Ethena Labs Faces Backlash Over 180M ENA Token Allocation

Ethena Labs, the organization behind the ENA and USDe tokens, faces scrutiny following revelations that 180 million ENA tokens have been allocated to sats farming, potentially diluting rewards for other participants.

The Ethena team’s action has raised questions about their ethical practices, transparency, and long-term commitment to community trust. This is a critical element for a CeDeFi (centralized decentralized finance) project, where a significant portion of operations and decisions are not fully visible to the public.

Alert: Important Notice for ENA/USDe Holders

The Ethena team is currently using 180M ENA tokens (25% of SENA supply that earns sats) to farm sats in Season 3, effectively diluting other participants’ rewards. This raises significant concerns about the team’s ethics.

A thread
— Nomad (@Nomad02887202) October 27, 2024

Coinbase Wallet Transfers Raise Questions Over Ethena’s Token Allocation and Reward System

The issue began in the beginning of October, following the distribution of 180 million ENA tokens to six separate wallets associated with Coinbase Prime Custody. This is the designated custodian for Ethena Labs and the Ethena Foundation.

Notably, Coinbase received 3 billion ENA tokens in August, well above the existing ENA circulation according to Ethena’s published vesting schedule. Observers believe this figure represents locked ENA tokens intended for the Ethena Foundation and core team members rather than circulation for general use.

As soon as sENA staking launched alongside the S2 airdrop, the Coinbase Prime Custody address transferred substantial amounts of ENA to individual wallets in a series of transactions: 30 million and 35 million on the first day, followed by 35 million, 30 million, 25 million, and 25 million over the next days. These transfers, now linked to sats farming, have positioned these wallets prominently on Ethena’s sats leaderboard.

Currently, addresses associated with Ethena rank highly, including 17th with 33.6 billion sats and 20th with 32.2 billion sats. These wallets also accumulate Ethereal points, rewards from a decentralized exchange set to launch in late 2024.

Critics Question Ethena Transparency and Fairness

Critics were quick to point out questionable ethics and raised issues of fairness in reward distribution, especially given Ethena’s previous record of sudden rule changes, as per the X post. In past seasons, some ENA holders found themselves subject to unexpected staking requirements and last-minute rule alterations, including a mandatory 50% stake during Season 1’s vesting schedule and a 30-day average holding rule for Season 2 participants. These sudden shifts, affecting potential earnings and staking commitments, have left some holders skeptical of Ethena’s consistency and transparency.

Such concerns vs. Ethena Labs are not new. As a CeDeFi project, its operations require a delicate balance between centralized decision-making and decentralized financial principles. However, the black-box nature of the project has made it challenging for holders to gain insight into how it handles funds. Ethena Labs reportedly manages a $2.6 billion user fund at present, yet few details are available regarding the exact allocation of these resources, the revenue generated, or the benefits allocated to SUSDe holders.

Ethena Labs addressed community concerns on Discord and X, confirming that no locked team or investor tokens are staked as sENA or earning Ethereal rewards. According to Ethena, all ENA tokens involved adhere to the original vesting schedule, with only unlocked foundation tokens, which are eligible but will not receive any airdrop or related rewards. To enhance transparency, the company said it plans to add a UI section showing the total sENA eligible for future airdrops, excluding any undistributed sENA in Liquifi contracts.

Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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