Original | Odaily Planet Daily

Author | Azuma

On July 25, Beijing time, the yield-bearing stablecoin protocol Resolv officially announced that it would gradually activate the "fee switch," intending to transfer up to 10% of daily protocol revenue to the foundation's treasury for long-term value creation of the protocol and to incentivize RESOLV stakers. Specifically, Resolv plans to gradually increase the revenue transfer ratio (2.5% → 5% → 7.5% → 10%) over a four-week period from July 31 to August 21, ultimately reaching the target value of 10%.

The so-called "fee switch" is a commonly used term in DeFi protocols regarding fee distribution, which can be understood as "a built-in contract function that determines whether the protocol will distribute income to the native token." However, different protocols have varying execution models. Previously, well-known projects like Uniswap and Ethena have also discussed the "fee switch" issue but failed to activate it due to community distribution disputes and concerns about maturity.

Generally, the "fee switch" typically means a direct benefit to the protocol's native token, as it will directly amplify the token's value capture ability. Conversely, since the "fee switch" often transfers part of the income that originally belongs to protocol users to token holders, it can somewhat harm user interests. Therefore, major protocols tend to be hesitant about whether to activate the "fee switch." For example, in the case of Uniswap, liquidity providers (LPs) could originally receive the entire 0.3% trading fee income, but once the "fee switch" is activated, they have to transfer part of their earnings to UNI holders, which relatively harms LP interests.

Resolv's Positioning and Considerations

Returning to Resolv, similar to Ethena's USDe, the USR issued by Resolv is also a yield-bearing stablecoin backed by an equal amount of spot longs and contract shorts. Its income mainly comes from "staking rewards from spot longs" and "funding fee income from contract shorts."

However, compared to Ethena, Resolv has implemented some additional mechanism designs, such as introducing a risk grading mechanism through the insurance pool RLP, allowing USR to achieve a higher over-collateralization rate. Additionally, a larger proportion of liquidity derivative tokens has been integrated, resulting in higher spot staking rewards. Under Resolv's mechanism design, the protocol has achieved an annualized return of approximately 9.5% since its inception, performing quite well among emerging stablecoins.

At the end of May, Resolv officially launched its governance token RESOLV. Although Resolv has attempted to empower RESOLV through methods such as "providing high staking rewards" and "accelerating the accumulation rate of points for the second quarter airdrop," the performance of RESOLV after its launch has still been less than ideal. Perhaps in an effort to boost the token price, Resolv has turned its attention to the "fee switch."

In the official announcement regarding the activation of the "fee switch," Resolv mentioned that "the current timing and architecture are mature" — the protocol has achieved real, non-theoretical traction; it has a clear value distribution framework; and it has demonstrated resilience — thus deciding not to delay the activation of the "fee switch" any longer.

As mentioned earlier, Resolv plans to gradually increase the revenue transfer ratio over four weeks, ultimately raising it to 10%. As for the specific use of this portion of revenue, Resolv states that it "will be used to expand the value provided by Resolv to users and stakers," including: 1) supporting new integrations between DeFi, fintech, and institutional venues; 2) funding ecosystem grants and product development; 3) promoting buybacks and other token-related initiatives. Resolv also mentioned that it will launch a dedicated dashboard in the future to track the use of revenue.

Resolv has also made rough assumptions about the protocol's income distribution after the "fee switch" is activated. With the current protocol TVL of $500 million and an average yield rate of 10%, it is expected to generate $50 million in revenue annually. After the "fee switch" is activated, $45 million will still flow directly to users through product earnings, while the protocol will retain $5 million for long-term value creation.

Is RESOLV More Cost-Effective Compared to ENA?

In last week's article "Up Nearly 50% in a Week, Could ENA Be the Biggest Beta for ETH?" we analyzed the logic behind ENA's recent strong rise; afterward, Ethena launched a treasury reserve mechanism similar to "micro-strategies" around ENA, further boosting ENA's price.

As ENA's early activation has taken place, more and more people have begun to focus on Resolv, a yield-bearing stablecoin project with a similar mechanism. So, is RESOLV really more cost-effective than ENA right now?

From a static numerical perspective, Ethena's current TVL is $7.781 billion, ENA's circulating market cap (MC) is $4.016 billion (MC/TVL ratio is 0.51), and the fully diluted valuation (FDV) is $9.48 billion (FDV/TVL ratio is 1.22); currently, Resolv's TVL is $527 million, RESOLV's circulating market cap (MC) is $57.28 million (MC/TVL ratio is 0.108), and the fully diluted valuation (FDV) is $205 million (FDV/TVL ratio is 0.39).

From the comparison of MC/TVL and FDV/TVL, RESOLV indeed has a better static cost-effectiveness than ENA. Although ENA currently benefits from the buying support of the treasury reserve strategy, considering that RESOLV will activate the "fee switch" ahead of time, it is expected that both tokens' prices will receive some support in the short term.

However, objectively speaking, the current application scope and network effect of USR are far less than that of USDe. Additionally, Ethena has a second business line, USDtb, apart from USDe, so Resolv still has a significant gap compared to Ethena in terms of protocol momentum.

Another point worth noting is that Resolv's statement regarding the portion of income from the "fee switch" is that it "will be used to expand the value provided by Resolv to users and stakers," but it does not specify what proportion of the 10% income will flow to RESOLV stakers. Therefore, it is difficult to speculate on the scale of new value capture for RESOLV after the "fee switch" is activated.

In summary, considering that RESOLV's market cap is at a relatively low level, the current RESOLV is indeed a significant alternative after ENA's rise. However, the long-term development expectations of the Resolv protocol itself still need to be evaluated, and the detailed income distribution plan after the "fee switch" is activated also awaits further disclosure. Whether it is worth building a position, everyone still needs to DYOR.

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