| No. | FIELD | CONTENT | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 00 | Table of Contents |
Part A - Information about the offeror or the person seeking admission to trading Part D - Information about the crypto-asset project Part E - Information about the offer to the public of crypto-assets or their admission to trading Part F - Information about the crypto-assets Part G - Information on the rights and obligations attached to the crypto-assets |
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| 01 | Date of notification | ||||||||||
| 02 | Statement in accordance with Article 6(3) of Regulation (EU) 2023/1114 | This crypto-asset white paper has not been approved by any competent authority in any Member State of the European Union. The person seeking admission of trading of the crypto-asset is solely responsible for the content of this crypto-asset white paper. | |||||||||
| 03 | Compliance statement in accordance with Article 6(6) of Regulation (EU) 2023/1114 | This crypto-asset white paper complies with Title II of Regulation (EU) 2023/1114 and, to the best of the knowledge of the management body, the information presented in the crypto-asset white paper is fair, clear and not misleading and the crypto-asset white paper makes no omission likely to affect its import. | |||||||||
| 04 | Statement in accordance with Article 6(5), points (a), (b), (c), of Regulation (EU) 2023/1114 | The crypto-asset referred to in this crypto-asset white paper may lose its value in part or in full, may not always be transferable and may not be liquid. | |||||||||
| 05 | Statement in accordance with Article 6(5), point (d), of Regulation (EU) 2023/1114 | Not applicable | |||||||||
| 06 | Statement in accordance with Article 6(5), points (e) and (f), of Regulation (EU) 2023/1114 | The crypto-asset referred to in this white paper is not covered by the investor compensation schemes under Directive 97/9/EC of the European Parliament and of the Council or the deposit guarantee schemes under Directive 2014/49/EU of the European Parliament and of the Council. | |||||||||
| SUMMARY | |||||||||||
| 07 | Warning in accordance with Article 6(7), second subparagraph, of Regulation (EU) 2023/1114 | Warning This summary should be read as an introduction to the crypto-asset white paper. The prospective holder should base any decision to purchase this crypto-asset on the content of the crypto-asset white paper as a whole and not on the summary alone. The admission to trading of this crypto-asset does not constitute an offer or solicitation to purchase financial instruments and any such offer or solicitation can be made only by means of a prospectus or other offer documents pursuant to the applicable national law. This crypto-asset white paper does not constitute a prospectus as referred to in Regulation (EU) 2017/1129 of the European Parliament and of the Council or any other offer document pursuant to Union or national law. |
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| 08 | Characteristics of the crypto-asset | ETHFI (the “Token”) is the native governance token of the Ether.Fi protocol, a decentralized liquid restaking platform on the Ethereum network. ETHFI is a fungible ERC-20 token recorded on the Ethereum blockchain and staking of ETHFI takes place on Ethereum. Governance Holders of ETHFI are granted governance rights within the Ether.Fi Decentralized Autonomous Organization (“DAO”). Token holders direct how the protocol's treasury is managed. All such rights are exercised through associated interfaces, or direct interaction with the blockchain, using a self-custodied blockchain wallet. Staking Holders of ETHFI can also stake ETHFI to access membership levels, loyalty points and other rewards within the protocol. The rights described above are exclusively tied to the on-chain actions and decisions of the decentralized protocol and do not depend on the actions of any centralized entity. Purchasers of the Token obtain the rights to participate in staking and the decentralized governance of the Ether.Fi treasury. Purchasers do not acquire ownership, profit-sharing rights, or any entitlement to financial returns. The Token does not represent a claim on any asset or obligation of the Foundation. The rights and obligations of Token holders are discussed further in Sections G.1-G.3. |
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| 09 | |||||||||||
| 10 | Key information about the offer to the public or admission to trading | ||||||||||
| Part A - Information about the offeror or the person seeking admission to trading | |||||||||||
| A.1 | Name | ||||||||||
| A.2 | Legal form | ||||||||||
| A.3 | Registered address | ||||||||||
| A.4 | Head office | ||||||||||
| A.5 | Registration date | ||||||||||
| A.6 | Legal entity identifier | Not applicable | |||||||||
| A.7 | Another identifier required pursuant to applicable national law | ||||||||||
| A.8 | Contact telephone number | ||||||||||
| A.9 | E-mail address | ||||||||||
| A.10 | Response time (Days) | ||||||||||
| A.11 | Parent company | ||||||||||
| A.12 | Members of the management body |
| |||||||||
| A.13 | Business activity | ||||||||||
| A.14 | Parent company business activity | ||||||||||
| A.15 | Newly established | ||||||||||
