Ether.Fi Proposes Buyback Plan to Reward ETHFI Stakers

Ether.Fi, a decentralized finance (DeFi) protocol focused on liquid restaking, has unveiled a proposal to allocate a portion of its protocol revenues to buy back native ETHFI tokens. The move is intended to boost the value of ETHFI, enhance its market dynamics, and align incentives with the growth of the Ether.Fi ecosystem.

The proposal, posted on Ether.Fi’s community governance forum on December 16, suggests that 5% of the protocol’s revenue will be directed towards purchasing ETHFI tokens. These tokens will then be distributed as rewards to users who have staked ETHFI for at least one month. Ether.Fi views this initiative as a starting point, with the possibility of increasing the buyback percentage over time based on the success of the program.

A decision on the proposal will be made through a vote by tokenholders, with the vote set to close by the end of this week. Ether.Fi has already been using protocol revenues to buy back tokens from its primary liquidity pool, but this new proposal would directly reward stakers, strengthening the ecosystem and providing more value to long-term participants.

Ether.Fi and Liquid Restaking

Ether.Fi is a leading player in the liquid restaking space, ranking as the fourth-largest DeFi protocol by total value locked (TVL), with nearly $10 billion in assets under management, according to DefiLlama. Liquid restaking allows users to take tokens that are already staked with validators and use them to secure additional protocols, creating a more efficient and productive use of staked assets.

The protocol has been active since 2023, generating nearly $60 million in cumulative income from fees and other revenue streams. Liquid restaking tokens (LRTs), which represent a tradable claim on a pool of restaked assets, have become increasingly popular, contributing to the growing TVL across DeFi protocols.

Ether.Fi competes with other prominent LRT protocols such as EigenLayer, Renzo, and Kelp. EigenLayer, the leading protocol in this space, boasts a TVL of around $18.5 billion, while Ether.Fi has solidified its position in the top five LRT protocols. According to Kairos Research, the collective TVL for the top five LRT protocols now totals approximately 3.38 million ETH, worth around $12.5 billion.

DeFi Protocols Adapt to Share Revenue

Ether.Fi’s proposal is part of a broader trend in the DeFi space, where protocols are under growing pressure to share their revenues with tokenholders. Several projects, including Ethena, Sky (formerly Maker), and Aave, have begun piloting value-accrual mechanisms aimed at benefiting their native tokenholders.

For example, Ethena, a yield-bearing stablecoin issuer, recently announced that it would allocate a portion of its $200 million in protocol revenue to reward its tokenholders, further demonstrating the DeFi sector’s shift toward rewarding users for their participation in the ecosystem.

As Ether.Fi moves forward with its buyback proposal, the DeFi community will closely watch the outcome, as it could set a precedent for other protocols looking to share value with their users and strengthen their ecosystems.