[Temperature Check] Activating the ONDO Fee Switch — Automated, Programmatic Buyback-and-Burn

[songjuhyun]

TL;DR

This is a temperature check, not a binding on-chain proposal. The goal is to gauge community sentiment on activating a “fee switch” that automatically routes a portion of Ondo protocol revenue into a programmatic, rule-based buyback-and-burn of ONDO — executed by smart contract with no ongoing discretionary management. I’d like feedback on whether we should do this, and if so, what percentage of revenue the community would support, before anything moves on-chain.

Motivation

Ondo has grown into one of the largest RWA protocols, with substantial and growing protocol revenue. Today, ONDO is purely a governance token with no link between protocol success and token value. Many holders feel that link should exist. An automated buyback-and-burn accrues value to ONDO by permanently reducing supply — without any direct payment or distribution to holders, and without ongoing managerial discretion. To keep it sustainable, this would start at a conservative 20% of revenue and scale up to 40% over time as the mechanism proves out.

Why an automated, programmatic burn

Two design choices keep this as low-risk as possible:

1. No direct payments to holders. Unlike dividend-style distribution or lock-and-earn staking — where holders directly receive a return — burning sends nothing to holders. Value accrues only indirectly through reduced supply.
2. 2. No discretionary management. The buyback-and-burn runs automatically by smart contract on fixed, pre-agreed rules (think EIP-1559-style base-fee burn), not a team manually deciding when to prop up the price.
3. Together these make the structure more sustainable and defensible than direct distribution, staking rewards, or a discretionary, team-operated buyback. (Note: lower risk is not zero risk; the Foundation’s legal review of the final structure is still important.)

Proposal (for discussion)

1. Activate a fee switch that allocates a share of net protocol revenue to a fully automated, on-chain buyback-and-burn of ONDO.
2. 2. Percentage (phased): Start conservative at 20% of net protocol revenue, then scale up to 40% over time as the mechanism proves stable and sustainable. (Exact ramp-up open to debate.)
   3. 3. Rules-based execution: schedule and sizing fixed in code (continuous or fixed-interval), neutral TWAP execution to avoid market-manipulation concerns, every buyback and burn fully verifiable on-chain, and no manual/discretionary intervention by any team.
      4. 4. Implementation: The policy direction would be decided by this community. Actual smart-contract implementation would be developed by the Ondo Foundation / core contributors and ratified in a later binding on-chain vote.

      5. Key considerations / open questions

   4. • Sustainability: What percentage leaves enough revenue for protocol growth, security, and treasury runway?
      • • Execution integrity: Confirming the burn is fully automated, transparent, and non-manipulative (neutral TWAP, published rules, on-chain proof).
        • • Regulatory: Even with an automated burn, the Foundation’s legal review of the final structure is valuable.
          • • Timing: Is now the right time, or should we wait for a specific revenue/maturity milestone?

          • Why I’m raising this

        • I’m posting on behalf of a community of ~1,000 ONDO holders interested in this topic. We want to do this the right way — building consensus here first, rather than rushing an under-supported proposal on-chain.

      • Next steps

   5. If there’s meaningful support, the next step would be to refine the parameters based on this discussion, then (with sufficient delegated voting power) move to a formal on-chain proposal via Tally.
3. Please share: Do you support activating a fee switch? What percentage would you back? What concerns should we address first?

[olympus.mons.ter]

I support ONDO Fee Switch.

I think 22% would be better.

[Kangyi]

I know we need 100M token to propose. And only a few of insititutions have this power. I would like to konw how we realize this together.

[Kangyi]

1. Create a formal ONDO value-accrual charter

Ondo should publish a transparent policy that explains exactly how ecosystem growth benefits ONDO holders. This does not need to be a dividend model. It can be a structured capital-allocation framework:

Source of value	Allocation proposal
Ondo Stocks platform fees	10–25% to ONDO buyback / lockup pool
Ondo Perps / Network fees	20–40% to stakers, validators, watchers
API / institutional integration fees	Part to treasury, part to ONDO buyback
Ecosystem incentives	Shift from pure emissions to lock-based rewards
Treasury yield / surplus	Governance-approved reserve, grants, buyback, or insurance

This would help investors model ONDO like a real ecosystem asset rather than a speculative RWA proxy. The policy should report quarterly: protocol fees, treasury balance, ONDO bought/locked/burned, token emissions, circulating supply, and product TVL.

2. Use ONDO staking for Ondo Network security

This is the strongest long-term value-capture route.

Ondo recently reframed Ondo Chain into Ondo Network, a high-performance infrastructure layer for applications such as Ondo Perps, spot markets, structured products, lending markets, and settlement rails. Ondo also said the system could evolve toward independent “watchers” that replay activity and challenge invalid state transitions.

Proposal: require ONDO staking for key network roles:

Role	ONDO utility
Watchers / verifiers	Stake ONDO, earn fees, face slashing
App operators	Stake ONDO to deploy or access premium infrastructure
Market makers	Stake ONDO for fee tiers and collateral efficiency
Institutional gateways	Stake ONDO for higher API limits and settlement privileges

This creates real demand + long-term lockup + security utility. It is better than simple “hold to earn” because the token becomes part of the infrastructure’s risk and trust model.

3. Introduce fee credits instead of direct revenue sharing

Direct revenue sharing can create securities-law risk, especially because Ondo’s tokenized assets have explicit regulatory restrictions and are not registered under U.S. securities laws.

