Ethena Foundation Approves Fee Switch

Ethena, the DeFi protocol behind the USDe stablecoin, is set to turn on its fee switch by the end of the month after governance voted to approve the proposal.

On Nov. 15, Ethena Foundation announced that its so-called fee switch, which enables revenue sharing for ENA holders, was approved. The foundation and risk committee will be working together to finalize parameters by Nov 30.

The ENA token price has reacted positively to the news and is up 15% to $0.6, or a $1.7 billion market capitalization, since the proposal's approval.

Market-making firm Wintermute submitted the proposal on Nov. 6 while stating, “there has also been no guidance on how ENA could potentially fit within the overall protocol revenue split and whether there is any plan in place to eventually allocate a portion of protocol revenue to ENA in some fashion.”

Ethena is currently generating all-time high revenues of $9.5 million over the last week according to TokenTerminal, making it the 8th highest-earning protocol in DeFi over the past seven days.

The protocol leverages multiple yield and hedge strategies to generate revenue. This is done through staking Ethereum, shorting derivatives that correspond to the collateral the protocol receives for USDe minting, and fixed rewards from stablecoins.

The chief revenue officer of on-chain governance protocol Tally chimed in, suggesting that the fee switch should focus primarily on governance participants rather than just ENA stakes.

“It’s our view that staking rewards should be paid to governance token holders in exchange for helping to secure the protocol through active governance participation, not just for passively holding sENA,” said Frisson.

The implementation of a fee switch will make Ethena one of the first major DeFi protocols to enable revenue sharing for stakers since the U.S. presidential election concluded. Some speculate that Donald Trump’s administration will allow for a regulatory framework that solidifies the legality of revenue sharing.

Following its launch in December 2023, Ethena has become one of the largest DeFi protocols by total-value locked (TVL) with $3.3 billion, making its stablecoin, USDe, the 4th largest on the market.