Decentralized finance (DeFi) protocol Ether.Fi has proposed allocating a portion of protocol revenues to buy back native ETHFI tokens and distribute them to stakers, according to a post in Ether.Fi’s community governance forum.

Ether.Fi has proposed “allocating 5% of protocol revenue to buy ETHFI and distribute it to ETHFI stakers as a reward” in a bid to “enhance the utility of ETHFI, strengthen its market, and align user incentives with the growth of the Ether.Fi ecosystem,” the Dec. 16 post said.

The Ether.Fi team described the 5% revenue allocation as a “starting point” and noted that rewards would initially only be available to tokenholders who have staked ETHFI for at least one month.

The proposal will be decided on by the end of this week following a tokenholder vote, according to the post. Ether.Fi already uses protocol revenues to buy back tokens from ETHFI’s primary liquidity pool.

Ether.Fi pitches buybacks for ETHFI stakers image 0

Ether.fi fees and revenue. Source: DefiLlama

Related: DeFi TVL nears 2021 highs on liquid restaking, Bitcoin L2s

Liquid restaking tokens

Ether.Fi, a liquid restaking protocol, is the fourth most popular DeFi protocol, with nearly $10 billion in total value locked (TVL), according to DefiLlama.

Restaking involves taking a token that has already been staked — posted as collateral with a validator in exchange for rewards — and using it to secure other protocols simultaneously. 

Liquid restaking tokens (LRTs) represent a tradable claim on a pool of restaked assets.

Since launching in 2023, Ether.Fi has earned cumulative income from fees and other revenue sources of nearly $60 million, according to DefiLlama.

Aggregate TVL in DeFi is approaching 2021 all-time highs, partly due to the popularity of restaking and LRT protocols .

EigenLayer is the most popular restaking protocol, with roughly $18.5 billion in TVL. Ether.Fi competes with LRT protocols including Renzo and Kelp.

“Overall [Ether] TVL for the top 5 LRTs currently sits at around 3.38m ETH, worth around $12.5bn,” Kairos Research said in a December note.

DeFi protocols are under increasing pressure to provide tokenholders with a share of protocol revenues, with projects including Ethena, Sky (formerly Maker) and Aave piloting value-accrual mechanisms for their native tokens.

On Nov. 15, Ethena, a yield-bearing stablecoin issuer, agreed to share a portion of its roughly $200 million in protocol revenues with tokenholders.

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