Overview

Ethena is a synthetic dollar protocol built on Ethereum that provides a crypto-native solution for money, USDe, alongside a globally accessible dollar savings asset, sUSDe. Ethena's synthetic dollar, USDe, provides the crypto-native, scalable solution for money achieved by delta-hedging Bitcoin, Ethereum and other governance-approved spot assets using perpetual and deliverable futures contracts, as well as holding liquid stables such as USDC and USDT.

USDe is fully-backed (subject to the discussion in the Risks section regarding events potentially resulting in loss of backing) and free to compose throughout CeFi & DeFi.

USDe peg stability is supported through the use of delta hedging derivatives positions against protocol-held backing assets, maintaining a relatively stable value with reference to the value spot crypto assets as well as futures positions.

The inclusion of liquid stables (such as USDC and USDT) enhances the efficiency of the delta hedging process, while also potentially acting as a safeguard in bear markets when funding rates and futures basis are suboptimal. Liquid stables may earn rewards depending on where they are held, potentially enhancing overall protocol revenue.

Quick Links

Users are currently able to:

• Permissionless Acquire USDe. Access external AMM pools to acquire or dispose of USDe with assets such as USDT or USDC.

• Direct Mint USDe. Transfer accepted reserve assets and receive USDe, subject to clearing KYC/KYB checks exclusively for approved market making counterparties. See Supplemental USDe Terms and Conditions.

• Direct Redeem USDe. Burn USDe & receive backing assets, subject to clearing KYC/KYB checks exclusively for approved market making counterparties

Example

1. 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.

2. Slippage & execution fees are included in the price when minting & redeeming. Ethena earns no profit from the minting or redeeming of USDe.

3. The protocol opens a corresponding short perpetual position for the approximate same notional dollar value on a derivatives exchange.

4. 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.

5. Ethena delegates, but never transfers custody of, backing assets to derivatives exchanges to margin the short perpetual hedging positions.

Delta Neutrality

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 for more details.

Off Exchange Custody

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 for more details.

Protocol Rewards

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 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 19% in 2024.

See for a detailed breakdown of funding rate historical data.

In March 2023 Arthur Hayes published his piece which outlined his vision for the largest opportunity in crypto - creating a synthetic dollar using crypto collateral and derivatives. The most important financial instrument on Earth to save and preserve wealth is simply a reward-bearing dollar. It sounds simple, but the demand for this product is several orders of magnitude larger than the entire crypto market combined, including Bitcoin. Ethena was built to provide this product and in doing so, force the convergence of capital and interest rates across DeFi, CeFi and TradFi via USDe.

It is important for us to consider how sustainable the generated protocol revenue really is. To do this, we can review the historic implied income that the protocol would have earned in various market conditions on an annualized basis. While the yields across DeFi are often self-referential and endogenous to the system, the protocol income is unique in that both components are exogenous to the protocol.

Ethena calculates APY weekly as part of internal accounting when distributing APY to the StakingRewardsDistributor contract which then drips it into sUSDe.

The APY calculated by Ethena matches funding and rewards earned from backing assets earned on a given day to the backing assets on that day, assuming nothing is distributed to the reserve fund.

However, to prevent lumpy distributions which people can arbitrage, and because its not currently feasible for Ethena to distribute more frequently than weekly, sUSDe rewards are distributed the week after the period to which they relate, in multiple smaller payments throughout the week. In that period, the USDe supply can increase or decrease, as can the % of USDe supply staked.

This can cause distortions between the APY we publish, and a number that's just based on the most recent 8 hourly payment to sUSDe, as seen on some data aggregator sites.

Ethena's APY is also annualized with weekly compounding reflecting the compounding interval users actually experience.

Ethena uses both linear and inverse margined perpetual futures, using linear perpetual futures that are denominated in USDT. Denominating in Tether means that the margin and PNL calculations are quoted in Tether, and by extension, results in Ethena being positionally long USDT.

