Overview

​Ethena aims to offer a scalable and censorship-resistant digital dollar that operates entirely within the cryptocurrency ecosystem. The protocol's core innovation is its synthetic dollar, USDe, which maintains its stability through a delta-neutral hedging strategy. This involves holding a combination of spot crypto assets (like Bitcoin and Ethereum) and simultaneously opening short positions in perpetual futures contracts on these assets. This approach is designed to offset price fluctuations in the underlying collateral, thereby maintaining USDe's value relative to the US dollar ^{[1] [10]}. As of October 2025, the protocol's infrastructure supports over $14 billion in liquidity and serves over 840,000 users ^{[12] [11]}.

The design of USDe also incorporates liquid stablecoins like USDC and USDT to enhance the efficiency of the delta hedging process and act as a safeguard during unfavorable market conditions. The protocol emphasizes that USDe is fully-backed, with a reported backing ratio of 100.65% ^[11]. In addition to USDe, Ethena offers a dollar-denominated savings instrument, referred to as the 'Internet Bond', through its staked USDe token, sUSDe ^[10].

USDe Stability

USDe maintains its peg stability through an automated, delta-neutral hedging strategy with respect to its underlying backing assets ^[3]. The term "delta" refers to the sensitivity of a derivatives contract to a change in the price of the underlying asset. A portfolio is considered "delta-neutral" when it has a delta of zero, meaning its value is not exposed to price changes in the underlying asset ^[2]. The strategy has proven effective, with USDe trading below $0.997 for less than 0.2% of the time ^[11].

To achieve this, Ethena balances its spot asset holdings with corresponding short positions. For example, when the protocol receives 1 ETH as backing, it holds a positive delta of 1 ETH. To neutralize this exposure, Ethena opens a short perpetual contract with a nominal position size equal to that 1 ETH, bringing the portfolio's delta to zero. This ensures the USD value of the backing remains constant regardless of market volatility; profits from the spot ETH position are offset by losses from the short position, and vice versa ^[2].

This automated hedging minimizes fluctuations in the backing's value, keeping the synthetic USD value of the assets relatively stable. Ethena trades with no effective leverage, as the size of the delta-offsetting short positions is equal to the backing assets. The protocol also maintains a dedicated Reserve Fund as an additional safety mechanism to manage market fluctuations and ensure system stability ^[10]. Liquid stablecoins like USDC and USDT are also used in the backing to provide flexibility and efficiency for the hedging process, acting as a buffer during periods of market volatility or adverse funding rates ^[3].

Backing Assets and Custody

​Ethena employs a robust system for the custody and security of its backing assets, centered on off-exchange settlement solutions. This means that the underlying crypto assets and collateral for derivatives positions are held with third-party custodians rather than directly on centralized exchanges, mitigating exchange failure and custodial risk ^[4].

The protocol emphasizes transparency through a multi-layered verification framework. This includes public, real-time dashboards of backing assets, weekly Proof of Reserves reports from independent third parties like Chaos Labs and Chainlink, and monthly attestations from custodians such as Copper and Ceffu to verify the value of assets held in custody ^[11]. Key trust assumptions within the solution design include the use of multisignature wallets and timelocks for critical operations, enhancing security and requiring multiple approvals for significant actions ^[5].

Minting and Redemption

Users can acquire USDe through two primary methods:

• Permissionless Acquisition: Users can obtain USDe by interacting with external Automated Market Maker (AMM) pools, exchanging assets like USDT or USDC for USDe.
• Direct Minting: Approved institutional market-making counterparties, after clearing Know Your Customer (KYC) and Know Your Business (KYB) checks, can directly mint USDe by transferring accepted reserve assets to the protocol. Similarly, these approved entities can directly redeem USDe by burning their tokens and receiving the backing assets ^{[1] [10]}.

The minting and redemption processes are governed by specific smart contracts and have maintained 100% availability ^[11]. The system's resilience was demonstrated during a market stress event in October 2025, when the protocol successfully processed over $2 billion in withdrawals within 24 hours with no downtime or impairment to its collateral ^[12].

