The Ethena Protocol has agreed to activate a fee switch within its network based on Wintermute’s revenue-sharing proposal. The blockchain protocol expects to have enabled a fee switch by the end of the month, following all implementation guidelines.

Wintermute submitted its proposal to Ethena, advocating for a fee switch

On November 6, algorithmic trading firm Wintermute proposed changes to the distribution of the ENA token, recommending a fee switch for the protocol.  Wintermute explained that the ENA protocol lacked precise mechanisms to guide the allocation of its earnings to its holders, hence the need for the proposal.

In an X post on November 15, the Ethena Foundation confirmed it would be making alterations based on Wintermute’s proposal:

The Ethena Foundation is pleased to share that the Wintermute proposal to enable an ENA fee switch has been approved by the Risk Committee. The Foundation will be working with the Risk Committee to crystallize parameters for fee switch activation by 30th November, with precise implementation mechanics to follow.

~ Ethena Foundation

While the Wintermute proposal did not provide specific details on revenue allocation or the fee switch mechanism, it did suggest changes to the circulating USDe supply, the protocol’s average revenue levels, and the spread between USDe’s annual percentage yield (APY) and market rates.

Wintermute also requested Ethena to assess the proper configuration of the fee switch, factoring in the USDe’s increasing supply and the competitiveness of the staked USDe returns.

Additionally, the trading firm asked the Ethena Foundation to reveal its revenue allocation records to clear any doubts about its received benefits. 

The market maker also asked for confirmation that future revenue generated will be used to advance the protocol’s goals and remain under ENA and sENA’s oversight.

Ethena Foundation sees the advantages the Wintermute proposal has to offer

Once the ENA Foundation received the proposal, it reviewed it and noted that the changes could benefit the protocol and its ecosystem. 

The foundation also clarified that all earnings from its Ethena Protocol will contribute solely to the protocol’s development and will not be used for any Labs or development services provider entities. Moreover, it stated that the protocol’s revenue for purposes other than USDe rewards and the Reserve Fund would be subject to governance approval.