How USDe Works
A crypto-native synthetic dollar utilizing spot assets as backing, onchain custody, and centralized liquidity venues
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A crypto-native synthetic dollar utilizing spot assets as backing, onchain custody, and centralized liquidity venues
Last updated
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A whitelisted user provides ~$100 of USDT and receives ~100 newly-minted USDe atomically in return less the gas & execution costs to execute the hedge.
Slippage & execution fees are included in the price when minting & redeeming. Ethena earns no profit from the minting or redeeming of USDe.
The protocol opens a corresponding short perpetual position for the approximate same notional dollar value on a derivatives exchange.
The backing assets are transferred directly to an "Off Exchange Settlement" solution. Backing assets remain onchain and custodied by off exchange service providers to minimize counterparty risk.
Ethena delegates, but never transfers custody of, backing assets to derivatives exchanges to margin the short perpetual hedging positions.
USDe derives its relative peg stability from executing automated and programmatic delta-neutral hedges with respect to the underlying backing assets.
Hedging the price change risk of the backing asset in the same size minimizes fluctuations in the backing asset price as the change in value of the backing assets asset is generally offset 1:1 by the change in value of the hedge.
Since the backing assets can be perfectly hedged with a short position of equivalent notional, USDe only requires 1:1 "collateralization."
See Delta Neutrality for more details.
Assets backing USDe remain in "Off-Exchange Settlement" institutional grade solutions at all times. The only time collateral flows between custody and exchange is to settle funding or realized P&L.
This enables Ethena to delegate/undelegate backing assets to centralized exchanges without being exposed to exchange-specific idiosyncratic risk.
See Off-Exchange Custody for more details.
sUSDe is the reward-accruing version of USDe. In order to receive rewards, users must stake their USDe to receive sUSDe.
Ethena earns protocol rewards from three different sources today, with the main source originating from Ethena's short perpetual futures positions that collect funding rates on exchanges.
In 2024, BTC funding rates averaged 11%, while ETH funding rates averaged 12.6%.
sUSDe APY averaged 18% in 2024.
See Historical Examples for a detailed breakdown of funding rate historical data.
