#8 Ether.Fi DAO Proposal: Enhancing ETHFI Utility and Liquidity with Protocol Rebates for Governance Participants

Protocol & Proposals
1

Summary

This proposal builds upon the success of Ether.Fi’s buyback and liquidity provision (LP) program by introducing a new revenue-sharing mechanism for ETHFI stakers. We propose allocating 5% of protocol revenue to buy ETHFI and distribute it to ETHFI stakers as a reward, further incentivizing long-term staking while maintaining and expanding the buyback and LP program. The initiative aims to enhance the utility of ETHFI, strengthen its market, and align user incentives with the growth of the Ether.Fi ecosystem.

Background

Success of the Buyback and LP Program:

Since its launch in July, Ether.Fi’s buyback and LP program has successfully brought approximately $2M of on-chain liquidity to the ETHFI market. This liquidity significantly reduces slippage for on-chain swaps, ensures smoother trading experiences, and enhances the market depth for ETHFI. The program’s performance is accessible through the Arrakis Dashboard

Current State of ETHFI and the ether.fi protocol:

  • ETHFI on-chain liquidity currently sits above $4M, largely in part to the buyback and LP program.
  • Current ETHFI staked = 12.7M ETHFI across Ethereum Mainnet, Arbitrum and Base. Expanding utility and staking rewards will further strengthen market confidence and user participation.
  • ether.fi currently sits as the market leader in the restaking category, capturing 65% of TVL as can be seen from the chart below. Based on this, ether.fi’s staking and restaking revenue continues to grow month over month, positioning the protocol for sustainable revenue generation, allowing for value accrual mechanisms like this proposal.

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Proposal Details

Protocol Rebates for Governance Participants:

  • Allocate 5% of Ether.Fi’s protocol revenue to buy ETHFI from the market each month. This ETHFI will then be distributed to ETHFI stakers. This is a starting point for allocation and will be revisited depending on the success of the program.
  1. Staking Requirements:
  • Stakers must have been staking ETHFI for at least one month prior to the distribution cutoff (end of month) to qualify for protocol rebates. This promotes long-term staking and discourages short-term farming. For example, if the distribution relates to revenue earned in November, the ETHFI must have been staked on the last day of the prior month (October 31st). Any reductions to the staking amount during the month the revenue was earned will also disqualify the users from receiving the distribution.
  1. Rebate Distribution:
  • Rebates will be distributed proportionately to each staker’s share of the total staked ETHFI.
  • Example: If a user stakes 5% of all ETHFI in the staking pool, they will receive 5% of the monthly reward distributed rewards.
  • Distribution will occur mid-month, subsequent to revenue announcement and buyback. The ETHFI will be claimable based on the chain that the user is staking on (currently Ethereum Mainnet, Base and Arbitrum).
  1. Continuation of the Buyback and LP Program:
  • The buyback and LP program will remain active to maintain on-chain liquidity and stabilize ETHFI’s market depth.
  • This program is essential for ensuring ETHFI remains accessible and tradable with minimal slippage, fostering confidence among stakers and investors.
  1. Alignment with DAO Interests:
  • This approach aligns user incentives with the protocol’s success, rewarding long-term ETHFI holders and encouraging participation in the ecosystem.
  1. Additional staking incentives
  • Staked ETHFI will continue to earn the same rewards. Further additional incentives for ether.fi stakers are also being explored.

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Conclusion

This proposal enhances ETHFI’s utility and strengthens its role within Ether.Fi’s ecosystem by leveraging the success of the buyback and LP program and introducing a sustainable governance participation framework for stakers. By aligning user incentives with protocol performance, Ether.Fi can drive long-term adoption, improve liquidity, and recognize active governance participants.

We encourage the DAO to approve this proposal to ensure the continued success of the ETHFI market and the broader Ether.Fi ecosystem.

Next steps

Voting duration: The voting window will be open for 4 days

Voting to be done through snapshot: https://snapshot.box/#/s:etherfi-dao.eth/proposal/0x1f268f3b8db87a75e8c9422d093377aea17357eb790cee04f9cbf3da2c9f9501

  • For: Approve 5% protocol revenue distribution to ETHFI stakers.
  • Against: Do not approve the proposal

Thank you for your continued support.

7 Likes
2

I love it!
There you go’
Now we talking about!!!

3

Hear hear! A worthy and fine proposal!

4

How did you arrive at 5%?

5

The intention of this proposal is to start with a relatively small allocation of protocol revenue, and continue to increase over time based on community feedback and DAO approval.

To clarify, this proposal of 5% is in addition to the buyback and LP program, which was set at 5% in the prior months. If the buyback and LP program remains at 5% for the next month, this results in 10% of revenue allocated to the sETHFI distribution (5%) and buyback and LP program (5%).

2 Likes
6

What a good proposal. LFG!

7

very nice proposal.LFG

8

@ether.fi Can we have details on implementation deadline, as there was no any specific information in both forum and snapshot. Thank you. Merry Christmas!

9

Thank you for your feedback. As the snapshot proposal has now passed, the program will begin with the first distribution in mid-January for protocol revenue received during the period of December 1-31st.

2 Likes
10

As a follow up to the above proposal, it was determined that the most efficient and simplest implementation of reward distribution for staked ETHFI holders would be to make sETHFI a yield bearing asset. This ensures users continue to accrue ETHFI rewards, and are not forced to pay gas fees to claim. Given this, the monthly rewards will be distributed daily to the staked ETHFI vault over the proceeding month.

The allocated percentage of revenue remains as per the successful DAO vote.

2 Likes