Ethena Labs, a stablecoin project that recently completed a strategic round of funding with a valuation of $300 million, announced the launch of its mainnet yesterday. Alongside the mainnet launch, Ethena Labs also introduced a points campaign called “Shard Campaign” to attract users to participate in the protocol and earn potential airdrops.
Ethena is a stablecoin project that focuses on “Delta Neutral.” The team behind Ethena Labs completed a strategic round of funding worth $14 million at a valuation of $300 million on February 16th, led by Dragonfly and BitMEX founder Arthur Hayes’ family office, Maelstrom. Additionally, Ethena Labs raised $6.5 million in a seed round last July, with Dragonfly leading the investment, as well as participation from Deribit, Bybit, OKX, Gemini, Huobi, and Arthur Hayes.
The stablecoin USDe, operated by Ethena, achieves its value stability through Ethereum collateralization and Delta hedging. Delta hedging is a financial strategy used to reduce or eliminate the impact of asset price fluctuations on the value of a portfolio. In the case of USDe, it means that if the value of the collateral decreases, the system will use derivative trading to protect its value and ensure the stability of USDe reserves.
To put it simply, when a user deposits approximately $100 worth of stETH, approximately 100 USDe will be minted after deducting the cost of executing the hedge. At the same time, Ethena Labs will use these stETH as collateral and open corresponding short-term perpetual contract positions on derivative exchanges to achieve hedging and ensure the stability of asset value.
It is worth noting that Ethena Labs uses MPA custody services for collateralization, and these stETH are held by settlement service providers outside of exchanges, reducing the specific risks associated with exchanges, such as hacking or closure.
As of the writing of this article, Ethena Labs’ mainnet has been launched, and the total locked asset value has reached $280 million. According to data from the official website, staking USDe will yield a return of 27.6%. This yield rate is quite attractive for a stablecoin. But where do these returns come from?
In fact, the Delta hedging mechanism of the protocol itself provides two inherent sources of income for USDe:
– Passive income from staking assets such as stETH (measured in ETH).
– Funding rates or spreads from perpetual contract positions.
In other words, USDe’s income comes from “staking rate + leverage demand in the market.” Both income sources are variable and can be further amplified during a bull market. Additionally, only those who stake USDe can receive rewards, so not all users will stake USDe, increasing the rewards for stakers.
However, you may wonder what happens if the funding rate remains negative for a long time during a bear market, making the passive income from staking insufficient to cover the losses from the funding rate. Founder Leptokurtic previously published a series of tweets on X discussing the sustainability conditions of USDe. Interested readers can refer to those tweets.
Currently, Ethena is conducting the “Shard Campaign” to encourage users to participate in the protocol and earn points, which can be redeemed for token airdrops in the future. The earlier users participate, the more points they can earn. (If you find this article helpful, please use this invitation link). The campaign consists of three tasks:
1. Provide liquidity to the USDe trading pair on Curve and lock LP tokens in Ethena Labs’ contract. However, it is worth noting that LP tokens can only be unlocked after a 21-day waiting period, and currently, all liquidity pools have reached their lock-up limits, so participation may require some waiting.
2. Buy and hold USDe on the Ethena platform, a simple and easy process.
3. Stake USDe in Ethena (requires a 7-day waiting period for unlocking) to earn a 27.6% annualized return and accumulate points.
In the latest 15 Request for Startups (RFS) released by Y Combinator, “Stablecoin Finance” is also included, indicating that the stablecoin race still has potential and room for development. Compared to mainstream centralized stablecoins (USDT, USDC) and overcollateralized stablecoins (DAI), USDe has unique mechanisms and advantages, making it promising for the future.
However, it should be emphasized that USDe itself is not completely risk-free. The protocol carries various risks, including smart contract risk, external platform risk, liquidity risk, custody risk, and counterparty risk. Although the development team is aware of these risks and actively working on improving or diversifying them, users are still advised not to underestimate them and avoid over-investment.
(This article is authorized for reposting from GT Radar)
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