On November 15, the Ethena Foundation announced that its risk committee has approved a proposal by Wintermute, a prominent market maker and supporter of the Ethena protocol, to overhaul the revenue-sharing structure within the ecosystem. This move is designed to better align the interests of staked ENA (sENA) holders with the protocol’s financial performance. The changes are expected to take effect by the end of November, pending finalization of implementation details.
Wintermute’s proposal aims to address what it described as a misalignment between sENA holders and the success of the Ethena protocol. The foundation noted that while the protocol—home to the U.S. dollar-pegged stablecoin USDe—has seen substantial revenue growth, this success has not directly benefited sENA stakeholders, who currently have limited exposure to the protocol’s revenue-generating activities.
In its proposal, Wintermute emphasized the importance of creating a direct connection between the protocol’s financial success and the rewards for sENA holders. According to Wintermute:
"The Ethena protocol has achieved significant market traction, yet sENA holders lack a direct connection to this revenue growth."
To remedy this, the proposal suggests introducing a mechanism that allocates a portion of Ethena’s revenue to enhance the utility and value of staked governance tokens (sENA). This move is expected to improve alignment and provide more tangible benefits to the protocol’s most committed stakeholders.
The proposed changes focus on a more equitable revenue-sharing model for the Ethena ecosystem. Under the new structure, a portion of the protocol's revenues will be earmarked for initiatives that increase the value and usability of staked ENA tokens. Additionally, the Ethena Foundation has committed to ensuring that all future protocol earnings will be used exclusively to benefit the ecosystem, with no funds flowing to external entities or affiliated development groups, such as Ethena Labs.
The Foundation has further clarified that governance processes will oversee how funds are allocated beyond operational reserves and rewards for holders of sUSDe, the protocol’s stablecoin. This ensures that the broader community has a say in how revenue is distributed, reinforcing the protocol’s commitment to decentralized governance.
One of the key pillars of Wintermute’s proposal is increased transparency around revenue allocations. The Ethena Foundation has pledged to provide greater clarity about how past earnings have been distributed and has committed to maintaining this transparency moving forward. All future revenue allocation decisions will be subject to community governance through voting structures tied to the ENA and sENA tokens, ensuring that the protocol remains accountable to its stakeholders.
This proposal marks a significant step towards realigning the incentives within the Ethena ecosystem. By directly linking the rewards of staked ENA holders to the protocol’s success, the changes are expected to foster a more engaged and incentivized community. With support from major industry players such as Binance Labs, Fidelity Investments, and Dragonfly, Ethena aims to strengthen the relationship between its governance token holders and the broader protocol’s financial performance.
Wintermute’s proposal also highlights the growing trend within blockchain ecosystems to create more transparent and efficient governance structures that better align stakeholder incentives. This move could set a valuable precedent for how governance protocols across the industry can address similar challenges related to revenue distribution and stakeholder alignment.
The Ethena Foundation is working closely with its risk committee to finalize the mechanics of the new revenue-sharing model. The final activation parameters are expected to be in place by November 30, at which point the changes will be implemented.
This overhaul of the revenue-sharing structure marks an important evolution for the Ethena protocol, reinforcing its commitment to its community of token holders and ensuring that the protocol’s financial growth directly benefits those who contribute to its governance and success.
November 2024, Cryptoniteuae