DeFi Treasury Protocol ETH Strategy Deploys Over 50% of Its ETH for Yield

ETH Strategy, a DeFi protocol that mimics corporate treasury operations on-chain, is now deploying its ETH into yield-generating positions through a partnership with Etherfi, a non-custodial liquid staking protocol.

According to an Aug. 18 blog announcement, allocations to partners like Etherfi are “intended to generate sustainable ETH-denominated returns as part of the ETH Strategy treasury program.” Users will get on-chain receipt tokens for each position, which act as a live, verifiable “proof of reserves,” ETH Strategy explained.

ETH Strategy, which has over 11,000 ETH in its treasury, says the integration is “designed to sit alongside other DeFi venues as we roll out additional partners, diversifying sources of yield while preserving liquidity and control.”

In practice, this means ETH can be allocated across multiple protocols, earning returns through lending, staking, or other yield mechanisms without locking users’ liquidity.

Staking Yield

In an X post on Aug. 18, ether.fi said ETH Strategy “will be deploying a significant portion of their ETH holdings into weETH,” a non-rebasing ERC-20 token representing staked Ethereum.

While the exact amount wasn’t disclosed, on-chain data shows ETH Strategy has allocated 2,048 ETH to weETH so far, along with smaller deposits to Lido, Liquid Collective, Renzo, and Aave.

ETH Strategy isn’t a company with a traditional off-chain balance sheet. It’s a set of smart contracts running on Ethereum that manage treasury positions autonomously. In its official documentation, ETH Strategy says it has “2 audits completed,” but adds that “these will be public later,” without naming the auditors or providing a timeline.

ETH Strategy did not respond to The Defiant’s request for comment.

The protocol’s native token STRAT is designed to give leveraged exposure to ETH without the typical liquidation risks of borrowing. Users bond ETH or stablecoins to receive a convertible note, which consists of a fungible on-chain debt token (CDT) and an NFT call option on STRAT.

Holders can sell the CDT for stablecoins while keeping the NFT to later convert into STRAT.

The protocol earns from the option premiums, and STRAT only gets minted when someone exercises their NFT option, which burns the matching CDT and keeps supply tied to activity.

That structure doesn’t eliminate market risk, though. The project’s documentation specifically warns that a prolonged ETH downturn “may result in insufficient treasury value to repay debt at expiry.”

As of press time, STRAT is down about 13.5% since its Aug. 13 launch, compared with roughly 9% for ETH, per data from CoinGecko.