What is Ethena USDe (USDe)?

Origins: Arthur Hayes' Vision and Guy Young

The concept behind USDe was inspired by Arthur Hayes' 2023 essay "Dust on Crust," which outlined how a crypto-native synthetic dollar could be created using delta-neutral hedging of staked ETH. Guy Young, a former finance professional, founded Ethena Labs to bring this concept to life.

The project quickly attracted significant investment from Dragonfly Capital, Arthur Hayes' family office Maelstrom, and other prominent crypto venture funds.

From Private Launch to Public Mainnet

Ethena launched USDe in private beta in January 2024, followed by a public mainnet launch on February 19, 2024. The protocol grew rapidly, with USDe supply reaching billions of dollars within months of launch, making it one of the fastest-growing stablecoins in crypto history.

Key Milestones

• • 2023: Ethena Labs founded by Guy Young. Raises seed funding from Dragonfly Capital and Maelstrom.
• • 2024 Q1: USDe launches in private beta (January 2024).
• • 2024 Q2: ENA governance token launched via airdrop. Ethena Season 1 airdrop distributes tokens to early users.
• • 2024 Q4: USDtb launched as a separate product backed by BlackRock's BUIDL fund. USDe supply exceeds $5 billion.
• • 2025: USDe becomes the third-largest digital dollar asset. Supply surpasses $6 billion. Ethena expands to multiple chains.

Team and Backers

Ethena Labs is backed by prominent crypto investors including Dragonfly Capital, Arthur Hayes' Maelstrom, Franklin Templeton, Fidelity-affiliated ventures, and other institutional investors. The team includes experienced professionals from traditional finance and crypto markets, focused on building institutional-grade infrastructure for the synthetic dollar.

Delta-Neutral Hedging

When a user mints USDe, they deposit collateral (typically stETH, ETH, or BTC). The protocol then opens an equivalent short position on perpetual futures markets. If the collateral's price rises, the short position loses an equal amount — and vice versa.

This "delta-neutral" position means the total value remains constant regardless of crypto price movements, effectively creating a synthetic dollar.

For example: if $1,000 of stETH is deposited, the protocol shorts $1,000 of ETH perpetual futures. If ETH rises 10%, the stETH gains $100 but the short loses $100, keeping the position worth $1,000.

Institutional Custody and Off-Exchange Settlement

To minimize exchange counterparty risk, Ethena uses institutional-grade custodians (Copper ClearLoop, Ceffu, Cobo) with off-exchange settlement. The collateral never sits on exchange order books — it remains in institutional custody while the futures positions are managed through mirror accounts.

This architecture means that even if an exchange were compromised, the underlying collateral would be safe.

sUSDe: The Yield-Bearing Token

Users can stake their USDe to receive sUSDe, a yield-bearing token that appreciates in value over time. The yield comes from two sources: (1) ETH staking rewards from the stETH collateral, and (2) funding rate payments received from the short perpetual futures positions.

In crypto markets, perpetual futures traders typically pay a positive funding rate to hold long positions, which flows to USDe holders who are on the short side.

The sUSDe token uses a vault model — its exchange rate against USDe increases as yield accrues. Users can unstake at any time, though there may be a cooldown period.

Reserve Fund

Ethena maintains a reserve fund to cover periods when funding rates turn negative (when the protocol would be paying rather than receiving funding). This reserve acts as a buffer to protect sUSDe holders from yield dilution during adverse market conditions. The reserve fund is built up from a portion of protocol revenue during positive funding periods.

1Compare providers

USDe is available on exchanges including Binance, Bybit, OKX, KuCoin, and others. Compare fees and spreads across platforms since USDe is pegged to $1.

2Create an account

Register on your chosen exchange and complete identity verification (KYC). Enable two-factor authentication for security.

3Fund your account

Fund your account via bank transfer, credit/debit card, or by depositing other cryptocurrencies. You can also swap other stablecoins (USDT, USDC) for USDe on decentralized exchanges.

4Buy USDe

Place an order for USDe. Since it is a stablecoin, market orders are generally safe. Alternatively, mint USDe directly on the Ethena app by depositing eligible collateral (for larger amounts).

