Arthur Hayes, co-founder of BitMEX, recently launched synthetic dollar project Ethena (ENA) supports the project. However, experts assess the risks of USDe suffering a similar fate to the UST stablecoin built on Terra (LUNA).
On April 2, Colin Wu introduced the new project to a wider audience in an interview with Ethena founder Guy Young. The interest in the project is due to the intense support of leading figures in the cryptocurrency market. For example, in addition to names such as Arthur Hayes, representatives of decentralized exchanges such as Binance, OKX, ByBit, Aave and Curve also support the project.
Following this interview, Andre Cronje, founder of Fantom (FTM) and Yearn Finance (YFI), expressed some concerns on X (formerly Twitter). Cronje began his post by drawing similarities to Terra’s project on UST, the famous but unsuccessful algorithmic stablecoin.
Interestingly, the decentralized finance (DeFi) expert developer’s comments come from a questioning rather than accusatory position, trying to understand the underlying risks of Ethena’s USDe. came.
Every so often we see something new in this space. I often find myself on the mid curve for an extensive amount of time. I am comfortable here. That being said, there have been events in this industry I wish I was more curious about, there have also been events I definitely did…
— Andre Cronje (@AndreCronjeTech) April 3, 2024
NEWS CONTINUES BELOW
As Koinfinans.com reported, Ethena is a protocol built on Ethereum (ETH) and has a governance token called ENA. Ethena aims to create USDe, a synthetic dollar, and provide “internet-specific yield” known as “internet bonds.”
Currently, the project can only be accessed through an “early access” invitation and offers a very high return of 35.4%. According to Ethena.fi, Ethena’s total value locked with 118,510 early access users is measured at $1.9 billion.
It is noteworthy that the idea behind Ethena was born from the blog post “Dust on Crust” published by Arthur Hayes in 2023. While USDe provides Staked Ether (stETH) as collateral, it achieves dollar parity by short selling Ethereum in derivatives of centralized exchanges.
The evaluation of Ethena highlights the importance of understanding the risks inherent in inherently unstable systems such as liquid staking and Futures contracts.
Risks of stETH include potential smart contract vulnerabilities and the risk of losing staked ETH as a result of validator misbehavior. Additionally, stETH may trade at a discount to the underlying asset, Ether, during periods of market stress, introducing liquidity risk.
