What is Ethena?
Ethena is a decentralized finance (DeFi) protocol built on the Ethereum blockchain, designed to offer a synthetic stablecoin called USDe. Unlike traditional stablecoins backed by fiat or other assets held by centralized custodians, USDe is backed by staked ETH and employs a delta-hedging strategy with short positions in ETH futures. This approach ensures the stability of USDe by counterbalancing the price movements of the underlying ETH collateral, thereby maintaining its peg to the US dollar.
The protocol generates yield from two primary sources: staking ETH to earn staking rewards and engaging in short positions on ETH futures to capture funding rates. This combination allows USDe holders to benefit from both staking rewards and yields from the derivatives market, providing a stable and scalable synthetic dollar that is less reliant on traditional financial systems.
Ethena also introduces sUSDe, a yield-bearing version of USDe. Stakers can earn high yields by locking USDe in the protocol's staking pool, receiving sUSDe in return. This setup has allowed Ethena to attract significant interest and capital, positioning it as a key player in the DeFi space.