Written by: Yangz, Techub News
On June 18, Ethena updated its token economics, planning to introduce a universal re-pledge mechanism in the Ethena ecosystem and the upcoming Ethena Chain, and to support any tokens obtained through airdrops. Users of ENA implement "lockout" requirements. 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.
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.
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 cross-chain transfers based on Ethena will be secured through staked ENA, Ethena will provide a unique value proposition for universal re-staking use cases through USDe and sUSDe for other systems and protocols to use as the underlying layer assets.
Compared to leveraging Ethereum as a base re-staking asset, USDe/sUSDe has two different qualities as assets that unlock unique potential use cases:
i) Non-correlation: Relatively stable assets that are "pegged" to the US dollar are generally uncorrelated with more volatile crypto-assets. During periods when slashing is required, the stability of the US dollar relative to Ethereum is an important factor in times of stress. Features--At this time we need the security of re-staking the most.
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.
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)
As the asset ecosystem and use cases surrounding USDe grow, so will ENA’s utility as an asset that helps ensure ecological security.
Update on ENA Locking and Vesting
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
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 contracts and Pendle contracts, 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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