Ethena is a synthetic dollar protocol built on Ethereum.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
What we like
Ethena offers users a censorship-resistant, crypto-native solution for a dollar-denominated savings instrument through its USDe token.
What we like less
USDe is exposed to ETH's price, meaning any price declines can result in funding rates for ETH short positions turning negative. Further, unstaking USDe requires waiting a 7-day exit period.
What it means for you
Staking USDe enables you to profit from a combination of Ethereum staking rewards and funding/basis spreads earned from perpetual futures contracts.
Key Metrics
  • TVL: $2.4B (Rank #11)
  • TVL Ranking by Other: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $2.36B
Risk Assessment
Watch Out
Protocol Code Quality
Protocol Maturity
  • Latest protocol version launched recently in 2024; maturity less than three months increases technical risk as smart contracts are not battle-tested
  • Top 5% 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
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • No governance token and/or contracts are fully immutable
Protocol Design
  • Protocol is susceptible to death spirals
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Basic controls in place to prevent risky borrowing
  • Basic mechanisms in place to incentivize liquidations
  • Basic method to accrue protocol reserves
Things to know about Ethena

What is Ethena

Ethena is a novel DeFi platform that introduces a unique concept called the synthetic dollar through its USDe token. Unlike traditional stablecoins, which are usually backed by dollars or other assets, USDe is supported by advanced strategies like delta-hedging and relies on Ethereum (ETH) as its core asset. This makes USDe a censorship-resistant synthetic dollar, offering innovative ways to earn yields. Ethena manages the issuance and redemption of USDe. It hedges the price change risk of the collateral asset (ETH) to ensure any change of value is offset by the change in value of the hedging leg. This ensures the USD value of the ETH collateral remains relatively stable in all market conditions. The yield generated by the protocol comes from two sources: staked Ethereum rewards and funding and basis spread earned from delta hedging positions. When minters provide assets to mint USDe, Ethena opens corresponding short derivative positions to hedge the delta of the received assets. The protocol earns the funding rate and basis spread from this position. Funding rates are periodic payments paid to traders who are long or short depending on the difference between spot prices and perpetual contract markets. As such, traders will either pay or get funding based on demand for long or short positions. When the funding rate is positive, longs pay shorts; when it is negative, shorts pay longs. Historically, longs have paid the funding rate to shorts, given the demand for leverage in DeFi. This is how Ethena generates its excess yield over the ETH staking yield. If funding rates turn deeply negative for a sustained period, such that the staked Ethereum yield cannot cover the cost, then the protocol's insurance fund will ensure solvency.

What are the risks

While the yield generated from USDe is enticing, there are still significant concerns about its design and potential risks. First, the protocol is vulnerable to negative funding rates. USDe's yield depends on positive funding rates, represented by fees paid by long positions to short positions. However, market conditions can shift, leading to negative funding rates. If this sustains for a long period, then USDe would incur losses on its short positions, potentially jeopardizing its peg stability and ability to generate sufficient yield to maintain its high APY. Second, USDe is reliant on centralized exchanges for its short ETH positions, which raises concerns about centralization and potential censorship. If CEXs were to halt short positions, it could significantly disrupt USDe's ability to maintain its peg and generate yield.

How you make money on Ethena

You can start generating yield on USDe by simply staking it on Ethena. Once staked, all you need to do is hold sUSDe (staked USDe) to start receiving yield. This yield is not paid directly to holders, but instead, accumulates within the staking contract, which results in an increasing sUSDe value over time. Alternatively, you can provide liquidity for USDe or sUSDe, paired with other tokens, to earn trading fees and liquidity incentives. Please be aware, there is a 7-day cooldown period from requesting to unstake sUSDe to receiving USDe. You must first request USDe to be unstaked, and wait for the cooldown period to elapse, before withdrawing your USDe.

Ethena Pools
Ethena USD Yield