ETHFI launches a $50 million buyback! Sets a $3 defense line, DAO vote passed 100%.

The liquid staking protocol Ether.fi is currently undergoing a key vote, serving as a touchstone to test the “bail-in” capability of the DeFi ecosystem. The DAO community proposal utilizes a surplus of 50 million USD from the treasury, and a buyback mechanism will be triggered if ETHFI Token falls below 3 USD. So far, the snapshot shows that the approval rate has reached 100%, and voting will end on November 4.

Trigger Mechanism for the 50 Million Dollar Buyback Plan

(Source: Ether.Fi)

The proposal put forward by the Ether.fi community will utilize the profits accumulated from protocol staking and operational income to buy back and burn ETHFI. The trigger threshold set is quite clear: when the market price falls below $3, the buyback will be executed in batches. This conditional buyback mechanism is relatively rare in the DeFi space, where most protocols either execute buybacks regularly or leave the timing to the team's discretion. Ether.fi clearly states the trigger conditions in the proposal, making the buyback behavior predictable and transparent.

A fund size of 50 million USD is considered a significant amount in DeFi protocols. This fund comes from the protocol's “bail-in” capability, which is accumulated through the fees charged for staking services and other operating income. This model indicates that Ether.fi's business model has entered a mature stage, capable of generating stable cash flow and accumulating surplus. In contrast, many DeFi protocols are still in the burn rate phase, relying on token inflation or VC financing to sustain operations.

In contrast to the current price range of $0.96 to $1.03, the market believes that this funding will form a clear price defense line. The current price is still about 200% away from the trigger line of $3, which means that the buyback mechanism will not be activated in the short term. However, the existence of this mechanism itself provides psychological support to the market, as investors know that even if the price continues to fall, there will be a buy support of $50 million near the $3 mark.

Core Elements of the Buyback Mechanism

Source of funds: Accumulated treasury surplus from protocol staking and operational income.

Trigger Condition: ETHFI token market price falls below 3 USD

Execution Method: Buy back and burn in batches to avoid a single large transaction impacting the market.

Transparency Guarantee: All transactions are completed on-chain and made public in real-time through Dune Analytics.

Historical Background: This will be the third round of repurchase, demonstrating a sustained market capitalization management strategy.

This is not Ether.fi's first move. If the proposal passes, it will be the third round of buybacks conducted by the protocol, indicating that a coherent market value management framework has been established. The effectiveness of the first two buybacks will affect the market's confidence in this proposal. If the first two buybacks successfully stabilized the price, the probability of this proposal passing and the market's reaction will be more positive.

DAO Voting and On-Chain Transparency Governance Innovation

The voting was conducted entirely through the DAO process, and all members with governance rights can participate in the decision-making. The data from the Snapshot as of the time of writing shows a support ratio of 100%, reflecting the community's strong consensus on stabilizing the coin price. This unanimous approval is not common in DAO governance, as some members usually vote against or abstain for various reasons. The 100% approval rate indicates that ETHFI holders are extremely dissatisfied with the current price and are eager for the protocol to take action to support the price.

Voting will close on November 4, which means that the proposal's passage is almost a foregone conclusion in the coming time. However, the Snapshot voting itself does not have enforceability and usually requires coordination with on-chain governance contracts to be executed. After the vote passes, the protocol team needs to translate the resolution into smart contract code, setting trigger conditions, repurchase logic, and funding scheduling mechanisms. This implementation process typically takes several weeks and may face technical and operational challenges.

Ether.fi promises that all buyback transactions will be completed on-chain and made publicly available in real-time through the Dune Analytics dashboard. The protocol team emphasizes: “We will put every buyback amount, timestamp, and transaction hash on-chain to ensure that anyone can track it.” This trustless transparency is seen as a key factor in the credibility of decentralized finance compared to traditional market buybacks.

Traditionally, stock market buyback plans are usually decided by the company's board of directors, and the execution details are kept confidential, making it difficult for investors to verify whether the company is truly repurchasing as planned. In contrast, Ether.fi's on-chain buyback allows every transaction to be verified by anyone, significantly reducing the cost of trust due to this transparency. The Dune Analytics dashboard will provide real-time data on buyback progress, average cost, number of tokens destroyed, etc., enabling the community to monitor whether the protocol is fulfilling its commitments.

Market Impact and the Challenges of DeFi Bail-in Paradigms

The repurchase behavior directly reduces the circulating supply, which theoretically helps to narrow the selling pressure and support prices. The same method has also appeared in protocols such as Aave DAO in the past, and industry cases show that if the execution speed is fast enough, it can indeed stabilize the coin price in the short term. Aave used treasury funds to repurchase and destroy AAVE tokens in 2023, and during the repurchase period, the price did see a rebound, but the long-term effect depends on whether the protocol's fundamentals improve.

At the same time, the protocol is willing to use the surplus accumulated from “bail-in” and also releases long-term bullish signals to the market. This signal transmission has an important psychological effect. When the protocol is willing to use real money for buybacks, it shows that the management has confidence in the project's future and believes that the current price is undervalued. This confidence may infect market participants, reduce panic selling, and even attract new funds to enter.

However, in the face of extreme market conditions, whether 50 million USD is sufficient to build a solid defense line remains to be seen. If selling pressure continues to expand, the subsequent strategy after the repurchase becomes the next test. Assuming ETHFI falls to 3 USD and triggers a repurchase, 50 million USD can buy approximately 16.67 million tokens. If the total circulation of ETHFI is in the hundreds of millions, this repurchase scale can only absorb about 5% of the supply. If market selling pressure comes from unlocking or large investors liquidating their positions, 50 million USD may just be a drop in the bucket.

Potential Risks of the Buyback Plan

Risk of Fund Exhaustion: If the $50 million is used up and the price remains below $3, market confidence may collapse.

Trigger Condition Controversy: Is the setting of 3 dollars reasonable, and why not 2 dollars or 4 dollars?

Timing Issues: The rhythm and timing of the buyback in batches will affect the results.

Fundamentals have not improved: Buybacks are just a short-term support, and if the protocol usage does not increase, the price is difficult to sustain.

Regulatory Uncertainty: There is controversy over whether the protocol's use of treasury funds to intervene in the market aligns with the spirit of decentralization.

This move is not only related to price protection, but also touches on multiple issues such as decentralized governance, capital mobilization, and market confidence. For Ether.fi, the 50 million USD is not just a number for price protection, but also a pressure test to see if decentralized governance can maintain resilience during a storm.

The results of the vote will be announced soon. For or against, the buyback debate has shown the market the DAO's decisiveness in capital allocation. The next chapter of the DeFi world is being written by every vote in the hands of the participants. If this buyback succeeds in stabilizing prices and rebuilding market confidence, it may provide a replicable self-help template for other DeFi protocols. On the contrary, if the buyback fails, it will raise deep questions about the effectiveness of DAO governance and the rationality of the use of treasury funds.