The Ethena Foundation has initiated a vote on a radical change to the ecosystem's financial model: nearly all net protocol profits will be directed toward a programmatic buyback of the governance token ENA. This is a step that could fundamentally reshape the approach to value distribution in DeFi projects.
The Mechanics of the "Fee Switch"
If approved by the community, all revenue from Ethena's products, including the USDe stablecoin, will go toward purchasing ENA on the open market. This means abandoning the previous model, where revenue was distributed among sUSDe holders and partner programs. The risk committee has already approved the initiative, and the vote itself has been launched on the Snapshot platform. However, timelines and guarantees of approval have not yet been disclosed.
Asset Consolidation and Tokenomics
In parallel, Ethena Labs and the Foundation have entered into a Master Framework Agreement, under which all intellectual property and rights to the value created by the protocol transfer exclusively to the organization. Management of these assets will be carried out by ENA holders through governance mechanisms, while Ethena Labs investors lose residual rights to cash flows.
A key change in tokenomics: the Foundation and leading venture investors have agreed to cancel future monthly token unlocks. Previously, their share accounted for 25% of the fixed ENA supply (3.75 billion coins) with a one-year cliff and a three-year vesting period. Now, unlocked assets will be removed from the schedule, although team tokens will continue to be released according to the original plan. Additionally, the Foundation has bought back the remaining locked ENA from several major early investors who had been selling assets over the past nine months, though the details of the deal have not been disclosed.
Market Impact and My Conclusions
Against the backdrop of this news, the price of ENA rose nearly 12% in a day, reaching $0.16. For comparison, in April 2024, the asset traded at a peak of $1.5. The current market capitalization stands at $1.54 billion, and the total value locked in Ethena is $4.5 billion, of which ~$4 billion is in USDe.
This is an ambitious attempt to solve two main problems for ENA: creating sustainable demand through buybacks and reducing pressure from future unlocks. However, I am concerned about the concentration of assets in the hands of the Foundation—this could strengthen the centralization of governance, which contradicts the basic principles of DeFi. The success of the initiative will depend on how much trust the community places in the current leadership and whether it is willing to accept such a model in the long term.