Staking USDe (sUSDe)

​Ethena offers sUSDe, a staked version of USDe that allows holders to earn a native yield. The protocol generates revenue from two primary sources: staking rewards from the underlying liquid staked token collateral and funding payments received from the short perpetual futures positions used for hedging ^[10]. These revenues are distributed to sUSDe holders, providing a yield-bearing dollar savings asset. As of October 2025, the sUSDe APY was 2.4%, with the average APY for 2024 having been 19% ^[11].

Hedging System and Oracles

Ethena's hedging system manages derivatives positions across various exchanges, incorporating internal services for trade monitoring and execution. The system undergoes regular security audits and stress tests to ensure its resilience ^[10]. Oracles provide accurate, real-time price data from multiple feeds for the underlying crypto assets, which is crucial for maintaining the delta-neutral hedge and ensuring the correct valuation of backing assets ^{[6] [7]}.

Ecosystem and Integrations

Ethena has expanded its ecosystem through integrations across more than 24 blockchain networks and numerous partnerships in both decentralized and centralized finance ^{[11] [13]}.

• DeFi Protocols: USDe is integrated into leading DeFi protocols such as Aave, Morpho, Pendle, and Hyperliquid. A partnership with Aave introduced "Liquid Leverage," allowing users to deposit sUSDe and USDe to earn multiple yield streams ^[11].
• Centralized Exchanges (CEX): The protocol has partnered with major exchanges like Binance, Bybit, Kraken, Mexc, and Deribit. The collaboration with Binance includes using USDe as reward-bearing collateral for futures trading, integration into Binance Earn, and the introduction of USDe spot trading pairs ^[11].
• Network Expansions: Ethena has adopted a multi-chain strategy, making its assets available on networks including Arbitrum, Base, Blast, Mantle, TON, and zkSync ^[13]. The protocol also announced a partnership with The Open Network (TON) to integrate its digital dollar into the Telegram ecosystem ^[11].
• Infrastructure and Trading: In October 2025, Ethena announced further ecosystem expansions. On October 21, it launched its Stablecoin-as-a-Service (SaaS) Whitelabel stack on the Caldera platform for other blockchain ecosystems ^[12]. The following day, on October 22, the mainnet alpha of Ethereal, the first Ethena-native decentralized exchange, went live after being approved by the community. The DEX offers spot and perpetual trading with a focus on USDe-based pairs ^[13].

USDtb and Regulatory Compliance

In addition to USDe, Ethena introduced USDtb, a related stablecoin product. In October 2025, Ethena announced that USDtb had become the first stablecoin to be issued in compliance with the U.S. GENIUS Act. This was achieved through a strategic partnership with Anchorage Digital, the only federally chartered crypto bank in the United States ^[12].

As part of this "onshoring" initiative, full control over the minting and redemption functions for the USDtb smart contract was transferred to cryptographic keys held by Anchorage Digital Bank, bringing the asset under a U.S. federal regulatory framework ^[12]. As of October 2025, the supply of USDtb was over $1.8 billion ^[11].

Tokenomics

​Ethena features its native governance token, ENA, which is central to the protocol's future governance mechanisms. The tokenomics of ENA and the broader ecosystem of protocol tokens are designed to support the stability and growth of its synthetic dollar, USDe ^[10].

ENA Token

​ENA is the governance token of the Ethena protocol. As of October 2025, its tokenomics are as follows:

• Total Supply: 15,000,000,000 ENA
• Max Supply: 15,000,000,000 ENA
• Circulating Supply: 7,156,250,000 ENA

The token is intended to be used for voting on governance proposals regarding the protocol's future development and risk management parameters ^{[10] [13]}.

