Ethena updates token economics, forcing airdrop users to become long-term Hodlers?

Author: Yangz, Techub News

On June 18, Ethena updated token economics, planning to use the Ethena ecosystem and A universal re-pledge mechanism will be introduced in the upcoming Ethena Chain, and "locking" requirements will be implemented for any users who obtain ENA through airdrops. Although Ethena claims that this move is intended to reduce the inflation rate of ENA and encourage ENA holders to become long-term users, considering that the Ethena team has changed the unlocking mechanism of airdrop tokens in the Shard Campaign many times before, this update is "forced" The meaning is very obvious. Some users also pointed out that Ethena’s mechanism changes this time are just to ensure that ENA cannot be sold before the team and investors unlock it. However, even if it is to maintain the value of ENA, this approach is somewhat disappointing to users.

Current use cases of ENA in the Ethena ecosystem

Currently, the use cases of ENA in the Ethena ecosystem include:

i) Lock ENA in Ethena to increase potential future returns. The purpose of this is to encourage the transfer of value from more merchant capital to users who are more beneficial to the long-term development of Ethena. The size of this reallocation scales linearly with the amount of USDe held by users. Therefore, as the supply of USDe increases, so does the potential demand for ENA holdings from members of the long-term consistent ecosystem. Currently, the ENA lock pool holds approximately 290 million ENA.

ii) By locking ENA in Pendle Finance PT-ENA, users can obtain the current fixed annual interest rate of approximately 75% in the form of PT-ENA. YT-ENA buyers can receive points allocation and only need Holding 1 YT = 1 ENA will satisfy the minimum ENA holding relative to its USDe holdings. Currently, the PT-ENA pool holds approximately 160 million ENAs.

iii) The next phase of incorporating ENA into the Ethena system and increasing its utility will be utilizing a universal re-staking pool to stake ENA. The first use case relies on a messaging system based on LayerZero DVN to provide economic security for cross-chain transfers of USDe. This is the first of multiple layers of infrastructure related to the upcoming Ethena Chain and financial applications built on the chain that will utilize and benefit from the re-staking ENA module.

More details about the chain can be found in the detailed Ethena 2024 roadmap post.

Currently staked ENA and sUSDe will be the first new assets available for deposit into Symbiotic, with initial LST both reaching caps within hours.

Currently data on locked ENA can be viewed through the Dune dashboard.

Details of the ENA Redemption Module

Ethena will first partner with Symbiotic and LayerZero to pilot the use of Universal Redemption A staking framework to secure cross-chain transfers of Ethena-based assets, including USDe and sUSDe. These transfers are verified via the LayerZero DVN network, which is secured via staked ENA within Symbiotic.

This module will also establish a common framework for LayerZero ecosystem partners to launch re-staking DVN, leveraging staked tokens to provide economic security and DVN operator choice.

For more detailed information about LayerZero DVN, please view the relevant documentation.

While Ethena-based cross-chain transfers will be secured via staked ENA, Ethena will provide a unique value proposition for universal re-staking use cases via USDe and sUSDe for use as the underlying asset by other systems and protocols.

Compared to utilizing Ethereum as a base re-staking asset, USDe/sUSDe as an asset has two different qualities that unlock unique potential use cases:

i) Non-correlation: Relatively stable assets that are “pegged” to the U.S. dollar are often uncorrelated to more volatile cryptoassets, and the stability of the U.S. dollar relative to Ethereum during periods of slashing is an important quality in times of stress – when we need it most. Security of Staking.

ii) Sustainable Real Returns: It’s unclear how AVS can provide truly non-inflationary returns on billions of dollars of re-pledged capital without providing excessive token rewards that make up the majority of returns rate of return. Since its inception, USDe’s real yield has been structurally higher than any USD-based asset, so using USDe uniquely solves this problem because it reduces the need for inflation rewards and narrows the gap between re-pledgers and The capital cost gap between systems consuming security.

Reward details for staking ENA in Symbiotic

Following the cap on ETH LST in Symbiotic within days, ENA and sUSDe will be the next eligible assets to be eligible for use in its next phase Make a pledge.

Staking ENA in Symbiotic will receive the following rewards:

• Maximum daily reward of 30 times points per ENA

• Symbiotic Credits

• Mellow Credits

• Potential future LayerZero RFP assignments (if assigned to Ethena)

# The ##ENA pool will go live on June 26th (next Wednesday).

Staking ENA in Ethena Chain

As detailed in the 2024 roadmap, Ethena Chain will focus on building on USDe as the native Gas token and pivot asset within the system Financial applications and infrastructure.

