On March 29, 2024, Binance announced that Binance Launchpool will launch the 50th phase of the project, Ethena (ENA). Users can invest BNB and FDUSD in the ENA mining pool for mining after 08:00 Beijing time on March 30 for a period of 3 days. In addition, Binance will list Ethena (ENA) at 16:00 Beijing time on April 2, and open trading pairs ENA/BTC, ENA/USDT, ENA/BNB, ENA/FDUSD and ENA/TRY.
Launchpool details
Token Name: Ethena (ENA)
Maximum supply of tokens: 15 billion IN
- Initial Circulating Supply: 1.425 billion ENA (9.5% of the maximum supply)
- Total amount of Launchpool mining: 300,000,000 ENA (2% of the maximum token supply): 240,000,000,000 ENA (80%) in the BNB mining pool, 60,000,000 ENA (20%) in the FDUSD mining pool
- Mining time: 08:00 on March 30, 2024 to 07:59 on April 2, 2024
The listing of Ethena (ENA) on Binance Launchpool is not unexpected. Back on February 19, when Ethen Labs opened its synthetic USD stablecoin deposits to the public, Ethena (ENA) became a hot topic of discussion on Crypto Twitter that almost everyone cared about.
In early March, BitMEX founder Arthur Hayes also posted a post praising Ethena: “I believe Ethena can surpass Tether to become the largest stablecoin.
Get to know Ethena
Ethena, a synthetic USD stablecoin protocol, will provide the first censorship-resistant, scalable, and stable crypto-native solution for funds realized through delta-hedged collateral collateral on Ethereum.
Ethena is essentially an open-ended hedge fund that uses liquid staking ETH tokens as collateral to short an equal amount of ETH to create a portfolio with a delta of 0, an allocation that ensures that the net value of Ethena’s holdings does not fluctuate with changes in the underlying value of its assets, while at the same time reaping yield from ETH staking and financing payments for its short positions.
To protect users’ collateral, Ethena (ENA) utilizes an over-the-counter settlement (OES) solution, where funds are held by a reputable third-party custodian and only account balances are mapped to CEXs to provide trading margin, ensuring that funds are never deposited on a centralized exchange.
Since staked ETH can be perfectly hedged with short positions of equivalent notional value, USDe can be minted at a collateralization ratio of 1:1, making Ethena (ENA) capital efficient on par with USD asset-backed stablecoins such as USDC and USDT, while also avoiding the reliance on sourcing assets from traditional financial markets, where asset issuers are subject to the rules of the physical world.
While Ethena’s (ENA) current model only uses staked ETH as collateral, the protocol may further use BTC as collateral for larger scaling, but doing so may dilute USDe’s yields, as BTC collateral does not generate staking yields.
How Ethena (ENA) works
Hooking
USDe is a stablecoin issued by Ethena and is designed to be pegged 1:1 to the U.S. dollar.
Ethena joins a variety of Authorized Participants (APs). APs can mint and burn USDe at a 1:1 ratio.
Coins:
Currently, stETH Lido, Mantle mETH, Binance WBETH, and ETH are accepted. Ethena then automatically sells the ETH/USD perpetual swap to lock in the USD value of ETH or ETH LSD. The protocol then mints an equivalent amount of USDe, matching the dollar value of the short permanent hedge.
Example:
AP deposits 1 stETH, worth $10,000.
Ethena sells 10,000 ETH/USD per swap contract = 10,000 USD/1 USD contract value.
AP received 10,000 USDe because Ethena sold 10,000 ETH/USD per swap contract.
Burn:
To burn USDe, the AP deposits USDe into Ethena. Ethena then automatically covers a portion of its short ETH/USD perpetual swap position, unlocking a certain amount of USD value. The protocol will then burn USDe and return a certain amount of ETH or ETH LSD based on the total amount unlocked in USD minus execution fees.
