coindesk.com
The native token of Ethena ($ENA), the protocol best known for its yield-generating “synthetic dollar” $USDe, surged Thursday after the foundation behind the project announced a major overhaul of the token’s economics.
The changes take aim at two issues that have dogged $ENA: selling pressure from early-investor unlocks and uncertainty over how much of Ethena’s economic value accrues to the token.
The plan removes the monthly VC unlock schedule, proposes using protocol revenue to buy $ENA and draws a clearer line between tokenholders and Ethena Labs shareholders.
Already one of crypto’s fastest horses this week, $ENA climbed 23% over the past 24 hours to $0.17. The token has doubled in price in a bit more than a week as the broader crypto rally heated up.
Cutting overhang, creating demand
The Ethena Foundation said in a post that it bought the remaining locked tokens from certain large seed investors that had sold $ENA over the past nine months. It will also accelerate the remaining original investor unlocks, ending the monthly release of VC tokens. Team tokens remain subject to their existing vesting schedules.
At the same time, $ENA holders are voting on a “fee switch” that would create a recurring source of demand for the token. Buybacks would scale up as $USDe circulation reaches specified milestones. Once the first threshold ($7.5 billion) is reached, 95% of net revenue from Ethena-branded businesses would go toward programmatic $ENA purchases, with the remaining 5% funding growth.
Ethena Labs and the foundation are also formalizing where the protocol’s economics reside, the post said. Under an agreement in principle, substantially all material intellectual property and economic upside from the Ethena protocol would belong to the foundation and ecosystem, rather than Ethena Labs equity holders. The agreement is expected to be published in October.
Revive $USDe growth
The overhaul comes after a sharp reversal for $USDe, whose supply has fallen below $5 billion from a peak near $15 billion in October during the crypto bull market. $USDe generates returns in part from derivatives funding rates, which dwindled as crypto markets cooled.
Ethena has since been looking for other sources of growth and yield. Last week, it announced a $1 billion facility with FalconX that can channel $USDe backing into overcollateralized institutional loans.
It also inked deals with major institutions: Janus Henderson invested in $ENA in June and is exploring $USDe distribution, while Coinbase COIN$192.49 launched a savings-product with Ethena while it’s venture arm bought $ENA.