By Jae, PANews
On the evening of August 27, the Ethena Foundation unveiled a package of proposals to reform the ecosystem and the token economics model, igniting market sentiment: ENA surged more than 20% at its intraday peak, rebounded nearly 60% over the week, and continued the strong uptrend seen over the past month.
The four adjustments proposed by the Ethena Foundation are closely interlinked and point to the same goal: to end the lingering sell-pressure shadow brought by VC monthly unlocks over the past one to two years, and to more effectively channel the economic value actually generated by the protocol to ENA holders.
Ethena unleashes four moves to reshape its token economics model
From buying out early investors’ positions, to canceling monthly unlocks; from binding economic rights in agreements, to activating a stepped revenue repurchase mechanism—Ethena has carried out a systematic redesign of its tokenomics model.
Buy out early sell pressure: clear out the “unstable supply.”
The first move by Ethena is to repurchase locked tokens from some early investors.
The foundation split the seed-round investors whose initial allocation exceeds 0.25% of the total supply into two categories: institutions that reduced their positions in the secondary market after the market peak in October last year—buying out all remaining locked tokens, though one wallet declined the invitation; and investors who have never sold—offered an option to exit at par value, but no institution chose to hand over tokens.
In essence, this is a “targeted clearing of unstable supply.” For early investors who have already sold, the locked tokens in their hands will no longer hang over the market like the sword of Damocles. However, Ethena has not disclosed the number of tokens and the dollar amount involved in the transactions, and the actual impact on the circulating supply is temporarily difficult to quantify.
Final-month unlocks: swap “slow knife cutting flesh” for “quick blade to cut through the mess.”
The second adjustment is to cancel the 3-year monthly unlocks for VC investors. The remaining undisclosed tokens will be released in full in one go on October 5, while the team’s share will follow the original vesting schedule and will not participate in any early unlock. After the adjustment, the proportion of tokens locked across the network will drop to roughly 12%, mainly consisting of team, ecosystem, and foundation holdings.
The biggest problem with the monthly unlock mechanism is the “persistent expectation of sell pressure.” Each month brings a new batch of unlocked tokens, so the market always fears buy pressure from early investors, and valuations are suppressed over the long run. Concentrated unlocks are like digesting the overhanging supply shock all at once—turning prolonged pain into short pain.
The other side of the coin is that concentrated releases also mean potentially bigger supply shocks in the short term. The final effect will depend on two variables: the token amount released at once, and investors’ actual selling behavior.
Draft (main framework agreement): put protocol value into token governance
The third adjustment addresses a long-standing pain point in DeFi: when the protocol makes money, who does it ultimately belong to?
The Ethena Foundation and the development entity Ethena Labs have reached a (main framework agreement) (Master Framework Agreement). The full text will be published in October. According to the current disclosures, the key intellectual property rights related to Ethena and the economic value generated by the agreements will belong to the foundation and its ecosystem, and will be governed by ENA holders.
This means that ENA’s value anchor will no longer be limited to vague governance rights; the economic returns from the protocol will be folded into the token-holder value capture framework.
Stepped repurchases: a revenue flywheel tied to USDe’s scale.
The final move most closely watched by the market is the stepped revenue repurchase mechanism (Fee Switch), essentially a fee switch. At present, the proposal has been approved by the risk committee and has been put up for a governance vote; the results will be announced on September 2.
The core of this adjustment is to tightly link the protocol’s net revenue extraction rate to the supply scale of USDe. When USDe supply reaches a launch baseline of $7.5 billion, 95% of the foundation’s net revenue will be used for programmed ENA repurchases in the secondary market, while the remaining 5% will be used for ecosystem growth. As USDe supply climbs to higher tiers, the extracted repurchase percentage and the repurchase scale will step up accordingly.
Repurchase funds come from the protocol’s three main business lines: USDe savings yield, the white-label stablecoin business, and the net income from Ethena [X], launching next week.