| A.16 | Financial condition for the past three years | ||||||||||
| A.17 | Financial condition since registration | ||||||||||
| Part B - Information about the issuer, if different from the offeror or person seeking admission to trading | |||||||||||
| B.1 | Issuer different from offeror | ||||||||||
| B.2 | Name | Not applicable | |||||||||
| B.3 | Legal form | Not applicable | |||||||||
| B.4 | Registered address | Not applicable | |||||||||
| B.5 | Head office | Not applicable | |||||||||
| B.6 | Registration date | Not applicable | |||||||||
| B.7 | Legal entity identifier | Not applicable | |||||||||
| B.8 | Another identifier | Not applicable | |||||||||
| B.9 | Parent company | Not applicable | |||||||||
| B.10 | Members of the management body | Not applicable | |||||||||
| B.11 | Business activity | Not applicable | |||||||||
| B.12 | Parent company business activity | Not applicable | |||||||||
| Part C - Information about the operator of the trading platform in cases where it draws up the crypto-asset white paper and information about other persons drawing the crypto-asset whitepaper pursuant to Article 6(1), second subparagraph, of Regulation (EU) 2023/1114 | |||||||||||
| C.1 | Name | Not applicable | |||||||||
| C.2 | Legal form | Not applicable | |||||||||
| C.3 | Registered address | Not applicable | |||||||||
| C.4 | Head office | Not applicable | |||||||||
| C.5 | Registration date | Not applicable | |||||||||
| C.6 | Legal entity identifier | Not applicable | |||||||||
| C.7 | Another identifier | Not applicable | |||||||||
| C.8 | Parent company | Not applicable | |||||||||
| C.9 | Reason for crypto-Asset white paper Preparation | Not applicable | |||||||||
| C.10 | Members of the Management body | Not applicable | |||||||||
| C.11 | Operator business activity | Not applicable | |||||||||
| C.12 | Parent company business activity | Not applicable | |||||||||
| C.13 | Other persons drawing up the crypto- asset white paper | Not applicable | |||||||||
| C.14 | Reason for drawing the white paper by persons referred to in Article 6(1) | Not applicable | |||||||||
| Part D - Information about the crypto-asset project | |||||||||||
| D.1 | Crypto-asset project name | ||||||||||
| D.2 | Crypto-assets name | ||||||||||
| D.3 | Abbreviation | ||||||||||
| D.4 | Crypto-asset project description | ||||||||||
| D.5 | Details of all natural or legal persons involved in the implementation of the crypto-asset project |
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| D.6 | Utility Token Classification | ||||||||||
| D.7 | Key Features of Goods/Services for Utility Token Projects | ||||||||||
| D.8 | Plans for the token | Past Milestones • Token Minted: The Token was minted on March 2024. • Token Distributed at Launch: 89 token warrants were issued to equity investors in Ether.Fi SEZC, all of which have since been exercised for an aggregate of approximately 459,145,571.41 ETHFI. In addition, 29 simple agreements for future tokens (“SAFTs”) were executed with non-U.S. investors and U.S. accredited investors, entitling those parties to receive a total of 23,516,259.51 ETHFI. Further, ETHFI was distributed through a series of airdrops to participants based on their contributions to the Ether.Fi protocol, its community, and the broader ecosystem. • Protocol Fee Distribution: Mechanisms where a portion of the fees generated by the protocol were used for strategic Token buybacks. These Tokens would then be distributed to active ETHFI stakers, thereby directly rewarding community members for their long-term commitment. This change was implemented on December 2024 and again on November 2025. • Staking Rewards: Staking system that provided additional benefits and rewards to users who stake and lock their ETHFI Tokens for extended periods. This would incentivize holding and reduce market volatility. This change was implemented on July 2024. These plans (with the exception of token minting and distribution at launch) were subject to community approval and discussed and voted on through the Ether.Fi governance portal and duly implemented. Disclaimer: Foundation does not control protocol upgrades nor the implementation of any future milestones into the Ether.Fi protocol. Rather, Ether.Fi SEZC is responsible for developing the protocol, the platform, and services offered by the overall Ether.Fi ecosystem. By purchasing ETHFI, you acquire the current functionality of the Token based on the Ether.Fi protocol as it exists at the time of purchase. The future of the Foundation treasury will be determined by Token holders through the Ether.Fi protocol's governance process. | |||||||||
| D.9 | Resource allocation | ||||||||||
| D.10 | Planned use of Collected funds or crypto-Assets | ||||||||||
| Part E - Information about the offer to the public of crypto-assets or their admission to trading | |||||||||||
| E.1 | Public offering or admission to trading | ATTR | |||||||||
| E.2 | Reasons for public offer or admission to trading | ||||||||||
| E.3 | Fundraising target | Not applicable | |||||||||
| E.4 | Minimum subscription goals | Not applicable | |||||||||
| E.5 | Maximum subscription goals | Not applicable | |||||||||
| E.6 | Oversubscription acceptance | Not applicable | |||||||||