We believe that crypto-native currencies are the Holy Grail and killer app, while the U.S. dollar is the lifeblood of every financial app.

The reimagined ENA will provide universal security for every use case in the following applications:

• Spot AMM

## Perpetual DEX
Yield Trading
Money Market
Low Collateral Lending
On-chain prime broker
Options and structured products
And on-chain infrastructure solutions , such as

Cross-chain transfer
Oracle supplier
Shared sequencer
Data Availability Solutions
In return, users may be eligible to benefit from potential airdrops from these protocols.

As the asset ecosystem and use cases around USDe grow, so will ENA’s utility as an asset that helps ensure ecological security.

Update on ENA Locking and Vesting

As of June 17th, any active airdrop via airdrop (e.g., from a Shard subject to vesting conditions) Part) users who receive an ENA must choose one of the three options outlined in Part One to lock in at least 50% of their claimable ENA allocation.

Otherwise, all unvested ENAs belonging to the relevant wallet of this user will be redistributed to other users who have locked ENAs. As more use cases for ENA emerge in the ecosystem, the options for locking ENA for this purpose will increase.

It needs to be clear: the purpose of the above regulations is to incentivize ENA holders to realign from employment capital to long-term cooperative users.

Instructions on the above content will be clarified on June 23 when users receive their ENA vesting for the next week. From that point on, at least 50% of newly vested ENAs need to be locked in the above options, otherwise users will lose unvested ENAs.

The foundation, team or investors will not retain any unattributed ENA that does not meet the above conditions, and these ENA will be used exclusively to benefit users who match the ecology.

Different views on this update of Ethena

For this update of Ethena, Ignas praised its integration with Symbiotic, saying that Ethena as the most important AVS will make Symbiotic surpass Eigenlayer. In addition, this update "also marks a change in token economics: now every DeFi token can be strengthened through the security of re-staking." Ignas said, "This also means that DAO tokens such as lrtENA "LRT" becomes possible, maybe "Maker should also be launched as AVS together with lrtMKT, or even lrtUNI, etc."

Kairos Research commented, "This is a very interesting move."

Kairos Research said that first of all, since its launch in early April, a large part of ENA has been locked in the protocol's own LP pledge contract and Pendle contract, accounting for approximately 3% of the total supply, or 28% of the current circulating supply. . According to on-chain data, the Ethena LP pledge contract has only had one large-scale ENA outflow before, with a total of approximately 23 million ENA flowing to a specific wallet and subsequently sent to Binance’s deposit address. This indirectly demonstrates users’ long-term support for the protocol. With this update of ENA, additional staking channels will also be created for it. Considering that the point reward multiplier will be exactly the same, and Ethena seems to hint that it will provide additional airdrops for future ecological projects, it is conceivable that when the new re-staking contract comes online, some of these tokens will be migrated from the above contract to the new one in the re-pledge contract.

However, Kairos Research also raised its own concerns about this update. Kairos Research said that while the "real yield" concept of Symbiotic AVS is cool and Ethena's vertical integration with it also makes sense, it is still unclear whether re-staking of an unstable governance token is the best solution for "security" . Additionally, while tokenization of cash and arbitrage trades helps give users access to some type of yield that would otherwise be unavailable to them, there is still counterparty risk involved, introducing a layer of opacity to an otherwise transparent protocol. Given that these parties are responsible for providing yields, before an entire ecosystem is built around the attractive yields offered by the Ethena protocol, Kairos Research recommends developing Ethena to increase transparency and better assess risk around the protocol.

Of course, in addition to the overall objective evaluation of Kairos Research, there are more complaints on CT about the mechanism of Ethena "forcing" airdrop recipients to lock up. @DarkCryptoLord quipped directly in the comment area, "Is ENA for governance? Before this, I'm not sure I saw any voting proposals for this update. Our vested ENA changed from monthly unlocking to What’s the point of being forced to lock 50% of governance tokens every week?” In addition, some KOLs were disappointed with the term “employment capital” used by Ethena, with @DefiMoon lamenting “What’s worse is that in the early days. USDe’s supporters have now become hired capital.”

It remains to be seen whether this update to Ethena’s token economics will damage users’ enthusiasm for participating in future ENA airdrops and damage the credibility of the Ethena team. Symbiotic users, on the other hand, may be worried about whether their points will be diluted by more and more participants.

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