The First's transaction volume exceeded 10 million within 12 hours of its launch. What is the origin of ENA, which challenges the throne of stablecoin?

As of 12:00 (UTC+8) on April 12, the transaction volume of ENA on The First platform has reached nearly 20 million US dollars. As a brand-new project that has only been online for half a day, the market popularity of ENA is obvious. Its outstanding performance has also made it very popular in social media and discussions among industry top KOLs. As a token that has been issued for less than half a month and quickly entered the top 100 in market value and was included in The First, what magic does ENA have that can attract so many investment giants to favor it?

1. What is ENA (Ethena)?

On April 11, The First released an official announcement to list ENA (Ethena) in the spot area at 00:00 on April 12, 2024 (UTC+8). Ethena Labs is the creator of USDe, a synthetic dollar protocol built on Ethereum that provides crypto-native solutions for currencies that do not rely on the infrastructure of the traditional banking system, as well as globally accessible "savings tools" denominated in US dollars - "Internet bonds". Ethena's synthetic dollar USDe provides a crypto-native and scalable solution for funds realized through Delta hedging of pledged Ethereum collateral.

In short, Ethena is essentially an open-ended hedge fund that creates a 0-delta portfolio by providing $1.3 billion worth of USDe tokens as liquid collateral for staking ETH and short an equal amount of ETH. This configuration ensures that for every $1 change in the underlying value of Ethena's assets, the net value of its holdings fluctuates by $0, while earning income from ETH staking and funding payments for short positions. Since staking ETH can be perfectly hedged with short positions of equivalent nominal value, USDe can be minted at a 1:1 collateral ratio, making Ethena (ENA) capital efficient and comparable to stablecoins backed by US dollar assets, such as USDC and USDT, while also avoiding reliance on obtaining assets from traditional financial markets, where asset issuers must comply with regulations in the physical world. So much so that Arthur Hayes, founder of BitMEX, once wrote an article praising Ethena (ENA): "I believe Ethena can surpass Tether to become the largest stablecoin."

2. ENA Token Distribution Plan

Total supply: 15 billion Initial circulation: 14.25 Foundation: 15% Investors: 25% (25% in the first year, unlocked linearly every month thereafter) Ecological fund: 30% Core contributors: 30% (Ethena Labs team and consultants, 25% unlocked in 1 year)

The tokens of the lanuchpool on Binance are as follows: Maximum supply of tokens: 15,000,000,000 ENA; Initial circulation: 1,425,000,000 ENA (9.5% of the maximum supply of tokens); Total mining: 300,000,000 ENA (2% of the maximum supply of tokens); Mining pool: BNB mining pool can mine a total of 240,000,000 ETHFI (accounting for 80%), FDUSD mining pool can mine a total of 60,000,000 ETHFI (accounting for 20%)

3. Advantages and risks of ENA

Advantage

1. Scalability: Ethena achieves scalability by leveraging derivatives, allowing USDe to scale with high capital efficiency. The pledged ETH is perfectly hedged by an equal short position, so synthetic USD only requires 1:1 collateral.
2. Stability: Ethena ensures that the synthetic dollar value behind USDe is stable under all market conditions by performing hedging operations immediately after asset transfers.
3. Censorship resistance: Ethena strengthens its censorship resistance by storing the backing assets in a decentralized manner on-chain without trust and managing them in a decentralized liquidity venue.

risk

1. Collateral decoupling risk: Ethena uses a mixture of LST collateral and regular ether shorts, which optimizes ETH basis trading but also increases the risk of decoupling. If LST collateral is decoupled from ETH, Ethena will face book losses.
2. Financing rate risk: Although Ethena may show amazing returns in the early stages, the risk of a financing rate inversion still exists. The number of days with negative financing returns has been reduced through strategies, but future financing rate inversions may still pose a threat to Ethena.
3. Counterparty risk: Although Ethena’s design reduces the risk of deploying user collateral to centralized exchanges, if an exchange goes bankrupt, Ethena will need to adjust its hedging strategy to reduce capital exposure.
4. General crypto risks: Like many early crypto protocols, Ethena faces the risk of potential dishonesty from the team and smart contract vulnerabilities. Although Ethena's OES escrow account strategy helps reduce the use of complex smart contracts, thereby reducing the risk of hacker attacks.

4. New disputes in the stablecoin market, The First strictly selects the ecosystem

In the current crypto market, with the passage of BTC ETF and the sharp rise in Bitcoin prices, we have witnessed the continued entry of traditional financial giants such as BlackRock into the market, which has not only boosted confidence in the crypto market, but also attracted a large amount of new funds. In particular, emerging and innovative crypto products have created huge demand and opportunities.

Although there was the biggest stablecoin Tether explosion incident, ENA, as an innovative crypto product, combines the stability of stablecoins with the decentralized characteristics, providing a new option that attracts traditional and emerging investors. Stablecoins and other relatively stable, fully dollar-backed assets are one of the three more than $1 trillion opportunities in the field. This type of crypto asset may be the emerging target for a large amount of new funds in the market to seek investment, greatly satisfying the market's exploration needs for emerging and potential projects. It is precisely based on the response to market demand and considering Ethena's risk management strategy and hedging mechanism that The First may also be optimistic about its long-term stable investment potential, especially in a dynamically changing market environment. Ethena's stability and risk resistance may make it a valuable tool for hedging market volatility and uncertainty. The First chose to launch ENA based on its sensitivity to market dynamics, its emphasis on user needs, and its commitment to financial technology innovation.