond funds and other credit/debt instruments, subject to the criteria below.
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Eligible RWA protocols must be:
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Deployed and liquid on OP Mainnet
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Sub-T+90 redemption liquidity (redemption proceeds accessible within 30 calendar days of request)
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Audited by a reputable third party, with no unresolved critical findings
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The Foundation retains authority to redeem RWA positions at any time, with proceeds returned to ETH, held as USD, or stablecoins.
Impact Summary
The table below illustrates how the proposed structure is expected to improve blended treasury yield relative to the Season 8 staking-only mandate. All figures are illustrative and subject to market conditions.
| Component | Allocation | Illustrative APY | Yield Contribution |
|---|---|---|---|
| Institutional staking (2 custodians) | 60% | ~2.5% | ~1.50% |
| Liquid staking — weETH (EtherFi) | 40% | ~3.5% | ~1.40% |
| Baseline (staking only) | 100% | ~2.90% | |
| Covered call / collar premiums | Up to 67% of ETH | ~5% incremental | ~5% |
| RWA yield on cash proceeds | Variable | ~5% incremental on cash deployed | ~5% |
| Blended target (proposed) | ~8% |
Note: The incremental yield from enhancement strategies and RWA deployment is a function of market conditions at time of execution and is not guaranteed.
Action Required
You should vote for this proposal if you wish to renew the ETH staking program for the next 12 months with the proposed program updates.
If approved, the Foundation will:
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Confirm custodian consolidation execution (naming providers) as a comment on this post within 30 days of approval.
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Commence selection of counterparties for higher yield generation strategy as a comment on this post within 120 days of approval.
This proposal would go into effect for the next 12 months at which point it must be renewed.