For example, if Ethena posts BTC as margin collateral, and takes a short position on a linear BTC/USDT perpetual future - Ethena has a delta of 0 on BTC due to being long spot (collateral) and short futures (perpetual), but it is directionally long USDT (quote currency) with no offsetting short exposure.

The inherent risk this presents is exposure to a potential USDT idiosyncratic event.

For context, 80% of perpetual futures open interest is stablecoin-margined, with the vast majority of those quoted in USDT.

Ethena closely monitors USDT stablecoin price risk and solvency, and if a problem persists will take action accordingly. In this instance, Ethena would aim to move more of the perpetual futures positions into inverse contracts, margined with BTC or ETH, depending on liquidity.

Stablecoins

Stablecoins and other relatively stable, fully-backed assets intended to approximate the dollar is one of three $1 trillion+ opportunities in this space. We see an immediate $20b+ opportunity to scale a synthetic dollar across DeFi, CeFi and TradFi.

Internet Money

User demand for existing stablecoins is already provable and enormous at more than $200 billion despite their “return-free" risk profile. An asset that enables permissionless reward accrual to ecosystem participants is the largest market opportunity that crypto can provide for individuals all over the world - even larger than either a volatile store of value or stablecoins as they currently exist.

Integrating USDe in CeFi as margin collateral on some exchanges has seen Ethena's size sit at an intersection between DeFi and CeFi. The next leg of growth for Ethena is integrating with Tradfi where the immediately addressable market is greater than $20 billion.

The basis trade is the largest cash flow opportunity in crypto, with the least amount of competition and the highest capacity for scale.

Data Link

Link to the full FAQ here.

What is "delta"?

"Delta" refers to the sensitivity of the derivatives contract to a change in the price of the underlying asset.

By way of example, if Ethena did not execute a hedge with respect to 1 ETH transferred by a minter upon mint of USDe, the backing of USDe would have a positive delta of 1 ETH. As a result, the USD value (and, by extension, USDe backing value) of the 1 ETH would change equally with the change in the spot market price of ETH.

Read more:

Vesting Schedule

Allocation

Core Contributors

Context

Ethena utilizes derivatives positions to buttress the synthetic USD value of the backing assets in most market conditions. This is achieved by being "delta neutral" through the use of an offsetting short derivatives position to the natural long spot position from backing assets.

In the subsections below, we go into what each term refers to and the key differences:

• Futures vs Perpetuals

Ethena will continue its transition from being a single asset issuer into a platform for the best builders to leverage and enable onchain financial innovation.

Dollars remain the structural plumbing through which onchain capital flows, both for settlement and payments but also all core DeFi primitives like trading, lending, derivatives and leverage.

However, we are yet to see the full scope of new products that have not been built but are now possible with sUSDe.

As part of building this ecosystem upon sUSDe, sENA has been structured to accrue value in a similar token model to BNB where ecosystem applications have set aside material portions of their token supply to be airdropped to sENA holders.

The Ethena Network is an initiative to directly support new protocols innovating with Ethena sUSDe enabled applications while aligning ENA with the success of these new protocols.

Rather than a flat governance structure wherein every protocol-level decision is put to a vote for participation by all governance tokenholders, the vast majority of decisions (other than those which the committees deem outside the scope of their remit) are delegated by the DAO to the relevant committees described in this section. Each committee will have a clearly defined and siloed role within the broader governance framework and ecosystem.

The primary role of $ENA governance tokenholders is initially to appoint committee members on a rotating basis; however, governance going forward will be a generally iterative process where all stakeholders will adapt and tweak the system on a collective basis to move towards an efficient system that enables an appropriate balance between efficient and informed decision-making and enabling stakeholders in the community to have adequate input where it makes sense.

Why Govern by Committee?

Due to the design of Ethena (e.g., the necessity for off-chain infrastructure), fully on-chain governance is not a practical or viable option at present. The Committee approach reflects prioritizing practicality while adding external checks and balances to that off-chain infrastructure and governance environment.