Example:
AP 存入 10,000 USDe。
Ethena buys back 10,000 ETH/USD per swap contract = $10,000 / $1 contract value
AP 收到 1 Steth = 10,000 * $1 / 1 $10,000 Seth/USD 减去执行费用
Pros and Risks of Ethena (ENA)
1. Pros
(1) Scalability
Scalability is achieved by leveraging derivatives, which allows USDe to scale with capital efficiency. Since the staked ETH can be perfectly hedged by an equivalent short position, the synthetic USD only requires a 1:1 collateral.
(2) Stability
Stability is provided by hedging the transferred assets immediately after issuance, ensuring the synthetic dollar value behind USDe under all market conditions.
(3) Censorship resistance
Resist censorship by separating backing assets from the banking system and storing trustless backing assets in a decentralized liquidity venue outside of an on-chain, transparent, round-the-clock, programmatic custodial account solution.
2. Risks
(1) Collateral decoupling risk
Ethena’s main risk is a mix of LST collateral and regular Ether shorts. While this optimization of ETH basis trading helps the protocol maximize its yield sustainability, it increases the risk!
If Ethena’s LST collateral is depegged from ETH, Ethena’s ETH shorts will not be able to capture the volatility, incurring a paper loss to the protocol.
While LST usually trades close to its peg, we have already witnessed multiple de-pegging scenarios for these tokens, such as Lido’s stETH price slashed to nearly 8% during the mid-year 3AC (Three Arrows Capital) black swan liquidation event in 2022!
The April 2023 Shapella upgrade enabled Ethereum staking withdrawals, which made it possible for 3AC liquidation to create the broadest depeg we’ve seen in blue-chip LST, but the fact remains that any future depeg events will put pressure on Ethena’s margin requirements (the amount of funds that must be deployed to exchanges to maintain its hedging exposure and avoid its positions being liquidated).
Once the liquidation threshold is reached, Ethena will be forced to realize a loss.
(2) Financing interest rate risk
While Ethena’s gains may seem staggering from the start, it’s important to note that there have been two previous attempts to scale up synthetic USD stablecoins, both of which have failed due to yield inversions.
2. $4.5 billion
Derivatives trading platform Aevo has pointed out on social media that ENA’s fully diluted valuation could reach $4.5 billion in the case of Ethena’s token ENA at $0.3.
3. $200 billion
BitMEX founder Arthur Hayes believes valuations don’t stop there.
According to Arthur Hayes, the expected long-term split will be that 80% of the yield generated by the protocol will be attributed to staked USDe (sUSDe), while 20% of the yield generated will be attributed to the Ethena protocol.
Ethena Protocol Annual Revenue = Total Revenue * (1–80% * (1 — sUSDe Supply / USDe Supply))
If 100% of USDe is staked, i.e. sUSDe supply = USDe supply:
Ethena Protocol Annual Revenue = Total Revenue * 20%
Total Yield = USDe Supply * (ETH Staking Yield + ETH Perp Swap Funds)
Both ETH staking yield and ETH Perp Swap funds are variable interest rates.
ETH Staking Yield – Let’s say PA yields are 4%.
ETH Perp Swap Funding – Assuming 20% PA.
A key part of the model is that the total dilution estimate (FDV) of the revenue multiple should be used.
Using these multiples as a guide, the following potential Ethena FDVs were created.
At the beginning of March, Ethena’s $820 million in assets yielded a 67% yield. Assuming a 50% supply ratio of sUSDe to USDe, it is inferred that after one year, Ethena’s annualized revenue will be about $300 million. Using a valuation similar to Ondo, the FDV is $189 billion.
Does this mean that Ethena’s FDV will be close to $200 billion at launch?
5. Ethena (ENA) future airdrop plan
This Wednesday, Ethena (ENA) announced its airdrop plan and will officially airdrop tokens to users on April 2. Ethena (ENA) plans to airdrop 750 million ENA tokens, representing 5% of the total supply. The campaign to earn “shards” will end on April 1, which qualifies users for token airdrops. People who unstaking, unlocking, or selling all USDe before this date will not be eligible for the airdrop.
Users will be able to claim tokens starting the next day, at which point ENA will be listed on centralized exchanges. Once the airdrop is over, Ethena (ENA) will launch a campaign to provide new incentives for the next phase of the airdrop.