Ethena Labs’ USDe has achieved astonishing momentum since it launched just 18 months ago. Since reaching $4.7 billion total value locked (TVL), USDe has become the fourth-largest stablecoin globally.
Guy Young founded USDe’s mission is to transform digital finance by developing an accessible and transparent form of currency that is universally accessible and transparent for both DeFi (decentralized financial) and CeFi (centralised financial) applications. USDe features a dollar peg, 1:1 backing ratio, and dynamic margin rate that aggregates yields from staked ETH markets with those from delta-hedged derivatives markets for maximum yield potential.
Whitelisted users depositing collateral assets are automatically whitelisted by the USDe protocol, and upon doing so it mints new tokens atomically before opening short positions with derivatives exchanges for that notional amount of the USD. This strategy, known as delta-neutral hedging, allows USDe to remain pegged to its counterpart without incurring additional costs or risk; profits from short positions offset any decline in collateral values keeping its 1:1 peg.
USDe’s unique method of hedging allows it to offer an 8% yield and provide a compelling incentive for investors to onboard new assets – particularly since these strategies can be replicated across global markets. As USDe grows, they aim to add other assets with liquid derivative markets so as to generate shorting revenue by shorting those assets.
USDe faces an ongoing challenge of maintaining its yield during market downturns, such as the recent crypto bear market that began last year. Reversals in funding rates have often caused cryptocurrency exchanges to freeze withdrawals of withdrawals created liquidity crises that destabilise stablecoins.
USDe sidesteps this risk by relying on off exchange services that store and manage assets, thus mitigating counterparty risks and decreasing volatility. Furthermore, its protocols remove the need for a central clearing house thereby increasing transparency while decreasing cost.
USDe project has attracted significant investment due to its fast-paced ecosystem, scalability and top-tier governance. Brevan Howard Digital, PayPal Ventures, Fidelity via Avon Ventures Dragonfly Capital Maelstrom led a $14 Million strategic round this week that also featured participation from BitMEX/Gemini founder Arthur Hayes’ family office as part of a $14 Million strategic round.
The USDe protocol is built on Ethereum, providing maximum transparency and decentralization throughout. Now the team is developing its next phase: an Ethereal Perpetual DEX permissioned blockchain that will attract institutional users through KYC infrastructure staking/trading solution for its USDe stablecoin.
USDe’s token, sENA, allows holders a share of its profit and allows them to vote on risk parameters. Furthermore, it plans to implement a future security model which allots a portion of protocol revenue to holders, giving them real ownership stake in the system. To learn more, listen to this week’s podcast episode on Apple Podcasts, Spotify, Overcast Pocket Casts Castbox Fountain etc.