Ethena Labs

Ethena Labs is a decentralized finance protocol built on Ethereum that issues synthetic dollar assets designed to function independently of traditional banking infrastructure. Its core product is USDe, a synthetic dollar backed by crypto collateral and delta-hedged derivatives, alongside sUSDe, a yield-bearing “Internet Bond” that packages protocol revenue into a dollar-denominated savings instrument. Ethena also issues USDtb, a fiat-backed stablecoin that holds tokenized U.S. Treasuries as reserves.

Overview

Ethena aims to create a crypto-native alternative to traditional stablecoins and bank-based dollars. Instead of relying solely on cash held in bank accounts, Ethena’s primary dollar asset, USDe, is a synthetic dollar whose value stability is achieved by hedging crypto collateral with derivatives positions on centralized exchanges. This structure is intended to provide censorship resistance, composability across DeFi, and scalability that is less constrained by access to banking rails.

On top of USDe, Ethena offers sUSDe, a staked version of USDe that aggregates yield from staking rewards and basis/funding spreads, marketed as a globally accessible, dollar-denominated savings instrument often referred to as the “Internet Bond.” The protocol is governed by the ENA token, which aligns incentives between Ethena Labs, liquidity providers, and users.

History and Background

Ethena Labs was founded by Guy Young and publicly emerged in 2023 with the goal of building a synthetic dollar that could scale without traditional banking. USDe launched in February 2024, with sUSDe following shortly afterward as the protocol’s yield-bearing layer. ENA, the governance token for Ethena, was released in April 2024 via an airdrop and liquidity programs.

From launch, Ethena grew rapidly as DeFi users and centralized exchanges integrated USDe and sUSDe into trading, collateral, and yield strategies. CryptoSlate’s coverage has highlighted Ethena Labs as a stablecoin issuer whose protocol revenue scaled into the hundreds of millions of dollars within its first year, placing it among the most profitable stablecoin projects globally by mid-2025.

Core Products and Mechanism

Ethena’s architecture revolves around three principal assets:

• USDe: A synthetic dollar that targets a 1:1 value with the U.S. dollar. USDe is backed by a mix of crypto collateral (such as staked ETH and BTC) and delta-hedged derivatives positions, as well as holdings of liquid stablecoins like USDC and USDT. Minting and redemption mechanisms, combined with hedging, aim to keep USDe’s price close to $1.
• sUSDe: A staked version of USDe represented on CryptoSlate as Ethena Staked USDe (sUSDe). Holders receive a share of protocol revenue sourced from staking yields on underlying collateral and funding/basis spreads from perpetual and futures markets.
• USDtb: A fiat-backed stablecoin tracked on CryptoSlate as Ethena Labs (USDTb), which maintains a dollar peg through reserves held largely in tokenized U.S. Treasury funds such as BlackRock’s BUIDL. USDtb complements USDe by offering a more traditional, cash-equivalent reserve model.

Technology and Risk Management

USDe’s stability mechanism relies on a delta-neutral strategy. The protocol holds long exposure to crypto assets (for example, staked ETH or BTC) while maintaining offsetting short positions via perpetual or futures contracts on major exchanges. In principle, this hedging neutralizes price volatility in the collateral so that the synthetic dollar’s value remains near $1, while the protocol captures staking rewards and positive funding rates as yield.

Ethena Labs emphasizes on-chain transparency for its positions and collateral wherever possible, while acknowledging that some risk is concentrated in centralized venues where derivatives are traded. The team identifies “funding risk” and exchange counterparty risk as key structural concerns: a prolonged period of negative funding rates, sudden changes in market structure, or stress at major exchanges could impair the protocol’s ability to maintain its hedge and, by extension, USDe’s stability.

Use Cases and Market Position

USDe and sUSDe are used across both centralized and decentralized venues. On centralized exchanges, USDe functions as a trading and collateral asset, benefiting from liquidity and listings on major platforms. In DeFi, USDe and sUSDe are integrated into lending markets, liquidity pools, and structured products, where users employ them for leverage, yield strategies, and hedging.

Ethena’s rapid growth has positioned USDe as one of the fastest-expanding dollar assets in the market, with CryptoSlate reporting double-digit billions in circulating supply and total value locked within 18 months of launch. This scale has prompted comparisons with traditional fiat-backed stablecoins and speculation that USDe could challenge larger incumbents in terms of on-chain liquidity and usage.

Risks, Incidents, and Considerations

Ethena’s synthetic design introduces risks distinct from fully fiat-backed stablecoins. The protocol depends on the availability and health of derivatives markets, the stability of centralized exchanges, and the continued viability of its hedging strategies. Changes in funding rates, liquidity shocks, or exchange outages can affect the net value of collateral and the ability to maintain a tight peg.

CryptoSlate has documented episodes where USDe briefly traded below $1 on centralized exchanges following pricing glitches and market stress, with the token subsequently re-pegging but shedding market capitalization as positions were unwound. These events have drawn attention to structural vulnerabilities in synthetic-dollar designs and sparked debate about the resiliency of basis-trade-backed stablecoins in extreme conditions.

Regulatory uncertainty is another factor. USDe is not a traditional fiat-backed stablecoin and may be treated differently under emerging stablecoin and securities frameworks. Ethena Labs has publicly engaged with regulators and sought clarity around how USDe and related products should be classified, including in the context of U.S. rules that restrict yield-bearing stablecoin products for certain investor segments.

For market participants, Ethena Labs represents a leading example of a crypto-native synthetic dollar and yield product stack. Its combination of aggressive growth, innovative hedging-based design, and non-trivial risk profile makes it a focal point in CryptoSlate’s coverage of next-generation stablecoins and on-chain dollar infrastructure.