Ethena: A Novel Approach to Building a Robust Stablecoin Protocol

Is Ethena a new stablecoin alternative? Let's find out together in "Ethena: A Novel Approach to Building a Robust Stablecoin Protocol." Join experts Guy Young, Founder of Ethena Labs, and Min Teo, Managing Partner & Co-founder of Ethereal Ventures, as they discuss the vision and structure behind Ethena at REDeFiNE TOMORROW 2024, the stage that will take you into the world of Crypto and to the Moon!

Creating a Crypto-Native Free from Traditional Banking

• Guy Young, founder of Ethena Labs, a decentralized application (DApp), focuses on creating a crypto-native called "USDe" and a DeFi Bond system called "Internet Bond" to develop financial solutions independent of traditional banking systems.
  
  
• Ethena aims to create a Crypto-Native Dollar, a digital currency disconnected from traditional banking, using digital assets like Stake ETH and perpetual swaps to hedge the risks in producing synthetic dollars.
  
  
• Users interact with Ethena by exchanging assets for USD Coin with the external market. Arbitrage opportunities arise when USDe prices are imbalanced, similar to the minting and redeeming process with centralized stablecoins.
  
  
• Ethena generates yield from holding Stake ETH and Basis in futures markets. Both yields can amplify returns in Crypto converted to USD and can be staked for further returns through a second token called "sUSD."

Ethena (ENA): One of the Most Popular Tokens on Ethereum

• Guy states that exchanges play a crucial role in Ethena's distribution and are its largest customers. The growth of the protocol benefits exchanges through fee collection and improved derivative markets.
  
  
• Recently, Ethena planned to bring additional protocol components on-chain, including pushing for decentralized exchanges to stimulate liquidity and facilitate efficient on-chain movement.
  
  
• Compared to Terra, he emphasized that Ethena's collateral assets are external to the system, backed 1:1 by USD with slight over-collateralization from Ethena, similar to MakerDAO but with different collateralization ratios to mitigate future risks.
  
  
• The Ethena (ENA) token has gained significant attention and become one of the most followed tokens on Ethereum. Guy shared insights into managing the token holder community, stating that Ethena treats users fairly and rewards early supporters, instilling confidence in ENA holders.

Ethena's Future Plans to Attract More Investors

• Guy discussed Ethena's future plans, including expanding USD usage in DeFi, CeFi (e.g., using USD as collateral on Bybit), and attracting traditional finance investors. USDe's yield has a negative correlation with real-world rates, making it attractive in varying interest rate environments.
  
  
• Ethena aims to build a network around the protocol with USDe as the primary asset and Gas Token. Ethena's vision is to make USDe the lifeblood for financial applications, attracting developers to build high-yield dollar systems.
  
  
• For collateral options, Ethena will focus on increasing exposure to BTC and ETH before adding other digital assets like SOL. The decision-making principle depends on the depth of derivative markets around those assets.

Summary

Guy discussed strategies for success in the crypto industry. He believes that creating unique financial products and offering unique returns are key to attracting new capital into the ecosystem instead of replicating financial products on blockchain technology.

He also identified security and KYC/AML compliance as major challenges for institutions entering DeFi. Default rates in DeFi are unacceptable at current capital levels, and the pseudonymous interactions in AMMs don't align with real-world regulations. Organizations or investors entering the crypto space should consider these factors.

Watch this session’s recording on Youtube : https://youtu.be/vbjqenohl_Q?si=Cs1uY3l19ITRMa6F