| E.7 | Oversubscription allocation | ||||||||||
| E.8 | Issue price | Not applicable | |||||||||
| E.9 | Official currency or any other crypto- assets determining the issue price | Not applicable | |||||||||
| E.10 | Subscription fee | Not applicable | |||||||||
| E.11 | Offer price determination method | ||||||||||
| E.12 | Total number of offered/traded crypto- assets | Not applicable | |||||||||
| E.13 | Targeted holders | ALL | |||||||||
| E.14 | Holder restrictions | ||||||||||
| E.15 | Reimbursement notice | ||||||||||
| E.16 | Refund mechanism | ||||||||||
| E.17 | Refund timeline | ||||||||||
| E.18 | Offer phases | ||||||||||
| E.19 | Early purchase discount | ||||||||||
| E.20 | Time-limited offer | Not applicable | |||||||||
| E.21 | Subscription period beginning | Not applicable | |||||||||
| E.22 | Subscription period end | Not applicable | |||||||||
| E.23 | Safeguarding arrangements for offered funds/crypto- Assets | ||||||||||
| E.24 | Payment methods for crypto-asset purchase | ||||||||||
| E.25 | Value transfer methods for reimbursement | ||||||||||
| E.26 | Right of withdrawal | ||||||||||
| E.27 | Transfer of Purchased crypto- assets | ||||||||||
| E.28 | Transfer time schedule | ||||||||||
| E.29 | Purchaser's technical requirements | ||||||||||
| E.30 | Crypto-asset service provider (CASP) name | ||||||||||
| E.31 | CASP identifier | Not applicable | |||||||||
| E.32 | Placement form | Not applicable | |||||||||
| E.33 | Trading platforms name | ||||||||||
| E.34 | Trading platforms Market identifier code (MIC) | ||||||||||
| E.35 | Trading platforms access | ||||||||||
| E.36 | Involved costs | ||||||||||
| E.37 | Offer expenses | ||||||||||
| E.38 | Conflicts of interest | ||||||||||
| E.39 | Applicable law | ||||||||||
| E.40 | Competent court | ||||||||||
| Part F - Information about the crypto-assets | |||||||||||
| F.1 | Crypto-asset type | Crypto-asset other than an asset-referenced token or e-money token | |||||||||
| F.2 | Crypto-asset functionality | The ETHFI Token is the native governance token of the Ether.Fi protocol, a decentralized liquid restaking platform on the Ethereum network. ETHFI holders are granted voting rights within the Ether.Fi DAO. Token holders direct treasury management, namely how the protocol's treasury funds are allocated for ecosystem development, grants, and partnerships. The Token's utility includes: • Staking and Rewards: While ETH is the primary asset staked on the platform to earn rewards, ETHFI can be staked to gain access to exclusive benefits, such as a share of the protocol's monthly fees. This incentivizes long-term holding and active participation. | |||||||||
| F.3 | Planned application of functionalities | ||||||||||
| F.4 | Type of crypto-asset white paper | OTHR | |||||||||
| F.5 | The type of submission | NEWT | |||||||||
| F.6 | Crypto-asset Characteristics | Overview • ETHFI is the native crypto-asset of the Ether.Fi protocol. • ETHFI is a fungible ERC-20 token recorded on the Ethereum blockchain. • Staking of ETHFI takes place on Ethereum. Key functionality The Token is intended to serve the main functions on the Ether.Fi protocol described in F.2. No profit rights, ownership, etc. ETHFI does not confer any profit rights, ownership in the Foundation, rights to financial returns, and is not backed by any underlying asset. Its sole purpose is to facilitate decentralized participation in and direct management of the Foundation treasury. While certain Ether.Fi protocol fees may be used for ETHFI buybacks on the secondary market, with such ETHFI being distributed as rewards to ETHFI stakers, these rewards are generated and transferred to holders autonomously and programmatically through the operation of the protocol, without the involvement of any legal entity (including the Foundation). Holders also do not have an entitlement or right that is actionable against any legal entity (including the Foundation) to such rewards. | |||||||||
| F.7 | Commercial name or trading name | ||||||||||
| F.8 | Website of the issuer | ||||||||||
| F.9 | Starting date of offer to the public or admission to trading | ||||||||||
| F.10 | Publication date | ||||||||||
| F.11 | Any other services provided by the issuer | ||||||||||
| F.12 | Language or languages of the crypto-asset white paper | ||||||||||
| F.13 | Digital token identifier code | ||||||||||
| F.14 | Functionally fungible group digital token identifier | ||||||||||
| F.15 | Voluntary data flag | False | |||||||||
| F.16 | Personal data flag | True | |||||||||
| F.17 | LEI eligibility | True | |||||||||
| F.18 | Home Member State | Ireland | |||||||||
| F.19 | Host Member States | Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. | |||||||||
| Part G - Information on the rights and obligations attached to the crypto-assets | |||||||||||
