Ethena's USDe stablecoin hits public mainnet, backed by ETH hedges for liquidity

Ethena was recently trending on social media platforms after announcing the USDe stablecoin on the public mainnet, alongside an innovative Shard Campaign designed to boost user engagement within its ecosystem. 

By rewarding contributions, the company seeks to cultivate a vibrant community, marking a shift away from conventional incentive models. The Shard Campaign, designed to foster long-term involvement, is organized into several short-duration seasons called “Epochs.” 

Each Epoch encourages different activities around the USDe stablecoin and community integration, with the campaign set to conclude within three months or upon reaching a $1 billion USDe supply. The initiative rewards users for various contributions, such as liquidity provision in USDe Curve pools and minting with different stablecoins, aiming to improve liquidity and promote ecosystem growth.

A key feature of the Shard Campaign is its decay mechanism, which reduces the number of Shards awarded over time, incentivizing early participation for greater rewards. This approach is targeted at users dedicated to contributing to Ethena’s long-term success, with certain jurisdictions, including the US, facing restrictions on participation.

Ethena has also emphasized compliance with regulations, ensuring that its synthetic dollar, USDe, and its staked version, sUSDe, operate within legal frameworks. The issuer previously revealed in an exclusive statement that USDe is backed by staked ETH and short ETH hedges, acting as a crucial liquidity source for Automated Market Makers (AMMs) and order books in Centralized Exchanges (CEXs). In parallel, sUSDe provides an opportunity for value accrual, benefiting from the underlying staking and hedging activities associated with USDe.

The launch of USDe by Ethena comes on the heels of a successful funding round in which the company secured $14 million from Dragonfly along with other prominent investors, including Bybit, OKX, Deribit, and Gemini. This funding supplements a previous $6 million investment round, which included contributions from major industry players such as Binance, aimed at supporting the development of decentralized finance solutions on the Ethereum platform.

The capital injection is directed at supporting USDe, which utilizes delta-hedging strategies and has already locked over $289 million in value since its December launch. Unlike traditional stablecoins, USDe employs financial derivatives to maintain its peg to the U.S. dollar, offering a novel approach to value stability in the digital currency market.

Ethena’s venture into the stablecoin market, with a focus on synthetic dollars rather than traditional stablecoins, strongly positions it within the expansive $130 billion stablecoin sector. Historically, issuing stablecoins has proven to be a lucrative venture, as issuers benefit from the interest earned on reserve assets without the obligation to pass these earnings on to the holders. This aspect of stablecoin economics is exemplified by Tether, the largest issuer in the market, which reported a profit of $2.85 billion in the fourth quarter.