USDtb is a digital dollar, otherwise known as a USD stablecoin. USDtb can be used the same way a holder would use any other dollar, whether to send and receive payments, acquire and trade assets, or to simply hold dollars.

Unlike actual dollars, USDtb is a blockchain-based token, which enables faster and cheaper spending than the traditional fiat banking system. Unlike many digital assets, USDtb is fully backed by institutional-grade tokenized U.S. treasury fund products (alongside a stablecoin reserve designed to facilitate rapid redemptions) to support stability. Initially, USDtb will be backed by BlackRock’s USD Institutional Digital Liquidity Fund Token, BUIDL, alongside Circle's USDC.

For more detailed information about USDtb, please visit the .

Staked ETH

In line with the principles of prioritizing liquidity and allocations that align with risk profiles, the protocol reduced the proportion of ETH LSTs compared to the total backing assets to less than 6%.

Liquid Stables

In an environment when certain perpetual contracts are yielding less than US treasuries, it is naturally unappealing for the protocol to hold perpetual futures positions. Additionally, in phases of market downturn, funding rates are at higher risk of turning negative, which could put additional pressure on the protocol.

With that in mind, Ethena started to allocate a greater portion of the USDe backing assets to stablecoins, specifically USDC on Coinbase. Each stablecoin offers a compelling yield, with USDC on Coinbase closely tracking US treasury yields.

Introducing stablecoins as backing assets for USDe is expected to ease pressure on the protocol during down markets, while maintaining the flexibility to transition to perpetuals when funding improves:

Below is the main Ethena dashboard highlighting Ethena's positions across different exchanges and assets.

With the introduction of Ethena's dynamic backing asset allocation methodology, the incorporation of stablecoins such as USDC introduce certain additional risks associated with fiat-backed and "Real World Asset" (RWA)-backed stablecoins. Risks associated with these stablecoins are generally disclosed by the issuer of the token.

With respect to USDC, certain risks are disclosed in Section 13 of the USDC Terms available at: .

In addition, centralized stablecoins, such as USDC or USDT, provide stability and capital efficiency, but they introduce:

• Unhedgeable custodial risk with bond reserves in regulated bank or trust accounts which are prone to censorship.

• A critical reliance upon the existing traditional banking infrastructure and country-specific evolving regulations.

This page details where USDe and sUSDe are available to be custodied.

If either asset is not available to be custodied with a custodian, Ethena is in the process of enabling it to be.

This page details where USDe is both or individually able to be used as derivatives margin collateral with exchange partners and eligible for rewards as part of partners' promotional programs.

What is a basis trade?

A basis trade is a trade in which the trader simultaneously purchases (sells) an asset and sells (buys) the futures contract for that asset. Since spot and futures are traded separately, their prices are not guaranteed to be the same at all times. In fact, their prices often diverge and this differential is known as the "basis".

As the future approaches expiration, its price often trends towards the underlying spot price. At expiration, futures contracts require the trader long the contract to purchase the underlying asset at the contract’s predetermined price, guaranteeing that at the futures contract expiry. Therefore, as the futures expiration draws nearer, the basis should approach 0.

If for example, the futures contract is trading at a premium to the underlying spot price, a trader can short this future against the underlying and as the future converges to the spot price at expiration they will collect this difference in basis. Fixed expiry futures will provide a fixed interest rate on this basis trade.

How USDe furthers censorship resistance

Ethena utilizes "Off-Exchange Settlement" (OES) providers to hold backing assets. This enables Ethena to delegate/undelegate backing assets to centralized exchanges without being exposed to exchange-specific idiosyncratic risk.

Inverse vs Linear Contracts

A linear payout is the simplest to describe and is used for many swaps. The price of a linear contract is expressed as the price of the underlying against the base currency. ETHUSDT is a linear perpetual and is quoted in Tether, with margin and PNL calculations denominated in Tether.