| G.1 | Purchaser rights and obligations | As a holder of the ETHFI Token, a purchaser will have the right to hold and transfer the Token on Ethereum and in relation to the protocol, gains the following rights, which are programmatically enforced by the protocol's smart contracts: • Governance Rights: Token holders have the right to participate in the decentralized governance of the Ether.fi protocol treasury. This includes: o Proposing Changes: A Proposer submits new governance proposals in relation to use of the Foundation's treasury for community consideration. o Voting on Proposals: Token holders can vote on proposals that affect the use of the Foundation's treasury. • Protocol Utility Rights: ETHFI Token holders have the right to utilize the Token for its intended functions within the Ether.fi ecosystem. This includes: o Staking for Benefits: The right to stake ETHFI to access membership levels, loyalty points, and other rewards within the protocol. These rights are exclusively tied to the on-chain actions and decisions of the decentralized protocol and do not depend on the actions of any centralized entity. Purchasers of the Token obtain the rights to participate in staking and the decentralized governance of the Foundation treasury. Purchasers do not acquire ownership, profit-sharing rights, or any entitlement to financial returns. The Token does not represent a claim on any asset or obligation of the Foundation. Obligations of the Purchaser By acquiring and holding ETHFI Tokens, the purchaser assumes certain responsibilities and acknowledges specific risks and obligations: • Responsibility for Self-Custody: The purchaser is solely responsible for the secure management and storage of their private keys and digital wallets. The Ether.fi protocol is non-custodial, and no centralized entity can recover lost or stolen tokens. This obligation is fundamental to participating in a decentralized ecosystem. • Compliance with Laws: The purchaser is obligated to comply with all applicable laws and regulations in their jurisdiction, including those related to cryptocurrency transactions, taxation, and securities. The purchaser is responsible for their own tax obligations arising from the acquisition, holding, and transfer of ETHFI Tokens. • Risk Acknowledgment: The purchaser acknowledges and accepts the inherent risks associated with holding a volatile crypto-asset, including the risk of significant price fluctuations, smart contract vulnerabilities, and regulatory changes. The purchaser has an obligation to conduct their own due diligence and understand these risks before acquiring the Token. • No Fiduciary Duty: By purchasing ETHFI, the Token holder acknowledges that neither Ether.fi Foundation nor Ether.Fi SEZC have any fiduciary or other legal duty to the Token holder. The relationship is based on the functional and technical specifications of the decentralized protocol. | |||||||||
| G.2 | Exercise of rights and obligations | Exercising Governance Rights To exercise governance rights, an ETHFI Token holder must connect their non-custodial wallet to the Ether.Fi governance portal. This portal, which is a decentralized application (dApp) interface, displays active proposals and voting history. The process for voting is as follows: 1. Connecting the Wallet: The user connects a compatible Ethereum wallet to the governance portal. The portal reads the user's ETHFI Token balance to determine their voting power. 2. Casting a Vote: The user selects a proposal and casts their vote ("For," "Against," or "Abstain"). This action initiates a small smart contract transaction that requires a nominal amount of ETH for gas fees to be executed on the Ethereum blockchain. 3. Delegation of Votes: A Token holder who does not wish to participate directly can delegate their voting power to another address or a community representative. This is a secure, on-chain transaction that allows for passive participation while maintaining the integrity of the voting process. Fulfilling Obligations The primary obligation of an ETHFI Token holder is to ensure the security of their own digital assets. This is fundamental to a self-custodial model. This includes, but is not limited to: • Securing Private Keys: The purchaser must use secure practices to store their private keys, such as using a hardware wallet or a passphrase-protected software wallet. • Transaction Due Diligence: Before executing any transaction, the purchaser should verify the contract address and the details of the transaction to prevent malicious attacks or scams. The decentralized nature of the protocol means that all actions, from voting to securing assets, are the sole responsibility of the individual Token holder. | |||||||||
| G.3 | Conditions for modifications of rights and obligations | A proposal from a Proposer could be initiated and approved through a community vote: • Proposal Submission: A Proposer can submit a formal proposal for governance of the Ether.fi protocol treasury. • Community Discussion: Before a vote, proposals are debated and refined by the community on forums and public channels to ensure transparency and broad consensus. • On-Chain Voting: The final decision is made by ETHFI Token holders through a secure, on-chain voting mechanism. A proposal is adopted only if it receives the required majority of votes, as defined by the DAO's governance parameters. This governance process means that no single entity, including the original development team, can unilaterally alter the rules of the rights and obligations of the holders of the ETHFI Token. | |||||||||
| G.4 | Future public offers | ||||||||||
