In the past 40 days, the supply of USDe on Ethena has experienced significant growth, soaring from around $242 million on February 18th to $1.376 billion on March 28th, marking a staggering increase of 468.79%. This surge followed a $14 million strategic funding round led by top investors on February 16th, bringing the total fundraising to $300 million. Not only did Ethena announce a large-scale airdrop plan, scheduled to distribute USDe tokens worth $1.3 billion to users on April 2nd, but it also attracted attention from prominent figures in the crypto sphere, including Su Zhu, who noted Ethena's introduction of new capital dynamics to the market.
Additionally, renowned figure in the cryptocurrency space, Su Zhu, shared his thoughts on Ethena via social media on March 19th. He pointed out that Ethena introduces a new dynamic to the crypto market, whereby investors may reconsider their positions in conventional spot holdings and short contract arbitrage strategies when funding rates trend towards neutral. Specifically regarding Ethena, its presence involves pledging a portion of assets and converting them into USDe, potentially impacting the price volatility of Ethereum (ETH) and leading to more pronounced price corrections and faster rebounds.
In the following text, we will delve into how the influential Ethena is making waves in the blockchain sector.
Arthur Hayes and Ethena: A Serendipitous Union Amidst the Technological Zeitgeist
In 2023, inspired by Arthur Hayes's profound insights, the Ethena protocol was born, marking a significant leap forward in the realm of decentralized stablecoins. Arthur Hayes is not only a heavyweight figure in the cryptocurrency space but also a wellspring of innovative thinking. His critical reflections on cryptocurrency stablecoin systems, particularly his concerns about their excessive reliance on traditional banking systems, provided the theoretical foundation for the birth of Ethena. Ethena aims to construct a stablecoin solution independent of traditional financial systems, addressing a core issue that has long persisted in the crypto sphere — how to create a currency that is both stable and scalable in a decentralized environment.
As we step into 2024, Arthur Hayes has once again voiced his steadfast belief in Ethena, predicting its potential to surpass market leader Tether and become the largest stablecoin. This conviction is not only based on Ethena's unique technological advantages and innovative financial tools but also reflects Arthur Hayes's macroscopic perspective and profound insights into the future of decentralized finance (DeFi). The emergence of Ethena is seen as a crucial step towards maturity in the crypto space, with its offerings of "internet bonds" and synthetic dollar USDe representing a solid stride towards the future of decentralized finance.
The affinity between Arthur Hayes and Ethena not only manifests in the founding inspiration of Ethena but also in his unwavering optimism about its future development potential. Through profound criticism of the traditional financial system and forward-thinking in the cryptocurrency field, Arthur Hayes has paved a path for Ethena that combines theory with practice. It is this combination of critical thinking and innovative spirit that places Ethena at the forefront of decentralized stablecoin development, showcasing to the world a future of finance that is more free, open, and inclusive.
Ethena Airdrop Frenzy: Leading the Way in Shared Governance Token Feasts
With the Ethena protocol, a decentralized finance (DeFi) platform with a market capitalization of up to $1.3 billion, preparing to launch its ENA governance token next week, we are witnessing an important milestone in cryptocurrency token economics. By distributing ENA tokens to holders of the "synthetic dollar" USDe, Ethena not only rewards the community but also initiates a token-based decentralized governance system.
Ethena Token Distribution Strategy: Building an Ecosystem of Mutual Benefit
According to Ethena's token distribution strategy, core contributors, investors, foundations, and ecosystem development each hold a certain percentage of the total supply. Specifically:
Core contributors hold 30%, rewarding team members who make core contributions to the development of the Ethena protocol.
Investors hold 25%, representing token rights obtained by investors who support the development of the Ethena protocol.
Foundations hold 15%, which will be used to further promote the adoption of USDe, reduce the crypto world's dependence on traditional banking systems and centralized stablecoins, and support future development, risk assessment, audits, and more.
Ecosystem development holds 30%, with 5% of these tokens distributed as the first-round airdrop to users, and the remaining portion supporting various Ethena initiatives and incentive activities in the future.
In the second quarter, Ethena will launch Sats Rewards.
Following the introduction of Ethena's governance token, the "Second Quarter Activity" will be immediately initiated to further expand its token economic model. This activity will focus specifically on the development of new products supported by Bitcoin (BTC) as underlying assets. This step not only expands the growth potential of USDe but also brings Ethena greater market acceptance and application scenarios.
At the core of the second-quarter activity is Sats Rewards, aimed at rewarding users participating in the Ethena ecosystem's development. By enhancing rewards for early adopters, Ethena strengthens community engagement and a sense of belonging while also encouraging new users to join. The design of this incentive mechanism demonstrates Ethena's recognition of the importance of building a sustainable and active community.
With a carefully crafted token economic model and incentive mechanisms, Ethena is committed to building an inclusive and sustainable DeFi platform, exploring new paths for the future of decentralized finance.
Insight into Ethena: Can it operate a robust cross-chain value symbiosis?
Stablecoins are considered a fundamental financial tool not only in the cryptocurrency field but also in traditional financial markets. Historical and widely used, basis trading exploits price differences between spot and futures instruments. In the cryptocurrency market, this trading method is particularly mature, with long positions typically paying fees to shorts to maintain positions, leading to perpetual contract prices often exceeding spot prices.
Ethena, functioning as an open hedge fund, employs the aforementioned strategy and tokenizes its trading collateral into the USDe stablecoin. By shorting an equivalent amount of ETH, Ethena creates a portfolio with a delta of zero, ensuring that the net asset value remains unaffected by market fluctuations. This strategy allows Ethena to benefit from ETH staking and financing rates.
However, Ethena's model also carries potential risks such as collateral decoupling risk, uncertainty in financing rates, and counterparty risk. Especially in cases where LST collateral is mixed with regular Ether, if the collateral decouples from ETH, Ethena could suffer paper losses.
To mitigate these risks, Ethena has adopted an Over-the-Counter Escrow (OES) solution, entrusting funds to reputable third-party custodians, only mapping them to centralized exchanges for trading margin, reducing the exposure of funds being held on centralized exchanges.
Although Ethena currently only uses staked ETH as collateral, the protocol might further incorporate BTC as collateral to scale, albeit potentially diluting the returns of USDe.
So, what's the worst-case scenario for Ethena? Besides standard crypto risks like team scams and smart contract vulnerabilities, specific risks for Ethena include exchange bankruptcies and liquidation of unsettled hedging positions. To address these situations, Ethena settles PnL daily, reducing capital exposure. If exchanges or OES custodians go bankrupt, leveraging other accounts may be necessary to maintain portfolio delta neutrality.
Lastly, we have to ask, amidst these risks, can Ethena continue to deliver its enticing annualized yield? Risk and economic returns in the crypto world always run parallel, don't they?