An inverse contract is worth a fixed amount of the quote currency. In the case of the ETHUSD perpetual, each contract is worth $1 of Ethereum at any price. ETHUSD is an inverse contract because it is quoted as ETH/USD but the underlying is USD/ETH or 1 / (ETH/USD). It is quoted as an inverse to facilitate hedging US Dollar amounts while the spot market convention is to quote the number of US Dollars per Ethereum.

Convexity Implications

Convexity (also known as Gamma) refers to the second derivative of a contract's value with respect to price, and in the case of inverse perpetual futures, it can differ from the relationship suggested by a linear move in price.

While the payoff for a linear contract is just the Contract Multiplier*(Entry Price-Exit Price), the payoff for an inverse contract is Contract Multiplier*(1/Entry Price - 1/Exit Price), introducing convexity.

Example

A trader goes long 50,000 contracts of ETHUSD at a price of 10,000. A few days later the price of the contract increases to 11,000.

The trader’s profit will be: 50,000 * 1 * (1/10,000 - 1/11,000) = 0.4545 ETH

If the price had in fact dropped to 9,000, the trader’s loss would have been: 50,000 * 1 * (1/10,000 - 1/9,000) = -0.5556 ETH. The loss is greater because of the inverse and non-linear nature of the contract. Conversely, if the trader was short then the trader’s profit would be greater if the price moved down than the loss if it moved up.

Users in permitted jurisdictions can lock & unlock positions with Ethena via the UI.

Using the UI, the locking & unlocking positions user workflow is:

1. The user requests to lock/unlock positions via our dApp interface by clicking "Lock"/"Unlock", which pops up their selected wallet to sign the requested transaction.

2. After the user signs the transaction with their wallet, the transaction is submit to the blockchain, if successful, the cooldown period starts.

3. Once the cooldown period ends, the user now needs to click on "Withdraw" and sign a second transaction.

4. Upon successful confirmation of the transaction, the user receives unlocked tokens.

Important to Note

• There is a cooldown period of 7 days after unlocking USDe, USDe will be available to withdraw after that period.

• There is a cooldown period of 7 days after unlocking sENA, sENA will be available to withdraw after that period. This is in addition to the 7 day sENA unstaking cooldown.

• There is a cooldown period of 21 days after unlocking LP tokens, these LP tokens will be available to withdraw after that period. Some LP tokens have no cooldown and can be withdrawn immediately.

Because of the active ecosystem on Ethereum mainnet and the history of our contracts there, it is highly encouraged to test there using a fork. Such can be achieved with tools like Tenderly and Anvil. Canonical, verified testnet deployments of USDe can be found here: Ethereum Sepolia: https://sepolia.etherscan.io/address/0x9458caaca74249abbe9e964b3ce155b98ec88ef2 Ethereum Goerli: https://goerli.etherscan.io/address/0x7faaf9bbc8a07d7731aab129e9a066f40560cf21

Context

Given Ethena uses some stETH and other LSTs in part to margin the delta hedging derivatives positions, the integrity and confidence in those assets is paramount. "Backing Assets Risk" in this context refers to the fact that a backing asset for USDe differs from the underlying asset of the perpetual futures position.

Ethena is agnostic to Ethereum LSTs. While stETH market share initially looked to be winning in a winner's take-all market, its market share has dramatically been reduced by other assets such as Mantle's mETH.

As in these cases the backing asset, ETH LSTs, is different to the underlying asset of the hedging contracts, ETH, Ethena needs to ensure the price difference between those two assets is as small as possible. This is accomplished by supporting LST assets with the least chance of depegging and broad industry support.

As discussed in the section, due to low leverage and tighter collateral haircuts, the impact of a stETH depeg is minimal to hedged positions and the possibility of liquidation is extremely unlikely.

Staked Ethereum assets make up just ~6% of the backing assets of USDe as of January 2025.

