Ethena (ENA)

Creator of the yield-earning stablecoin, synthetic dollar token USDe

Basics

• Based in:
• Started in / Announced on:
• Testnet release:
• Mainnet release:

Audits & Exploits

• Bug bounty program can be found [insert here].

Bugs/Exploits/Depegs

• Temporarily detached from its peg amid market declines (15-4-2024). Data reveals that the token, designed to mirror the U.S. dollar’s value, declined to $0.965 each.

Token

Token Allocation

• From Decrypt (3-4-2024):

"Airdropped 5% of the total $ENA supply to all USDe and sUSDe holders as part of its Season 2 campaign, which is set to last five months."

Update (19-6-2024):

"Ethena Labs has announced an overhaul to its tokenomics, which now requires airdrop recipients to lock up at least half of their ENA tokens or risk losing their unvested ENA tokens. The rule went into effect on June 17—several months after the April ENA airdrop. The announcement has caused the price of ENA to drop to $0.58, a decrease of 18% n the past 24 hours, as of this writing."

Utility

• ENA is the governance token of Ethena

Technology

• Whitepaper or docs can be found [insert here].
• Code can be viewed [insert here].
• Consensus mechanism:
• Algorithm:
• Virtual Machine:
• Development language used:

Transaction Details

• Capacity (TPS):
• Latency:

How it works

• From Decrypt (3-4-2024):

"The protocol's foundation is built on the minting and redeeming of USDe—a process where users convert their cryptocurrency into USDe stablecoins, aiming to maintain a stable peg to the US dollar. This process is vital for ensuring that USDe can serve as a reliable medium of exchange in the volatile crypto market. Ethena leverages Ethereum and staked Ethereum as collateral, ensuring every USDe is backed by a tangible asset. Considering the volatile nature of crypto, this system introduces several layers of risk—primarily around the protocol's reliance on the fluctuating value of Ethereum. The protocol's stability hinges on a strategy known as delta hedging—a method to reduce, or hedge, the amount of money an investment might lose due to changes in the market.

Ethena uses delta hedging to keep its USDe stablecoin's value regardless of Ethereum's price movements. If Ethereum's price goes up, the value of Ethena's Ethereum holdings increases, which is good. But to avoid risks if the price later drops, Ethena sets up special derivatives contracts that decrease in value when Ethereum's price rises—also known as short positions. This might seem like a loss, but if Ethereum's price were to drop further, these contracts should gain value, offsetting any decrease in the value of the Ethereum held.

Ethena regularly adjusts these contracts to match the current market, acting like an ever-adapting safety net to keep USDe stable." This last part is done centralized by the team. "The timing of transfers between custodians and exchanges, the need to manage relationships with multiple OES providers, and the operational overhead of coordinating across different platforms all present challenges that Ethena must navigate."

Roadmap

• Can be found [Insert link here].

Revenue

• From Onchain Times (16-7-2024):

"According to TokenTerminal, Ethena is the fifth largest revenue generating business today making $93M in annualized revenues. After accounting for costs paid out in sUSDe yield, Ethena is making $41M in earnings, making it the most profitable dapp YTD."

• Claimed it earned %5.4M in 1 week, but in reality (4-4-2024):

"They are keeping the yield from anyone holding USDe instead of sUSDe. Why does anyone hold USDe? Because they are incentivizing it with $ENA tokens. Ethena is essentially selling ENA tokens from the treasury for the yield that USDe holders would otherwise be staking for. They are dumping their ENA tokens on you and claiming it as protocol revenue."

Usage

Ethena’s USDE has been on a downward trajectory since reaching its peak market cap on July 4 2024. Back then, 3.61 billion USDE was in circulation, but since that peak, 770 million coins have been redeemed, bringing the market supply down to 2.84 billion USDE.

Projects that use or built on it

• MakerDAO is issuing $100M of DAI to farm USDe, which made Aave off board DAI.

Pros and Cons

Cons

• Is deceptive in its communication, first about funding, then about revenue. From Decrypt (3-4-2024):

"Ethena was ensnared in controversy when a February press release seemed to imply that they had raised millions from notable investors, who were later revealed to not have any involvement. In a now-deleted tweet, Ethena said the release was inaccurate, and the team later told Coindesk it was a “honest mistake.”"

Team, Funding and Partners

Team

• Full team can be found [here].
• Got praise, and perhaps support? of Arthur Hayes.

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