… But what is it?

Ethena is a protocol that offers a synthetic dollar, USDe, running on the Ethereum blockchain. The main goal of USDe is to provide a decentralized, censorship-resistant, and scalable form of money, native to the cryptocurrency ecosystem. It maintains its peg to the US dollar ($1 ≈ $1) through a delta-neutral hedging strategy. It uses liquid Ethereum staking tokens like stETH as collateral while also opening short positions on ETH perpetual futures contracts. The protocol also introduces the concept of "Internet Bond" through sUSDe (staked USDe). It generates yield from two sources: ETH staking rewards and funding rates from futures positions. Exploring the mechanisms of such innovations is often facilitated by a good training platform that provides analysis and educational materials.

Learn the history of ...

Ethena Labs, the creator of USDe, was founded by Guy Young. His vision was to create a stable, scalable, and decentralized alternative to existing stablecoins. The project quickly attracted the attention of investors, raising funding from funds such as Dragonfly, Binance Labs, and figures such as Arthur Hayes. The USDe synthetic dollar was publicly launched in early 2024, after a testing phase. The launch was accompanied by a campaign to engage the community and distribute ENA governance tokens through an airdrop. It allowed early adopters to gain a stake in the protocol. Etheny's growth story, like that of other disruptive DeFi projects, is an example of dynamic innovation, often discussed during online training on emerging financial technologies.

Technological analysis

The core of Ethena's operation and the stability of the USDe is the delta-neutral hedging strategy. When users deposit collateral in the form of LST, the Ethena protocol issues USDe. At the same time, to neutralize the risk of a change in the price of ETH, the system automatically opens short positions on ETH perpetual futures contracts on centralized derivatives exchanges. This balance between a long position in spot ETH and a short position in derivatives is intended to keep the value of the hedging portfolio constant relative to ETH price movements. The profit for sUSDe holders comes from two main streams

• Staking rewards of deposited LST tokens,
• Short futures funding rates.

The governance of the protocol, including parameter changes or the introduction of new types of security, is carried out using the ENA token, which performs functions typical of governance tokens in DeFi. This model, despite innovation, carries significant risks:

• long-term negative funding rates may generate losses,
• Rapid market movements can lead to the liquidation of positions on exchanges.
• there is counterparty risk related to CEXs,
• Bugs in smart contracts cannot be ruled out. A thorough understanding of these aspects is crucial, and the materials available on the Webinar Academy platform can help with this.

… vs. other cryptocurrencies

When comparing USDe with other stablecoins, its specific features become apparent. With centralized stablecoins (USDT, USDC), backed by fiat reserves, USDe is striving for greater transparency and independence from the traditional financial system. Unlike decentralized, overcollateralized stablecoins like DAI, which requires you to lock up assets worth more than the issued tokens, USDe uses a delta-neutral strategy. This is aimed at higher capital efficiency and scalability, without relying on the traditional model of overcollateralization. Ethena differs from failed algorithmic stablecoins (e.g., UST) in that USDe is always backed by underlying assets and hedging positions. However, its complexity and dependence on the derivatives market introduces a new set of risks. The stability of the USDe does not depend on algorithmic supply and demand in the same way as it does with UST. Understanding these fundamental differences is essential for assessing the risk profile, and specialized online training often offers comparative analysis of different stablecoin models.

Analysis of the future ...

The prospects of Etheny and her synthetic dollar USDe are of keen interest in the cryptocurrency community. Potential success depends on the protocol's ability to consistently maintain USDe stability and generate an attractive and, importantly, sustainable income for sUSDe holders. If the delta-neutral mechanism proves its reliability in a variety of stressful market conditions, USDe has the potential to become a significant stablecoin, offering a crypto-native alternative to traditional solutions, especially attractive to DeFi users looking for decentralized forms of money. Possible uses for USDe include lending, trading on decentralized exchanges, and as collateral in other DeFi protocols.

However, the challenges remain significant. The risk of long-term negative funding rates is real and could undermine the viability of the system. The reliance on centralized derivatives exchanges introduces counterparty and regulatory risk. Changes in regulations or operational issues for CEXs can directly affect Etheny's ability to hedge effectively. Increasing regulatory oversight of stablecoins around the world could particularly affect innovative models like Ethena, requiring adjustments or limiting their development. For those who want to be mindful of new financial technologies, the Webinar Academy training platform offers courses to help you understand the complex market environment.

Competition in the stablecoin market is extremely intense, with many well-established players. Still, Etheny's unique approach to generating income and stability can give her a significant place in the market. Some investment platforms are already analyzing the potential of USDe and the ENA token. Long-term success will depend on effective risk management, continuous adaptation to changing conditions, and building lasting trust in the community. Further integration with other DeFi protocols and the development of user-friendly tools will also be crucial in increasing adoption. Ethena, with its synthetic dollar USDe, represents an innovative approach in DeFi, aiming to create a scalable and income-generating financial instrument. The delta-neutral hedging mechanism is unique, offering interesting prospects, but also carrying specific risks related to complexity and derivatives markets. Potential users should consider these aspects carefully. Etheny's future will depend on its ability to maintain stability, generate income and adapt to a dynamic market and regulatory environment.