A safer value-capture mechanism may be fee credits:

User type	ONDO-linked benefit
Retail / qualified users	Lower mint/redeem spreads
Large traders	Lower Ondo Stocks trading fees
API partners	Lower API and quote-generation costs
Market makers	Better fee tier and rebate tier
DeFi protocols	Lower integration costs if they stake ONDO

This avoids a pure “dividend token” design while still creating economic demand. For example, a broker, wallet, fintech app, or market maker using Ondo Stocks APIs could lock ONDO to receive better pricing or higher throughput. Ondo’s API docs already show that Ondo Stocks supports REST and streaming APIs for wallets, exchanges, and fintech integrations.

4. Launch veONDO: lock-weighted governance and incentive routing

A veONDO model would reward long-term holders without simply printing emissions.

Mechanism:

Lock duration	Voting power multiplier
3 months	1.0x
1 year	2.0x
2 years	3.0x
4 years	4.0x

veONDO holders could vote on:

Governance area	Why it matters
Ecosystem rewards	Directs ONDO incentives to productive liquidity
Chain / network deployments	Prioritizes Solana, Ethereum, BNB Chain, etc.
Product integrations	Chooses wallets, brokers, DeFi partners
Treasury allocation	Grants, buybacks, insurance fund, liquidity support
Risk parameters	Collateral ratios, market-maker limits, reserve policies

This would turn governance into a real economic coordination layer. ONDO already has governance lineage through Ondo DAO and Flux Finance; early materials described ONDO holders as able to control emissions and govern DAO products.

5. Build an ONDO-backed insurance / risk reserve

Ondo’s biggest institutional selling point is trust. So ONDO should capture value by helping insure the ecosystem.

Proposal:

Component	Design
Insurance reserve	Funded by a portion of protocol fees
ONDO staking	Stakers underwrite defined operational risks
Slashing	Applied only for clearly defined failures
Rewards	Paid from insurance premiums / network fees
Coverage	Smart-contract, oracle, settlement, or operational incidents

This creates a stronger institutional story: ONDO is not only a governance token; it helps secure the reliability of tokenized finance infrastructure.

6. Use buyback-and-lock, not only buyback-and-burn

A simple burn can pump narrative, but it may not build long-term ecosystem strength. A better model is:

Protocol surplus → market buyback → DAO treasury lock → strategic use.

The bought ONDO could be:

Use	Benefit
Locked in treasury	Reduces liquid float
Used for grants	Funds ecosystem growth
Paired as liquidity	Improves market depth
Allocated to insurance reserve	Strengthens trust
Burned only when surplus is high	Adds scarcity without weakening treasury

This would help offset the upcoming unlock pressure. DefiLlama shows a major ONDO unlock scheduled for January 17, 2027, equal to 17.1% of supply and about 35% of float, with only 48.70% unlocked currently.

7. Convert future unlocks into optional long-term lockups

This is important before the 2027 unlock.

Instead of allowing all unlocked tokens to become liquid immediately, Ondo could offer a voluntary conversion:

Option	Holder benefit	Ecosystem benefit
Normal unlock	Full liquidity	No float control
1-year lock	Bonus governance power	Lower sell pressure
2-year lock	Fee-credit multiplier	Stronger retention
4-year lock	Maximum veONDO power	Deep supply sink

This would not remove unlock risk completely, but it would reduce market fear and signal insider / ecosystem alignment.

8. Make ONDO useful inside Ondo Perps

Ondo Network’s first application is Ondo Perps, which Ondo describes as a professional-grade perpetual futures platform with native access to tokenized RWAs as collateral.

ONDO should be integrated carefully:

Mechanism	Recommended design
Trading fee discount	Based on staked ONDO tier
Market-maker tiering	Require ONDO lock for top rebates
Insurance contribution	Part of perps fees buys/locks ONDO
Governance	veONDO votes on risk parameters
Collateral	Allow only staked ONDO with conservative haircut

I would avoid making raw ONDO a major collateral asset too early because it is volatile. But staked ONDO could support fee tiers, governance, and insurance.

9. Create institutional access tiers tied to ONDO locking

Ondo’s business is increasingly B2B/B2B2C: exchanges, wallets, fintechs, brokers, custodians, and DeFi protocols. ONDO can become an access key.

Example:

Tier	ONDO requirement	Benefit
Standard	No lock	Basic API access
Partner	250k ONDO locked	Higher API limits
Market maker	1M ONDO locked	Better spreads / rebates
Strategic partner	5M+ ONDO locked	Governance seat / launch priority

This creates structural demand from serious ecosystem participants, not only retail holders.

10. Activate governance with a quarterly proposal cycle

Ondo should create predictable governance cadence:

Quarter	Required proposal type
Q1	Treasury and reserve report
Q2	Ecosystem incentive allocation
Q3	Product / chain expansion vote
Q4	Value-accrual parameter review

This matters because inactive governance weakens the token thesis. The governance token needs recurring decisions that actually affect capital allocation, product expansion, and incentive routing.

My recommended priority order

Priority	Proposal	Impact	Regulatory risk
1	ONDO staking for Ondo Network watchers/verifiers	Very high	Medium
2	Fee credits for staked / locked ONDO	High	Low–medium
3	veONDO lock-weighted governance	High	Low
4	Buyback-and-lock policy	High	Medium
5	Institutional access tiers	Medium–high	Low
6	Insurance / risk reserve	Medium–high	Medium
7	Direct revenue sharing	Very high	High

My proposal would be this combined model:

Stake ONDO → receive veONDO → gain governance power + fee credits + network-role eligibility → protocol surplus buys and locks ONDO → stakers secure Ondo Network and insurance reserves.

[jorge]

Binance does 20% burn, Hype does like 99%, why not go somewhere in the middle

[Pjsboa]

They need a fee switch otherwise there not any valu to coin - people will dump it.