Name of the Proposal: Support Ongoing Protocol Development & Growth
Status: Draft
Note: This draft is built upon discussion in the post (link) and designed to ensure continued operational capacity by reimbursing a core contributor for operating expenses incurred in contribution. This proposal is narrowly scoped on expenses to make sure contributions to the Drift Ecosystem remain robust. Other elements of the linked governance discussion around other uses for fees (acquisition of DRIFT, ecosystem fund) require deeper discussion, which will continue in relevant foundation channels.
Acknowledgements: Thank you to something, jim, saxthefiver, Cepox, namanc, newton, ariel, jack, svet, Gibby, Drift, 2z7, Alphen, 404dreamt, tango55 and mhonkasalo for contributing to discussion so far.
Reference proposals:
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First Draft: Programmatic Protocol Fee Re-Routing
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Community Discussion: Exploring Future Use of Protocol Fees
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Drift Constitution: https://drift.foundation/docs
Abstract
DIP-9 establishes a sustainable fee distribution framework designed to fund ongoing protocol development to ensure continued maintenance and contribution from contributors.
To maintain robust operational capacity, DIP-9 allocates $1.5 million per month in protocol fees to Drift Labs to support operating expenditures. More information on the reasoning behind the amount and implementation is provided later in the proposal. This amount may be reviewed and adjusted over time based on changes to estimated expenses.If the proposal passes an initial payment of $9 million would be made to proactively cover the next 6 months of operating expenses for H1 of 2026. The upfront payment allows operational confidence and key senior personnel to be hired into the contributor network. Following that, distributions would be monthly pending a change via governance process.
Through this framework, DIP-9 ensures that protocol revenue is deployed efficiently by funding continued development and setting a precedent that contributors alongside protocol expenses can be reimbursed by the DAO for their contributions.
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 collected protocol fees. The proposal’s content focuses on use of the 80% directed towards collected protocol feesDrift 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 cash-flow positive with $42 million in fees earned to date and a large community fund.
Drift Labs functions as a development contributor, executing on protocol engineering, research, and administrative initiatives. Drift Labs is separate from the Drift Foundation, which functions as a non-profit steward of the ecosystem tasked with supporting governance, ecosystem expansion, and the long-term sustainability of the protocol. This relationship is defined in the Drift Constitution, linked in references above. Defining an ongoing payment to help cover operational expenses funds operations and provides community transparency.
The Drift Protocol Foundation incurs engineering infrastructure, miscellaneous subscription and gas cost for the protocol. These expenses represent services that keep the protocol operational and include but aren’t limited to AWS expenses for servers, gas costs for cranking on-chain operations and RPCs. These expenses are currently advanced by Labs although they can be paid for by any maintainer.
Mandate: 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.
Reasoning
DIP-9 proposes using the fees that are currently distributed to collected protocol fees to fund continued protocol development to ensure robustness of the protocol and encourage community contribution.
Distribution to Drift Labs: The DIP proposes allocating $1.5 million monthly from collected protocol fees to Drift Labs & other associated contributor entities to fund operations associated with protocol development as well as to cover Drift Protocol Foundation expenses which the Labs entity currently pays for.
Drift Labs Costs:
Disclaimer: These estimates are based on extrapolation of the last three months of expenses and include a buffer for expected team and operational growth. A notable line item is Gas Fees which have a higher allocated amount than expected to account for major protocol changes shipping in the coming months. If the actual number is substantially different than expected the Security Council has the flexibility to change the amount with a transparency statement posted to Discourse.
Given projections including increased gas cost and buffer for growth $1.5 million a month distributed to labs should roughly cover operating expenses. The expected increase in gas spend in order to increase the frequency of oracle updates. More frequent oracle updates improve the protocol’s ability to provide vAMM liquidity, resulting in more competitive liquidity overall and better fills for users.
The goal of programmatic distributions to Labs is to cover expenses, to strengthen the relationship between a contributor, Drift Labs, and the Drift Foundation and fund ongoing protocol development in perpetuity.
In order to succeed in a highly competitive environment, Drift needs to make some key hires and make core technical improvements to win. This budget allows the core contributors to focus on growth for H1 2026, with the view that the success of this proposal will allow a far higher return on investment to be generated on fees. The goal is to accelerate the flywheel for fees and growth during this time of market uncertainty.
Consistent contributor compensation is a foundational requirement for maintaining Drift’s competitiveness, resilience, and long-term decentralization.
Proposal
DIP-9 outlines sending $9 million USDC from collected protocol fees to Drift Labs to proactively fund 6 months of Drift Labs expenses associated with being a maintainer and contributor of Drift protocol.
The treatment of fee allocations defined in DIP-8 will remain the same. Read more about the reasoning behind this fee split in DIP-8.
Fees include inflows 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.
Direct Distribution: Estimated expenses are set at $1,500,000 monthly to fund continued development of the protocol by Drift Labs. Reasoning around the amount can be found in the Reasoning section of the proposal. The monthly distribution amount may be adjusted by the Security Council if actual expenses differ significantly from estimates. If adjustments are made there will be a transparency statement issued on Discourse. The Security Council will also have operational flexibility on methodology and timing for Direct Distribution. This flexibility is included to maximize capital efficiency and avoid shocks to the system since funds in collected protocol fees may be deployed into open positions via the vAMM or in the borrow lend.
H1 of 2026 forward looking operating costs will be covered by a proactive distribution of $9 million from collected protocol fees to Drift Labs. H2 distribution will happen monthly for an additional 18 months if no adjustments are made via governance processes.
*These are example numbers used to make a high level illustration of how fees will be allocated to different uses if DIP-9 passes.
*
The distribution to Drift Labs is treated as a cost to the Protocol. In cases where fees generated are under $1,500,000, that distribution will still be made as long as there is capital in the collected protocol fees. This structure is important to ensure the security and continued maintenance of the protocol through volatility. In the case there is not sufficient funds after fees or in collected protocol fees to cover expenses incurred via contributors the contributors can petition the DAO via the appropriate governance processes on Discourse to be reimbursed for those expenses retroactively.
Considerations
DIP-9 will run for an initial period of two years, after which the Security Council may propose continuation or sunset. Drift Labs will be required to present a set of H1 Financials as part of a transparency report to the community.
Monthly direct distribution amount can be changed by the Security Council to reflect changing Drift Labs’ funding needs. In the case that adjustments are made the Security Council will issue a transparency statement on the Discourse. 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.