Ethena USD (USDe) is a synthetic dollar protocol built on the Ethereum blockchain. It aims to provide a fully-backed on-chain stablecoin. Ethena's USDe is not the same as a fiat stablecoin like USDC or USDT. USDe utilizes a unique strategy to keep its peg to the US dollar: Ethereum liquid staking tokens (LST) hedged on perpetual futures by shorting an equivalent amount of ETH. This means that the risks of interacting with USDe are inherently different than they are with other stablecoins.
History
Ethena is a synthetic dollar protocol on Ethereum, introducing a crypto-native currency, USDe, and a global dollar savings asset, sUSDe (staked USDe). Founded by Guy Young in July 2023, Ethena launched the USDe token on February 19, 2024. Simultaneously, Ethena began its Shard Campaign, set to conclude when USDe's supply reached 1 billion tokens or after three months.
A week later, with the start of Epoch 2 of the Shard Campaign, USDe’s supply quickly grew to 600 million. Through ongoing integrations and multiplier adjustments, the target of 1 billion tokens was achieved by March 13, 2024, surpassing expectations. Yet, the Shard Campaign continued until April 1, 2024. On the following day, Ethena introduced the ENA governance token, enabling tokenholders to participate in decision-making.
On April 2, 2024, the Sats Campaign started, scheduled to end in five months or when USDe’s supply reaches 5 billion, whichever comes first (at time of writing, USDe supply is at 4.7 billion). On April 4, 2024, Ethena added BTC as collateral for USDe, supporting its full operation. Ethena is dedicated to transparency, offering public metrics on collateral, swaps, staking, solvency, and yields.
What Makes Ethena USD Unique
USDe maintains its peg through a delta-neutral hedging strategy. This strategy involves using a specific type of financial contract called perpetual futures. Traders use these contracts to bet that the price of Ethereum (ETH) will go down, which is known as "shorting." At the same time, they have Ethereum set aside as collateral. The main goal of this method is to keep the value stable and close to $1, countering any large price changes in the market. This helps maintain stability even when the price of Ethereum fluctuates.
Unlike many stablecoins that offer little to no yield, USDe generates returns from its hedging activities and staked Ethereum rewards. This yield is distributed to USDe holders, providing a passive income stream.
Another major difference is Ethena offers native staking of their USDe tokens. When natively staking your USDe on Ethena, you receive sUSDe which can be redeemed for your staked USDe plus rewards.
By relying on decentralized protocols and derivatives markets, Ethena USD aims to be more scalable and resistant to censorship than traditional fiat-backed stablecoins.
Ethena Labs emphasizes transparency, providing on-chain data and audits to ensure users can verify the protocol's operations and reserves.
How Ethena USD is Used
USDe offers a stable store of value, protecting against the volatility of other non-stablecoin cryptocurrencies. In addition, through its protocol, holders can earn passive rewards, combining stability with yields.
In decentralized finance (DeFi), USDe can serve as collateral, enabling various financial activities like lending and borrowing on dApps like Aave. It is also easily tradable on exchanges like Uniswap or 1inch, and can be used for payments and remittances, providing an efficient way to transfer value.
You can buy, hold, and bridge USDe in the MEW Mobile app if you prefer using mobile, or by downloading the Enkrypt browser extension if you prefer using a web browser.
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