Following the general approval of the sENA “fee switch” proposal earlier this month, the Ethena Risk Committee deliberated to crystallize the parameters which the Ethena protocol needed to meet to activate it.
After multiple rounds of discussions and a blind voting process, the committee members have decided on the following success metrics, at which point Ethena would be considered in a sufficiently strong position to begin directing a portion of protocol revenue to sENA in some fashion:
Success Metrics:
- USDe circulating supply: >$6bn
- Cumulative protocol revenue: >$250m lifetime (current $166m)
- CEX adoption: USDe integrated on 4 of top 5 centralized exchanges by derivative volumes
As the original Wintermute proposal outlined: it may be the case that direct revenue distributions are suboptimal to implement in practice for a variety of reasons related to the maturity of the protocol and other considerations. These success metrics are the first step at crystallizing a satisfactory level of protocol maturity for Ethena.
Once all of the success metrics are hit, the fee switch for sENA can be considered. At that stage, Ethena will have solidified its position as a market leader and can start the fee switch activation process.
At the current 7 day growth rate in USDe supply of 15%, and weekly revenue of ~16m, the USDe supply metric would be hit in three weeks, while the revenue metric would be hit in 5 weeks.
If all three success metrics are hit, the Risk Committee will then assess the following two risk metrics on an ongoing, regular basis, when determining whether or not to distribute a portion of protocol revenue to sENA in some fashion:
Risk Metrics:
- sUSDe APY spread vs benchmark rate: between 5.0-7.5% over benchmark rate.
Risk committee members will determine the spread and benchmark rate on a regular basis and sUSDe APY will need to clear that hurdle in order to enable a distribution of protocol revenue to sENA.
- Reserve Fund Sizing
The Reserve Fund will be assessed on a monthly basis by all members to determine if it is adequately sized. If yes, the sENA fee switch can be activated.
The exact split of protocol revenue to be sent to sENA is still to be determined, and more details on the split will follow. Furthermore, the Risk Committee will perform legal and operational diligence with respect to various methods of implementation, to be evaluated and confirmed by the Ethena Foundation, beginning now. Updates on this process and any decisions related to implementation structure will be provided on an ongoing basis.
Risk Committee members will provide monthly updates on sENA fee switch progress in the governance forum as well as publicly sharing their risk metric analysis on a monthly basis. app.ethena.fi will soon introduce a metrics dashboard where users can track the progress towards sENA fee switch activation.