Protocol Tokens

Beyond its governance token, the Ethena ecosystem is built around a suite of tokens designed for different functions:

• USDe: The protocol's core product, a synthetic dollar designed to maintain a 1:1 peg with the US dollar. It is backed by a delta-hedged portfolio of crypto assets and short derivatives positions ^[10].
• sUSDe: A staked version of USDe that allows holders to earn a yield generated from the protocol's revenue streams, which include staking rewards from collateral and funding payments from short positions. This serves as the protocol's 'Internet Bond' savings instrument ^[10].
• USDtb: A related stablecoin that, on October 13, 2025, became the first to be issued in compliance with the U.S. GENIUS Act. This was achieved through a partnership with Anchorage Digital, the only federally chartered crypto bank in the U.S., which now controls the minting and redemption functions for the token. This move represents a significant onshoring of the stablecoin under a U.S. federal regulatory framework ^[12].
• iUSDe and etfetp: Upcoming products listed by the protocol ^[11].

Risks

Ethena acknowledges several inherent risks associated with its synthetic dollar model, which differ from those of traditional fiat-backed stablecoins. These risks are extensively detailed in the protocol's documentation and include:

• Funding Risk: The risk that negative funding rates on perpetual futures contracts could outweigh the yield generated from staked assets, leading to a decrease in the protocol's reserve fund.
• Liquidation Risk: The possibility of collateral being liquidated on derivatives exchanges if market movements are sudden and severe, and the protocol's hedging mechanisms fail to respond adequately.
• Backing Assets Risk: Risks related to the underlying crypto assets themselves, such as smart contract vulnerabilities, de-pegging of liquid stablecoins used as backing, or significant price volatility.
• Stablecoin-Related Risks: General risks inherent to stablecoins, including regulatory scrutiny, market acceptance, and the potential for a loss of peg.
• Margin Collateral Risks: Risks associated with the specific types of collateral accepted for margin on derivatives exchanges, including their liquidity and volatility ^[8].

To manage these risks, the protocol employs a dedicated reserve fund, undergoes regular security audits and stress tests, and uses continuous monitoring systems ^[10]. The system's resilience was tested during a significant market volatility event in October 2025. Amid widespread market disruption, Ethena successfully processed its largest-ever withdrawal volume, handling over $2 billion in a 24-hour period with no downtime or impairment to its collateral ^[12].

Governance

​Ethena's governance structure includes a Risk Committee, which plays a crucial role in overseeing and managing the protocol's risk parameters. This committee is responsible for assessing and advising on various risks, contributing to the overall stability and security of the Ethena protocol ^[9].

The protocol's native token, ENA, is intended to be used for governance. As part of its future development, Ethena plans to introduce more formal governance mechanisms and progressively decentralize the protocol, allowing ENA holders to participate in key decision-making processes ^[10]. An example of this governance in action occurred in October 2025, when the Ethena community approved the launch of the Ethereal decentralized exchange ^[13].

Team, Funding, and Corporate Developments

Team and Investors

The Ethena team is composed of professionals with experience from firms in both traditional finance and cryptocurrency, including Wintermute, Flow Traders, and Genesis Trading ^[10]. The project is backed by several venture capital firms, such as DragonFly Capital, YZi Labs (formerly Binance Labs), Delphi Ventures, and OKX Ventures ^[13].

In October 2025, Ethena Labs announced its first team expansion since its launch, with plans to hire approximately 10 new members to support the development of two new product lines. In the same period, it was reported that Coinbase acquired Echo, the crowdfunding platform that facilitated Ethena's initial fundraising project ^[13].

StableCoinX de-SPAC Transaction

On July 21, 2025, a de-SPAC transaction was announced involving a newly-formed entity, StableCoinX Assets Inc., created to support the Ethena ecosystem. StableCoinX entered into a business combination agreement with TLGY Acquisition Corp, a special purpose acquisition company, to form a publicly traded entity named StableCoinX Inc. The new company is intended to be a dedicated crypto treasury and infrastructure business for Ethena, with plans to list its Class A common shares on the Nasdaq under the proposed ticker symbol "USDE" ^[14].

The transaction is supported by a $360 million Private Investment in Public Equity (PIPE), which was anchored by a $60 million contribution in ENA tokens from the Ethena Foundation. In connection with the deal, the Ethena Foundation also announced it would initiate a token buyback program ^[14].