Wallet types

USDe is an ERC-20 token, so it can be stored in any Ethereum-compatible wallet:

• • Software wallets: MetaMask, Coinbase Wallet, Rainbow, Trust Wallet
• • Hardware wallets: Ledger, Trezor (highest security for large amounts)
• • DeFi-native wallets: Rabby, Frame (optimized for DeFi interactions)

Hardware Wallets

Ledger and Trezor both support USDe as an ERC-20 token. Hardware wallets provide the best security for storing significant amounts of USDe, keeping your private keys offline while still allowing you to interact with DeFi protocols.

sUSDe Staking

Instead of simply holding USDe, consider staking it as sUSDe on the Ethena app to earn yield. The sUSDe token appreciates in value as yield accrues from funding rates and ETH staking rewards. You can unstake at any time, though there may be a cooldown period.

Seed phrase and security

When setting up a self-custody wallet, you'll receive a seed phrase (12 or 24 words). Write it down on paper and store it securely offline. Never share your seed phrase or enter it on websites. Anyone with your seed phrase can access your funds.

DeFi Lending and Borrowing

USDe and sUSDe are integrated across major DeFi protocols. Use USDe as collateral on lending platforms like Aave, or provide liquidity in stablecoin pools on decentralized exchanges. sUSDe is accepted as collateral on several protocols, allowing you to earn yield while borrowing.

Payments and Transfers

Send USDe to anyone with an Ethereum address, 24/7, without intermediaries. USDe transactions settle in minutes on Ethereum mainnet, or in seconds on Layer 2 networks at lower gas fees.

Savings and Yield

Stake USDe as sUSDe to earn yield generated from ETH staking rewards and perpetual futures funding rates. This provides a native savings mechanism with yields that have historically exceeded traditional savings rates, though they vary with market conditions.

Trading Pair

USDe serves as a stable trading pair on decentralized exchanges and is increasingly used as margin collateral on perpetual futures platforms. Its yield-bearing nature via sUSDe makes it attractive as idle capital in trading portfolios.

Risks

While USDe targets $1, it carries unique risks: funding rates on perpetual futures can turn negative during bear markets, potentially draining the reserve fund; exchange counterparty risk exists even with off-exchange settlement; smart contract bugs could affect the protocol; and regulatory uncertainty around synthetic stablecoins could impact availability.

During extreme market dislocations, USDe may temporarily trade below $1.

Guy Young

Founder and CEO of Ethena Labs. Previously worked in traditional finance before moving into crypto. Conceptualized and built the Ethena protocol to create a scalable, crypto-native synthetic dollar with native yield.

Arthur Hayes

Co-founder of BitMEX and author of the "Dust on Crust" essay that inspired USDe's design. Hayes' family office Maelstrom is an early investor in Ethena. His vision of a delta-neutral synthetic dollar laid the conceptual groundwork for the protocol.

Conor Ryder

Head of Research at Ethena Labs. Responsible for the quantitative analysis of the delta-neutral strategy, funding rate modeling, and risk management frameworks that underpin USDe's stability mechanism.

Seraphim Czecker

Head of Growth at Ethena Labs. Previously held senior positions in traditional finance and crypto markets. Leads Ethena's partnerships, exchange integrations, and DeFi ecosystem expansion.

Synthetic Stablecoin Regulation

As a synthetic stablecoin that does not hold fiat reserves, USDe occupies a novel regulatory position. Most stablecoin regulations being developed globally focus on fiat-backed stablecoins and may not directly apply to USDe's delta-neutral hedging model. Regulators are still determining how to classify and regulate synthetic dollar instruments built on derivatives positions.

Country Differences

USDe's regulatory treatment varies by jurisdiction:

United States: USDe is available on several exchanges accessible to US users. The SEC and CFTC have not issued specific guidance on synthetic stablecoins. The derivatives-based mechanism may attract scrutiny from the CFTC. Tax treatment follows standard crypto rules.

Canada: Available on exchanges operating in Canada. Subject to existing crypto regulations under FINTRAC. No specific guidance on synthetic stablecoins.

European Union: The MiCA regulation framework includes provisions for stablecoins, though its applicability to synthetic dollar instruments is still being clarified.

Australia: Available on Australian exchanges. Subject to standard cryptocurrency regulations under AUSTRAC. No specific regulatory framework for synthetic stablecoins.

Regulations for synthetic stablecoins are evolving rapidly. Always verify current rules in your jurisdiction.

Derivatives-Based Compliance

USDe's backing mechanism relies on perpetual futures positions on centralized exchanges, which creates a unique regulatory profile. While USDe itself cannot be frozen by Ethena Labs, the underlying exchange positions are subject to exchange rules and regulations. Users should be aware that regulatory actions affecting major crypto exchanges could indirectly impact USDe's operations.