In this issue of Coin Metrics State of the Network, we take a closer look at Ethena’s synthetic dollar ecosystem, breaking down how USDe and its yield-bearing counterpart sUSDe function. We explore the mechanics behind Ethena’s backing and yield generation, how these assets are used across exchanges and DeFi, and what recent volatility reveals about the risks and resilience of synthetic stablecoins.
Key Takeaways:
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Ethena’s USDe has rapidly grown into the third-largest stablecoin, distinguished as a yield-bearing, synthetic dollar backed by crypto collateral and delta-neutral futures positions rather than fiat reserves.
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Staked USDe (sUSDe) accrues yield from perpetual funding rates, ETH staking rewards, and liquid stablecoins, with returns tied to exchange funding dynamics and on-chain yields.
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USDe primarily serves as a savings and yield instrument. Its integration with DeFi protocols like Aave and Pendle enhances capital efficiency and composability, while linking stability to on-chain leverage.
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Market stress events like the Bybit hack and October flash crash tested Ethena’s design and risk management, highlighting how funding, exchange, pricing and liquidity dynamics influence the stability of synthetic dollars like USDe.
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