In essence, this is an income-driven deflationary engine attached to the token—but the prerequisite for ignition is for USDe’s scale to return to growth. At present, the derivatives market is fairly quiet, funding rates are low, and the repurchase engine will likely be idle in the near term. The ENA you buy now is more like a “forward growth option.”
From $15 billion down to $4 billion—USDe’s shrinking scale forces a business pivot.
This sweeping restructuring is a necessary choice after Ethena entered a bottleneck phase.
Previously, USDe relied on a Delta-neutral hedging strategy of crypto spot long plus contract short, capturing basis-trading arbitrage gains from the derivatives bull-market. Its circulating scale once nearly reached $15 billion—making it the flagship protocol in the synthetic dollar space. However, as the crypto market cooled, derivatives funding rates fell sharply. USDe’s market cap shrank to $4 billion. Protocol revenue tightened, and ENA fell into a double bind: “sell-pressure on the supply side, no value anchor.”
Ethena’s current problem is not only the supply pressure of the token itself, but also the stall in the positive cycle of “USDe growth → protocol revenue → token value.”
Since this year began, Ethena has already started proactively breaking the deadlock:
Establish a $1 billion financing facility with FalconX—connect USDe collateral assets to an over-collateralized lending market;
Bring in the long-established traditional giant Janus Henderson to invest in ENA and explore distribution channels for USDe;
Jointly with Coinbase, launch savings derivative products for both retail and institutional users.
The protocol is trying to move away from a single reliance on funding rates in the crypto derivatives market, and expand into diversified businesses such as stablecoins, savings, and institutional credit.
At its core, this tokenomics adjustment is a value-model redesign to support business transformation. In the past, USDe expansion only brought in protocol revenue, and ENA holders didn’t get to enjoy growth dividends. Now, Ethena needs to transmit the gains from business growth to the token via repurchases.
Support sentiment in the short term, rely on performance in the long run
In the short term, improvements on the supply side and expectations for repurchases may support a period of market sentiment recovery. But whether this reform can truly work ultimately still depends on growth in the underlying business.
There is only one decisive factor: can Ethena transform from a “high-yield, pro-cyclical product” to a “diversified, revenue-generating infrastructure”?
If USDe can get back onto a growth trajectory, and new business lines such as white-label stablecoins and institutional lending can continue contributing revenue, then the positive flywheel of “revenue growth → repurchase expansion → token appreciation → ecosystem expansion” can be set in motion. That gives ENA a chance to evolve from a governance token into a deflationary asset backed by real yields.
Conversely, if revenue remains highly tied to crypto market cycles, and new business expansion does not meet expectations, then the repurchase mechanism will be merely a valuation adjustment tool in a counter-cycle—not a stable value-capture mechanism.
In other words, this adjustment will solve the “tokenomics problem,” but it hasn’t solved the “business growth problem” yet. Short-term sentiment can be lifted by expectations; long-term value ultimately depends on performance delivery.
Put in a broader context, Ethena’s restructuring plan is another typical case of DeFi protocol value returning to the mainstream.
For a long time, the value of governance tokens in DeFi has largely depended on narratives and expectations. Even if an agreement earns more, it has little relationship with token holders; unlocks and inflation are also long-term pressures hanging over every agreement. Now, more and more top-tier protocols are starting to face these problems—trying to tie repurchases to generated revenue and capture value through governance.
However, all tokenomic designs ultimately need to be built on the fundamentals of the protocol itself. The repurchase engine requires business growth to drive it, and value capture requires real revenue to support it. Without scale growth and protocol profitability, even the most sophisticated token model is just a castle in the air.
For Ethena, the concentrated unlock on October 5 is the first test it faces after its value-reform overhaul.
(The above content is excerpted and reposted with permission from partner PANews; original link: )
“Buy out supply, start repurchases: Ethena fires four arrows at once—how does ENA’s ‘value return’ play out?” This article was first published on (Blockcast).