| G.5 | Issuer retained crypto-assets | As part of the initial distribution of the Token, the Issuer retained | |||||||||
| G.6 | Utility token classification | False | |||||||||
| G.7 | Key features of goods/services of utility tokens | ||||||||||
| G.8 | Utility tokens redemption | ||||||||||
| G.9 | Non-trading request | True | |||||||||
| G.10 | Crypto-assets purchase or sale modalities | ||||||||||
| G.11 | Crypto-assets transfer restrictions | ||||||||||
| G.12 | Supply adjustment protocols | False | |||||||||
| G.13 | Supply adjustment mechanisms | ||||||||||
| G.14 | Token Value Protection Schemes | False | |||||||||
| G.15 | Token value protection schemes description | ||||||||||
| G.16 | Compensation schemes | False | |||||||||
| G.17 | Compensation schemes description | ||||||||||
| G.18 | Applicable law | ||||||||||
| G.19 | Competent court | ||||||||||
| Part H - Information on the underlying technology | |||||||||||
| H.1 | Distributed ledger technology (DTL) | ||||||||||
| H.2 | Protocols and technical standards | ||||||||||
| H.3 | Technology used | ||||||||||
| H.4 | Consensus mechanism | ||||||||||
| H.5 | Incentive mechanisms and applicable fees | The Ethereum network operates on a Proof-of-Stake (PoS) consensus mechanism. Validators stake ETH to secure the network and, in return, receive rewards in the form of block issuance and transaction fees. Transaction fees on Ethereum consist of a base fee, which is algorithmically adjusted based on network demand and is burned (per EIP-1559), and a priority fee (tip), which is paid to validators as an incentive to prioritize inclusion of a transaction in a block. Validator rewards are generated from: • Priority fees attached to user-submitted transactions, • Newly issued ETH as part of consensus-level incentives, and • MEV (Maximal Extractable Value), which represents additional ordering incentives captured by validators through transaction sequencing. Users interacting with Ethereum-based tokens or smart contracts are required to pay network fees denominated in ETH. These fees are not collected by the Foundation but are inherent to the operation of the Ethereum blockchain and are paid directly to validators or burned by protocol rules. As such, the Foundation has no control over Ethereum network fees, which are determined algorithmically by network conditions and validator dynamics. ETHFI, which is an Ethereum-based ERC-20 token, includes an optional on-chain staking mechanism that allows holders to deposit tokens into a staking contract to earn protocol-aligned fees detailed below. The protocol does not charge fees for staking or unstaking; however, users are responsible for standard Ethereum network gas fees, which are paid to validators and not retained by the Foundation. Withdrawal Fee Buybacks: 100% of all revenue generated from staked ETH withdrawal fees generated—both implicit (delayed exits) and explicit (instant exits)—is allocated to buybacks of ETHFI. These buybacks are executed on a weekly cadence. The resulting ETHFI is remitted directly to staked ETHFI holders, distributing protocol value fees back to active staked ETHFI holders. Protocol Revenue Fees Buybacks (Monthly): A portion of revenue fees generated from the broader Ether.fi protocol—including Stake, Liquid, and Cash products—is also allocated for ETHFI buybacks. These buybacks occur on a monthly cadence. As with weekly buybacks, the acquired ETHFI is distributed to staked ETHFI holders. In accordance with approved governance proposals, all buyback-derived ETHFI is redistributed to staked ETHFI holders. A portion of this may also be allocated toward enhancing on-chain liquidity, at the discretion of the DAO or Foundation when needed for market stability and accessibility. | |||||||||
| H.6 | Use of distributed ledger technology | False | |||||||||
| H.7 | DLT functionality description | ||||||||||
| H.8 | Audit | True | |||||||||
| H.9 | Audit outcome | The Ether.fi protocol and related smart contracts have been subjected to multiple independent audits by blockchain security firms. These assessments were performed to verify code integrity, contract logic, and adherence to recognized security best practices prior to and following major deployments. Security auditing firms such as CertiK, Zellic, Halborn, and others have been engaged to audit smart contracts prior to launch or upgrade. As of the latest submission date, no high- or critical-severity findings were identified, and any findings in prior audits have been resolved. All audit documentation is maintained in the project's public repository under the “/audits” directory on GitHub (https://github.com/etherfi-protocol/smart-contracts/tree/master/audits). | |||||||||
| Part I - Information on risks | |||||||||||
