Ethena
Ethena is a synthetic dollar protocol built on Ethereum.
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Invest- Documentation
- Auditors
- Please see our FAQ on experienced auditors
- Website
- Token: ENA
- Tags: Basis Trading
- TVL: $11B (Rank #6)
- TVL Ranking by Basis Trading: #1
- Blockchain: Ethereum
- Chain TVL
- Ethereum: $10.99B
- Code reviewed by several experienced auditors; Spearbit, Quantstamp and code4rena
- Public team promotes accountability
- No documented protocol hacks since launch
- Latest protocol version launched in 2024; maturity over one year minimizes technical risk as smart contracts are well battle-tested
- Top 1% by total value locked reduces risk
- Multisig wallet controls protocol upgrades
- Multisig consists of at least 4 signers, which means the protocol is less susceptible to centralization risks
- Timelock is at least 48hrs, which provides users with sufficient time to exit if any malicious upgrades are approved
- Highly concentrated voting power increases risk
- Robust controls to mitigate oracle price manipulation
- sUSDe, the staked version of USDe, accrues interest over time. A 7-day unstaking queue helps prevent sudden mass redemptions during stress events, giving markets time to stabilize and allowing arbitrage to restore peg stability.
- An insurance fund covers losses from events like sustained negative funding rates, collateral depegs, or forced unwinds, smoothing returns and providing a buffer during market stress.
- Losses from collateral depreciation or funding stress are socialized across all users, discouraging first-mover advantage during redemptions.
- Collateral is diversified across ETH and BTC perpetual contracts and yield-bearing stablecoins, reducing reliance on a single market and allowing Ethena to shift yield sources when funding conditions worsen.
- Mint and redeem caps can be applied to manage liquidity during large inflows or outflows, acting as circuit breakers to limit systemic shocks.
What is Ethena
Ethena is a DeFi protocol that issues USDe, a censorship-resistant synthetic dollar backed by a diversified mix of staked ETH, BTC, and stablecoins. Peg stability is maintained through a delta-hedged strategy in perpetual futures markets, offsetting price changes in the underlying collateral with opposing derivative positions. Ethena dynamically rebalances collateral composition and hedge allocations to adapt to market conditions. Yield is generated from yield-bearing stablecoins, staking rewards from liquid staking tokens, and the funding and basis spreads earned on short perpetual positions. Historically, perpetual markets have favored positive funding rates — with longs paying shorts — creating a structural yield advantage for USDe’s hedged positions. To mitigate prolonged negative funding environments, Ethena diversifies hedges across ETH, BTC and stablecoins, maintains an insurance fund to absorb losses, and can enforce mint/redeem caps to limit sudden liquidity shocks.
What are the risks
USDe’s yield comes primarily from delta-neutral hedges in perpetual futures markets, which can be vulnerable to prolonged periods of negative funding rates. If this persists, hedging becomes a cost rather than a source of yield, potentially putting pressure on the peg. Ethena mitigates this by diversifying hedges across ETH and BTC, which have different funding rate dynamics, and by holding a significant portion of collateral in stablecoins like USDC, USDtb, and sUSDS. These stablecoins provide a more predictable source of yield and give Ethena flexibility to rebalance away from funding-rate exposure when market conditions are unfavorable. Additional risks include exchange or custodian failure for hedge positions, and a small LST allocation that carries limited slashing risk. Mint/redeem caps and the 7-day sUSDe unstaking window help reduce reflexive bank-run dynamics.
How you make money on Ethena
The simplest way to earn yield is by staking USDe on Ethena to receive sUSDe, which automatically accrues yield from the protocol’s collateral strategies. Instead of paying yield directly, the value of sUSDe increases over time as returns compound within the staking contract. You can also use USDe or sUSDe in DeFi by providing liquidity on supported pairs, earning trading fees and potential incentive rewards. Unstaking sUSDe requires a 7-day cooldown before USDe can be withdrawn, giving the protocol time to manage redemptions in an orderly way.
