🌟 Ethena Labs Opens Public Access to its Ether-Based Synthetic Dollar USDe, Raises $14 Million from PayPal Ventures and Franklin Templeton 🚀

Ethena's USDe, also known as the Synthetic Dollar, operates separately from the traditional financial system and strives to provide non-US investors with a US dollar-based savings opportunity with potential returns.

Ethena, a company that issues a crypto dollar based on Ether, has raised $14 million in funding and made it available to the public.

Ethena Labs, the innovative player in the blockchain technology and financial field, has made waves in the crypto community by opening public access to its revolutionary ether-based synthetic dollar USDe. This move comes after the company successfully raised an impressive $14 million in funding, with notable investors including PayPal Ventures and asset manager Franklin Templeton.

💰 Riding the Crypto Wave: Ethena Raises $20 Million

This recent investment round, which also saw participation from previous backers Dragonfly and Maelstrom (the family office of BitMex founder Arthur Hayes), brings Ethena’s total venture capital funding to an impressive $20 million. Other investors who joined the round include Avon Ventures (an affiliated venture fund of FMR, parent company of Fidelity Investments), and major exchanges such as Bybit, OKX, Deribit, and Gemini.

Ethena, while referring to its USDe token as a synthetic dollar rather than a stablecoin, is undoubtedly keen to make its mark on the $130 billion stablecoin market. Stablecoins, which are blockchain-based representations of cash, have become an integral part of the crypto economy, providing liquidity, value transfers, and a safe haven for economies with fragile banking systems and fiat currencies.

💡 How Does USDe Work?

USDe, the brainchild of Ethena Labs, aims to provide a dollar-denominated savings vehicle with yield for international investors outside the United States. What sets USDe apart is its independence from the traditional financial system and banking rails.

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The value of USDe is backed by liquid staking tokens, including Lido’s stETH, which are paired with an equal value of short ETH perpetual futures positions on derivatives exchanges. This unique pairing aims to maintain a “rough target” price of $1 for USDe, replicating a cash and carry trade ━ a trade that bets on the decline of price. By maintaining a delta-neutral investment position, changes in the price of ether are effectively offset, ensuring stability for USDe.

USDe holders can create or mint tokens by depositing stablecoins like Tether (USDT), USDC, DAI, and others on the Ethena protocol. By locking or staking their USDe, users gain access to sUSDe and receive a yield generated from the native ETH staking yield and the futures funding rate.

🎢 Stablecoin Yields: Lessons from the Past

The mention of high stablecoin yields may give pause to crypto investors who remember the notorious collapse of Terra-Luna’s algorithmic stablecoin in May 2022. Terra’s UST token once paid out an eye-popping yield of nearly 20% but ultimately suffered a hyperinflationary death spiral when investors withdrew en masse, causing a catastrophic loss of confidence.

However, Ethena’s CEO Guy Young points out the critical differences between USDe and Terra-Luna’s failed stablecoin. According to Young, USDe’s yield always depends on the prevailing market environment. Unlike Terra-Luna, which had a flawed stablecoin design and artificially set yields funded by developer firm Terraform’s treasury, USDe’s cash-and-carry trade is based on solid market principles.

In times of changing market conditions, investors who wish to exit their USDe positions can unstake tokens and withdraw their holdings from Ethena after a seven-day waiting period. This process effectively unwinds the underlying cash-and-carry trade by selling staked ETH and covering the short futures position.

⚠️ Risks and Rewards: USDe’s Complex Design

While Ethena prides itself on being independent from the traditional banking system, it’s important to note that USDe is still exposed to certain counterparty risks. Partner liquid staking protocols and derivatives exchanges carry inherent risks that investors should be aware of. Austin Campbell, former head of portfolio management at stablecoin issuer Paxos, highlighted this point on Twitter, emphasizing the potential liquidity risks during times of crisis.

The team at Ethena wants to ensure transparency and clarity, which is why they chose to market USDe as a “synthetic dollar” instead of a stablecoin. Recognizing its complex structured financial product status, the team is focused on providing a viable alternative within the stablecoin ecosystem.

Despite the risks, Ethena’s USDe has already attracted over $220 million in deposits since opening access to early investors in December 2021, as reported by DefiLlama data. Prominent investor Arthur Hayes even expressed his confidence in Ethena, predicting that it will soon become a credible challenger to industry giant Tether.

🔮 The Future of USDe: Disrupting the Stablecoin Ecosystem

Looking ahead, the future appears promising for Ethena and its groundbreaking USDe token. With the recent surge in demand for stablecoins, Ethena’s timing couldn’t be better. By offering a crypto-native synthetic dollar alternative, Ethena is poised to become a major player in the stablecoin ecosystem.

As the crypto industry continues to evolve, it’s clear that traditional stablecoins backed by centralized collaterals are no longer the only option. Investors are hungry for innovative solutions that offer more transparency, independence, and sustainable yield opportunities. USDe is set to meet these demands head-on, providing investors with a safe and lucrative investment avenue.

📚 References and Further Reading: 1. The Tether Killer? A True Stablecoin Would Enhance Banking and Crypto 2. New Zealand Central Bank Governor Issues Warning About Stablecoins 3. Nigeria’s Central Bank Fleshes Out New Rule Allowing Crypto Firms Access to Bank Accounts 4. The Spectacular Implosion of Terra-Luna’s Algorithmic Stablecoin 5. DefiLlama Data: Ethena’s USDe Deposits

🤝 What are your thoughts on Ethena’s USDe? Do you believe it has the potential to disrupt the stablecoin ecosystem? Share your opinions with us in the comments below! And don’t forget to spread the word about this exciting development by sharing this article on your favorite social media platforms. Let’s keep the conversation going! 💬💪

Edited by Sheldon Reback.

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