| I.1 | Offer-related risks | Tokenomics and Market Risks • Liquidity and Trading Risk: If the Token is listed on major exchanges, there is no guarantee of sufficient liquidity. Low trading volume could make it difficult for Token holders to sell their Tokens without a significant impact on the price, leading to potential losses. • Concentration Risk: If a small number of wallets hold a significant percentage of the total Token supply, this creates a concentration risk. These large holders could manipulate the market or sell off a large portion of their Tokens, causing extreme price volatility. Regulatory and Legal Risks • Evolving Regulatory Landscape: The legal and regulatory status of cryptocurrencies, especially those related to staking protocols like the Token, is constantly changing. New laws, regulations, or enforcement actions in key jurisdictions could negatively impact the protocol's operations and the Token's value. • Classification as a Security: There is a risk that regulatory bodies could classify the Token as a security. If this were to happen, the Token and the protocol could be subject to strict securities laws, which could hinder its functionality and marketability. • Sanctions and Restrictions: The protocol operates globally, but it is subject to sanctions and restrictions imposed by various governments. Users from certain jurisdictions may be unable to participate in the offering or use the protocol, which could limit the Token's reach and utility. Protocol and Operational Risks • Smart Contract Vulnerabilities: The protocol relies on complex smart contracts to manage staking, restaking, and token distribution. Despite rigorous audits, these contracts could contain undiscovered bugs or vulnerabilities that malicious actors could exploit, leading to a loss of user funds. • Oracle Failure: The protocol may rely on oracles—data feeds that provide external information to smart contracts—to determine certain values or execute functions. If an oracle is compromised or provides incorrect data, it could lead to the incorrect execution of a smart contract and significant financial losses. | |||||||||
| I.2 | Issuer-related risks | Governance Risks • Voting Inefficiency: The Token is a governance token for the DAO. However, active participation in DAO governance can be low. Low voter turnout can lead to decisions being made by a small fraction of the community, or it can slow down critical updates and bug fixes due to a lack of quorum. This can also lead to a "tyranny of the majority" where a few powerful token holders can disproportionately influence outcomes. Operational and Transparency Risks • Lack of Transparency: While the protocol is built on a public blockchain, there may be a lack of transparency regarding the use of treasury funds, the vesting schedules of team tokens, or other financial details. This can erode trust and make it difficult for the community to hold the team accountable. • Improper Use of Funds: The funds raised from Token sales or those held in the DAO treasury may not be used effectively or as promised in the whitepaper. Mismanagement, misappropriation, or simply poor investment decisions with these funds could jeopardize the protocol's future development and growth. Regulatory and Legal Risks • Legal Entity and Liability Risk: The legal status of a DAO and its members is often unclear and varies across jurisdictions. Token holders, as "members" of the DAO, could be held personally liable for the actions or liabilities of the protocol, especially if it is not legally recognized as a distinct entity. • Intellectual Property and Third-Party Risk: The protocol may rely on third-party services, open-source code, or intellectual property. There is a risk that these dependencies could be subject to legal disputes, licensing issues, or could be discontinued, which would negatively impact the protocol's operations. | |||||||||
| I.3 | Crypto-assets- related risks | Technology and Network Risks • Underlying Network Risk (Ethereum): The value of the Token is directly tied to the health and security of the Ethereum network. Any major network-wide issues, such as a consensus failure, a significant bug, or a large-scale attack on the Ethereum protocol, could severely impact the value of staked ETH and, by extension, the Token. • Smart Contract Risk: The protocol relies on a series of complex smart contracts for its core functionality, including the minting of eETH and the governance of the protocol. Despite being audited, these smart contracts may contain undiscovered bugs or vulnerabilities. An exploit of these vulnerabilities could lead to the loss of staked ETH or other assets locked in the protocol, which would directly devalue the Token. • Centralization of Staking: A risk to the long-term security of the Ethereum network is the centralization of staking, where a few large entities control a significant portion of the total staked ETH. If this centralization occurs, it could pose a systemic risk to the network, and as a major liquid staking protocol, Ether.Fi could contribute to or be affected by this centralization, which could impact the network's security and reputation. Market and Liquidity Risks • Liquidity Risk: The liquidity of the Token on exchanges is not guaranteed. While a token may be listed on a major exchange, there is no assurance that it will maintain sufficient trading volume. Low liquidity can make it difficult for holders to sell their Tokens without causing significant price impact, leading to a potential loss of value. • Price Volatility: The value of the Token is highly volatile and speculative. Its price can fluctuate dramatically in a short period due to market sentiment, news, or broader cryptocurrency market trends. There is no guarantee that the Token