Name of the Proposal: Programmatic Protocol Fee Re-Routing
Status: Draft
References:
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Drift Constitution: GitHub
Abstract
This proposal seeks to establish a capital-efficient fee distribution structure designed to drive ecosystem growth. DIP-9(draft) proposes using 100% of “excess fees”, as defined in this proposal, toward programmatic acquisition of DRIFT tokens. Acquired tokens will be sent to the DAO treasury. Use of the tokens will be at the discretion of the DAO via future proposals. The goal of the proposal is to make efficient use of protocol-owned funds by directing protocol funds toward DRIFT acquisition in order to encourage further adoption and growth of the broader Drift ecosystem.
Context
Under DIP-8, trading fees are currently distributed according to the following split: 10% to the Insurance Fund, 10% to the upcoming Drift Liquidity Pool (DLP), and 80% to the protocol-owned holdings. The proposal’s content focuses on use of the 80% directed towards protocol holdings.
Previous proposals, such as DIP-4, demonstrated that buybacks can be an effective tool and executed effectively. The proposal showed that allocation of protocol revenues to the DRIFT token is both feasible and value-accretive. DIP-4 spent $1,095,127 to acquire 2,550,103 DRIFT at an average price of $0.4294 per token. One can view previous community discussion around DRIFT acquisition here: Link DIP-9(draft) aims to expand on the success of DIP-4 by introducing a framework for programmatic DRIFT acquisition, further strengthening the protocol and token holder relationship.
Mandate: Any future use of acquired Drift will align with the DAO’s mandate and be approved via the appropriate governance processes. The Drift Foundation is a non-profit entity responsible for the long-term growth and sustainability of the DRIFT ecosystem. Its key responsibilities include governance support, ecosystem expansion, and maintaining the DAO’s security and stability. Part of the DAO’s mandate is to fulfil its responsibilities in a capital-efficient manner, ultimately all issuance is a cost and it is crucial that for the foundation to be net positive to the ecosystem so it is important that it acknowledges that and prioritises capital-efficiency in operations.
Reasoning
Drift Protocol is a core pillar of Solana DeFi with multiple market-leading products (Perps, Borrow Lend, Amplify and Vaults). Beyond strong market positioning, Drift sits in a position of financial strength. The ecosystem overall is cashflow positive with $42mm in fees earned to date and a large community fund.
Stats:
Protocol-owned holdings: ~$42mm (Grafana )
Annual Revenue: ~$50mm ( Artemis Dashboard )
Community Allocation 43%: (Drift | Perpetual Swaps on Solana )
Drift Protocol’s financial position is robust, with sufficient reserves in protocol-owned holdings. As a result, additional reinvestment into these holdings likely is not the most efficient use of new fee revenue. DIP-9(draft) proposes that directing excess fees towards acquisition of DRIFT tokens is a more efficient use of funds as it strengthens alignment between the token and the ecosystem and gives the protocol increased upside in potential future growth. Excess fees are defined as fees allocated to protocol-owned holdings less any future proposed use cases. At the time of this proposal 100% of fees directed towards protocol-owned holdings would be considered “excess fees” and directed towards programmatic acquisition of Drift.
By allocating excess fees toward programmatic DRIFT acquisitions, DIP-9(draft) directly links protocol revenues to token value. This mechanism strengthens tokenholder confidence, compounds ecosystem growth, and ensures that the protocol’s long-term success accrues transparently to the community.
Proposal
100% of fees distributed to protocol-owned holdings will be routed into a buyback module that executes daily purchases of DRIFT. Execution will occur entirely on-chain. Repurchased tokens will be transferred to a DAO-controlled treasury account.
The treatment of fee allocations defined in DIP-8 will be updated only for the 80% Protocol allocation. All other fee splits remain unchanged. Read more about the reasoning behind this fee split in DIP-8.
Fees include fees generated from Drift’s multiple products. Initially fees will include net-taker trading fees, borrow fees, and liquidation fees. Inclusion and distribution of fees from additional fee sources added in the future will be at the discretion of the Security Council.
Acquisition Implementation:
Execution will be carried out by the Drift Security Council or at the delegation of the Drift Security Council beginning on a forward-looking basis from a designated future start date. Buybacks will occur daily, with transparent parameters around execution. Drift Protocol will issue a transparency dashboard to help make it easy for the community to track buyback execution.
Considerations
DIP-9(draft) will run for an initial period of one year, after which the Security Council may propose continuation or sunset.
The Security Council retains the right to adjust the structure of the program if deemed necessary for continued health of the protocol. In the case that adjustments are made the Security Council will issue a transparency statement on the discourse.
The DAO must approve any future use of repurchased DRIFT tokens through the appropriate governance processes. Incentives and grants should be evaluated through the lens of capital-efficiency: each program must attract incremental fees greater than its cost. In this way, the mechanism not only aligns the token with protocol growth but also enforces fiscal responsibility in treasury management.