# CRYPTO 101

Ethena’s New Stablecoin Revolution

Ethena (ENA)


  • Ethena's USDe stablecoin uses a Delta Neutral mechanism, ensuring 1:1 collateral with staked ETH and equivalent short positions.
  • $ENA introduction begins Ethena's decentralization, enabling governance through token-based voting on risk management and other key decisions.
  • Ethena's strategic partnerships and funding rounds highlight its emergence as a leading DeFi protocol, with $20.5M raised and a $300M valuation.


Ethena launches USDe, a high-interest stablecoin, using a Delta Neutral mechanism for stability, scalability, and censorship resistance. $ENA drives decentralized governance.






Ethena is a synthetic dollar protocol based on Ethereum, focused on providing crypto-native solutions for currencies independent of traditional banking systems. It also offers a globally accessible dollar savings tool known as the “Internet Bond.”


In February 2024, Ethena garnered significant market attention by launching a new dollar stablecoin, USDe, with an annual interest rate exceeding 27%. USDe achieves stability, censorship resistance, and scalability through Delta-hedged collateralized Ethereum. Currently, the supply of USDe has surpassed $1 billion, making it one of the fastest dollar assets in cryptocurrency history to reach this milestone, highlighting Ethena’s position as an emerging leader in the DeFi sector.


Ethena’s strategic partnership with the derivatives trading platform MirrorX has further expanded its market influence and accessibility. Through integration with Binance Exchange, Ethena and institutional clients can seamlessly access various MirrorX products for derivatives position settlement, further diversifying products and markets within the Binance ecosystem.


As the ecosystem continues to develop, Ethena has attracted attention from major DeFi players. Over the past year, it has successfully raised $20.5 million through two funding rounds, with key investors including Galaxy Digital, OKX, Dragonfly, Binance Labs, and Bybit. This has brought Ethena’s valuation to $300 million.


  • Ethena Stablecoin USDe


Ethena ($ENA) is a decentralized stablecoin protocol developed by Ethena Labs on the Ethereum blockchain, featuring a “Delta Neutral” mechanism. The protocol offers a stablecoin named USDe, which operates differently from traditional stablecoins like USDT and USDC. It achieves stability through collateralized crypto assets and short contract positions.


  • Delta Neutral Mechanism


The “Delta Neutral” mechanism uses liquid staked ETH tokens as collateral and short positions of an equivalent amount of ETH to create a portfolio with a delta of zero. Since staked ETH can be perfectly hedged with equivalent nominal value short positions, USDe can be minted with a 1:1 collateral ratio. This makes Ethena ($ENA) as capital efficient as dollar-backed stablecoins like USDC and USDT, while avoiding reliance on traditional financial market assets, where issuers must comply with real-world regulations.


>>> More to read : What Is Stablecoin ? Stable Virtual Assets



Following a six-week “Fragmentation Event,” the total supply of Ethena’s stablecoin, USDe, surged to $1.3 billion, which is 1.5 times the entire RWA tokenization market. This growth has set the stage for Ethena to begin distributing its second native token—$ENA.


The team stated that the introduction of $ENA marks the start of decentralization for the Ethena protocol. They have described this token as “network money,” providing further details on the fragmentation event, supply specifics, and eligibility criteria for claiming the token.


$ENA will play a critical role in Ethena’s governance. Token-based voting will determine various aspects such as the general risk management framework, the composition of USDe backing, risks related to exchanges and custodians, community grants, and the size of reserve funds.




  • Advantages


(1) Scalability


By leveraging derivatives, Ethena achieves scalability, allowing USDe to expand capital efficiently. Since staked ETH can be perfectly hedged with an equivalent short position, synthetic dollars only require a 1:1 collateral ratio.


(2) Stability


Stability is ensured by immediately hedging transferred assets upon issuance, guaranteeing the value of synthetic dollars backing USDe under all market conditions.


(3) Censorship Resistance


Ethena resists censorship by separating backing assets from the banking system and storing trustless backing assets on-chain. These assets are held in transparent, auditable, and programmatic custody accounts, ensuring decentralized liquidity that is accessible around the clock.


  • Risks


(1) Collateral Decoupling Risk


One of the main risks for Ethena is the mixed use of LST collateral and regular ETH shorts. While optimizing ETH basis trading helps maximize the protocol’s yield sustainability, it also increases risk. If Ethena’s LST collateral decouples from ETH, the ETH shorts would fail to capture the volatility, resulting in unrealized losses for the protocol.


(2) Financing Rate Risk


Although Ethena’s initial yields may appear impressive, it’s important to note that two previous protocols attempting to scale synthetic dollar stablecoins failed due to inverted yield curves.


(3) Counterparty Risk


Deploying user collateral to centralized exchanges can be risky. However, Ethena mitigates this risk by using OES custody accounts and performing daily profit and loss settlements to minimize exposure. In case of exchange bankruptcy, Ethena can leverage positions on other exchanges to maintain a delta-neutral portfolio until the unsettled positions are resolved.


(4) General Crypto Risks


Ethena’s depositors face the risk of fund misappropriation due to the centralized control of project keys. Additionally, while hacking risks are common in crypto projects, Ethena reduces this risk by using OES custody accounts, avoiding complex smart contract vulnerabilities.


>>> More to read : Pendle Finance: Tokenizing Future Yields



  • What is Ethena?

Ethena ($ENA) is a decentralized stablecoin protocol launched by the Ethena Labs team on the Ethereum blockchain, featuring a “Delta Neutral” mechanism.


  • What is $ENA?

$ENA is Ethena’s second native token. The launch of the $ENA marks the beginning of the decentralization of the Ethena protocol.



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