will maintain its value, and it could experience a complete loss of value. • Interoperability and Bridge Risk: To function across different layers and protocols, ETHFI or its associated tokens like eETH may need to be bridged to other blockchains. These bridges are often a point of vulnerability and have been the target of major exploits. A hack or failure of a bridge used by the Ether.Fi protocol could lead to a significant loss of bridged assets and a loss of confidence in the Token. • Buyback Mechanism Risk: The Token buyback program relies on the protocol's ability to earn ongoing fees, which may be affected by market conditions, network activity, or technical and regulatory changes. Even as a systematic process, buybacks do not guarantee price support, liquidity, or appreciation, and Token value may fluctuate independently. Regulatory developments could also impact the timing, structure, or execution of buybacks. Participants should not view the program as an assurance of future performance or Token value. • Token Burning Risk: Token burns permanently remove ETHFI from circulation and are intended to reduce supply and support the Token's economic model. However, there is no assurance that such burns will increase Token value, demand, or liquidity, as market conditions and external factors may outweigh their effects. Burns are irreversible and may limit future flexibility in treasury management or ecosystem incentives. Additionally, changing regulatory requirements could affect how or when burns are conducted. Participants should not view burns as a guarantee of price support or predictable economic outcomes. Economic and Financial Risks • Incentive Misalignment: The tokenomics of ETHFI, including its reward mechanisms and governance structure, may not perfectly align with the long-term interests of all Token holders. An imbalance in incentives could lead to actions that benefit a specific group (e.g., large holders) at the expense of others, which could harm the Token's value. • Competition Risk: The liquid restaking space is highly competitive, with new protocols and services constantly emerging. Ether.fi faces stiff competition from other protocols that may offer more attractive yields, better user experience, or different services. Failure to compete effectively could lead to a decrease in its market share and a decline in the value of the ETHFI Token. • Restaking and AVS Risks: A key feature of Ether.Fi is its native restaking via EigenLayer, which allows staked ETH to be used to secure other networks, or Actively Validated Services (“AVS”). Each AVS has its own set of rules and risks. If an AVS suffers a security breach or experiences a slashing event, the restaked ETH and, by extension, the ETHFI Token, could be negatively affected. | |||||||||
| I.4 | Project implementation- related risks | Technology and Development Risks • Roadmap Failure: The project's success depends on the core team's ability to execute on its stated roadmap. There is a risk that the project will fail to deliver key features, meet planned milestones, or address emerging technical challenges, which could harm the protocol's adoption and the Token's value. • Scalability Issues: As a liquid restaking protocol on Ethereum, growth is tied to the scalability of its underlying technologies. While Ethereum is undergoing upgrades, the protocol may face its own scalability constraints as the number of users and transactions increases, leading to network congestion, high transaction fees, and a poor user experience. • Third-Party Integration Risk: The protocol may rely on third-party services, APIs, or protocols (e.g., EigenLayer for restaking). A failure, bug, or security vulnerability in a third-party service could have a cascading effect, disrupting the protocol and leading to losses or service interruptions. • Unforeseen Technical Complexity: The liquid restaking and DeFi space is a rapidly evolving and technically complex field. The project may encounter unforeseen technical hurdles that require significant time and resources to solve, potentially causing development delays and increasing costs. Security and Operations Risks • Vulnerability to Hacks and Exploits: Despite security audits, smart contracts and the protocol's infrastructure could contain undiscovered vulnerabilities that malicious actors could exploit. This could lead to the theft of staked assets, a loss of user funds, and a complete breakdown of trust in the protocol. • Key Management Risk: The security of the protocol's funds and operations relies on the proper management of private keys. A loss, theft, or compromise of a private key for a critical smart contract or treasury wallet could lead to an irreversible loss of funds. The Foundation will not be able to provide assistance or remedy to Token holders in such circumstances. • Governance Security Risk: As the protocol decentralizes and shifts to a DAO governance model, there is a risk that the governance process itself could be compromised. This could occur through a "51% attack" (where a single entity gains control of a majority of voting power) or through a social engineering attack that tricks Token holders into voting for a malicious proposal. Execution and Human Capital Risks • Personnel Risk: The project's success is highly dependent on the continued involvement and expertise of its core development team and key contributors. The departure of key personnel could jeopardize the protocol's ongoing development, maintenance, and security. • Lack of Adoption: The protocol may fail to gain significant market adoption and attract a critical mass of users. Without a robust user base, the network effect that drives value in liquid restaking protocols would not materialize, and the Token's utility and value would diminish. • Inadequate Community Management: The project's long-term success is also dependent on a strong and engaged community. Poor communication, a failure to address community concerns, or an inability to foster a positive environment could lead to a loss of community trust and support. | |||||||||
| I.5 | Technology-related risks | • Underlying Network Risk (Ethereum): The value of the Token is directly tied to the health and security of the Ethereum network. Any major network-wide issues, such as a consensus failure, a significant bug, or a large-scale attack on the Ethereum protocol, could severely impact the value of staked ETH and, by extension, the Token. • Smart Contract Vulnerabilities: The protocol relies on complex smart contracts to manage staking, restaking, and token distribution. Despite rigorous audits, these contracts could contain undiscovered bugs or vulnerabilities that malicious actors could exploit, leading to a loss of user funds. • Third-Party Integration Risk: The protocol may rely on third-party services, APIs, or protocols (e.g., EigenLayer for restaking). A failure, bug, or security vulnerability in a third-party service could have a cascading effect, disrupting the protocol and leading to losses or service interruptions. • Unforeseen Technical Complexity: The liquid restaking and DeFi space is a rapidly evolving and technically complex field. The project may encounter unforeseen technical hurdles that require significant time and resources to solve, potentially causing development delays and increasing costs. | |||||||||
| I.6 | Mitigation measures | Mitigation of Technology and Smart Contract Risks • Rigorous Audits: The Ether.Fi protocol's smart contracts have undergone comprehensive security audits by reputable third-party firms. While no audit can guarantee 100% security, these reviews help identify and remediate critical vulnerabilities before deployment. The audit reports are made public to provide transparency and maintained in the project’s public repository under the “/audits” directory on GitHub (https://github.com/etherfi-protocol/smart-contracts/tree/master/audits). • Bug Bounty Programs: A standing bug bounty program on platforms incentivizes white-hat hackers and security researchers to identify and responsibly disclose any vulnerabilities. This provides an ongoing layer of security and rewards the community for helping to protect the protocol. Mitigation of Issuer and Governance Risks • Non-Custodial Model: A core tenet of Ether.Fi is the non-custodial approach, which means users retain control of their ETH. This fundamentally mitigates the key management risk and the risk of the issuer mismanaging or losing user funds. Unlike a centralized exchange, the protocol itself cannot be "hacked" to drain user assets, as the assets are not held by a single entity. • Phased Decentralization: The project has a clear roadmap for progressive decentralization, moving from a multi-sig wallet controlled by the founding team to a fully decentralized autonomous organization (DAO). This gradual shift ensures that governance is handed over to the community in a secure and deliberate manner, avoiding abrupt changes that could introduce new risks. Mitigation of Crypto-Asset Related Risks • Diversified Node Operator Set: The protocol works with a diverse group of professional node operators to avoid a single point of failure and mitigate centralization risk within the Ethereum staking ecosystem. This decentralization at the validator level adds a layer of resilience to the protocol. • Transparent Financial and Risk Dashboards: In collaboration with risk management firms like Chaos Labs, Ether.Fi provides a public risk portal that gives the community real-time visibility into key metrics, such as withdrawal queues, validator performance, and AVS (Actively Validated Services) allocations. This transparency helps the community and users make informed decisions. Disclaimer: The above listed mitigation measures may not be implemented as contemplated or prove effective; no assurance is given that they will reduce or eliminate the risks described. | |||||||||
| Part J - Information on the sustainability indicators in relation to adverse impact on the climate and other environment-related adverse impacts | |||||||||||
| S.01 | Name | ||||||||||
| S.02 | Relevant legal entity identifier | ||||||||||
| S.03 | Name of the crypto-asset | ||||||||||
| S.04 | Consensus Mechanism | ||||||||||
| S.05 | Incentive Mechanisms and Applicable Fees | ||||||||||
| S.06 | Beginning of the Period | ||||||||||
| S.07 | End of the Period | ||||||||||
| S.08 | Energy Consumption | ||||||||||
| S.09 | Energy Consumption Sources and Methodologies | ||||||||||