Ethena: How Ambitious Is the Crypto-Native Dollar?

Why Ethena Became Popular

Traditional stablecoins (USDC, USDT) rely on bank accounts and fiat reserves, which come with centralization risks. Ethena aims to completely change this—by using purely crypto assets + derivatives hedging to create a truly decentralized stablecoin.

This is not just hype. Data shows that USDe has already been deployed on 24 blockchains, and sUSDe offered a 19% APY in 2024. The market is betting on a vision: that future internet finance might no longer depend on traditional banking systems.

How to Use USDe and sUSDe

The core mechanism is simple:

• USDe = BTC/ETH and other assets + inverse futures contracts
• Achieve price stability by delta hedging (buy spot, sell futures)
• In terms of assets, Ethena holds BTC/ETH and simultaneously shorts equivalent positions in the derivatives market

Where does the money come from:

• Futures funding rate income
• Basis trading profits
• Liquidity mining

All these earnings are distributed to sUSDe holders. Simply put, you deposit USDe to get sUSDe, and you can earn protocol income—no need to leverage trade on your own.

ENA Token’s Potential

ENA is the governance token, with a total supply of 15 billion. Distribution is as follows:

• Core team 30% (1-year lockup + 3-year linear vesting)
• Ecosystem development 30%
• Investors and foundation hold respective proportions

From an investment perspective, the value of ENA depends on:

1. USDe scale growth—the greater the issuance, the higher the protocol revenue, and the stronger the valuation support for ENA
2. Market adoption—whether it can capture stablecoin market share, with competitors including USDC, USDT, and MakerDAO’s DAI
3. On-chain network effects—the more integrated DeFi applications, the stickier the ecosystem
4. Regulatory outlook—if policies become favorable toward decentralized stablecoins, it could be a black swan event

Where Are the Risks

Derivatives risk: The whole model relies on futures market liquidity and stable funding rates. If the market crashes or there’s a liquidation risk in futures, the hedge could fail.

Competitive pressure: USDC is backed by Circle and Coinbase, and USDT is the market leader. Ethena needs a killer application to break through.

Regulatory uncertainty: Synthetic stablecoins are a new species, and regulatory attitudes vary by country. If regulations tighten, it could be devastating.

Scale trap: A 19% APY sounds attractive, but once USDe’s scale explodes, the yield will be diluted—this is the fate of all high-yield projects.

Is the Underlying Logic Worth Watching?

It is. Ethena represents a direction in stablecoin evolution—from fiat-backed to algorithm-backed. Although the risks are high, if it succeeds, its impact could surpass that of a single exchange.

For retail users, sUSDe’s 19% APY is indeed attractive in the current environment, but be clear—this is yield, not arbitrage. Principal risk is always present. For ENA token investors, this is more like betting on the long-term growth of an ecosystem, requiring strong risk tolerance.

Currently, Ethena is still in its early growth phase, and USDe’s market cap is still small compared to USDT/USDC. But if you look at a 3-5 year horizon, it’s worth tracking.