Existential Importance to the Space

Stablecoins are the single most important instrument in crypto. All major trading pairs across spot and futures markets in centralized and decentralized venues are denominated in stablecoin pairs with 90% of orderbook trades and >70% of onchain settlements being stablecoin denominated. Stablecoins settled $8.5 trillion onchain in just Q2 2024, constitute some of the largest assets in the space and are by far the most utilized assets across decentralized exchanges and money markets.

Stablecoins are not only the foundation of the entire industry, but are also arguably the only crypto asset to have (i) found true product-market fit globally with more than 100m users, (ii) the largest addressable market, and (iii) the greatest potential for revenue generation.

Centralized Challenges

Stablecoins solely dependent on traditional financial infrastructure, such as USDC or USDT, provide stability and capital efficiency, but they introduce:

• Unhedgeable custodial risk with all of the backing in bond collateral in regulated bank accounts which are prone to censorship.

• A critical reliance upon the existing banking infrastructure and country-specific evolving regulations.

• A "return-free" risk for the user as the issuer internalizes yield generated utilizing backing assets whilst externalizing the risk of depeg to users.

Decentralized Fragility and Lack of Scale

"Decentralized" stablecoins - those with designs not incorporating or relying on traditional banking or financial infrastructure - have historically experienced a number of issues relating to scalability, mechanism design, and a lack of incentives to users.

• "Overcollateralized stablecoins" have historically experienced issues scaling as their growth was inexorably tied to the on-chain growth in leverage demand for Ethereum. Lately, some stablecoins have resorted to onboarding Treasuries in an effort to improve scalability, at the cost of censorship resistance.

• "Algorithmic stablecoins" have faced challenges with their mechanism design which were found to be inherently fragile and unstable. Such designs are unlikely to be sustainably scalable.

• Prior "delta-neutral synthetic dollars " struggled to scale due to a critical reliance on decentralized trading venues that lack sufficient liquidity and are exposed to smart contract exploits.

The Solution is Now Possible

Through the use of derivatives we can create a native form of money that can provide a scalable alternative to the existing centralized and decentralized offerings.

To access centralized exchange liquidity, Ethena must provide backing assets to support the delta hedging derivative positions that act as the peg stability mechanism.

Ethena holds all backing assets with "Off-Exchange Settlement" solutions. These providers both custody deposited assets as well as enable Ethena to delegate/undelegate assets to/from centralized exchanges without ever transferring the assets to the exchanges.

"Off-Exchange Settlement" providers enable Ethena to settle the outstanding PnL of Ethena's derivatives positions frequently. This enables Ethena to mitigate potential impact in the event of an exchange failure between settlement cycles.

Most importantly, Ethena depositing backing assets assets with an "Off-Exchange Settlement" provider does not transfer beneficial title over the assets to the provider or exchange partners. In the event of an agreed exchange failure, Ethena should be able to delegate funds to another exchange to support hedging requirements.

"Off-Exchange Settlement" providers such as , , and have long been used by institutional participants in the space to ameliorate this exact risk.

Transparency

Ethena strongly believes in users' ability to independently verify the existence and control of the protocol backing as well as the hedging derivatives positions.

• All "Off-Exchange Settlement" providers may enable the provision of onchain wallet addresses so users can validate the existence of the protocol backing assets; however, as some backing assets are held in omnibus accounts with other assets, this might not be feasible.

• Periodic attestations (at least monthly) by custodial partners of backing asset value held within institutional custodial solutions will be published to provide transparency where addresses are not able to be provided.

• Ethena is actively exploring tools to help publicly prove & enable users to independently verify the existence of hedging derivatives positions.

Approach to Decentralization

There are a variety of trade-offs to consider when evaluating the degree to which the protocol relies on maximally decentralized solutions.

The core mission of creating a stablecoin equivalent that is not reliant on banking infrastructure has to date required either:

1. Capital inefficient overcollateralized "loans" onchain.

2. Unstable algorithmic designs.

3. Unscalable delta-neutral designs that are fully reliant on decentralized exchanges.

In order to address the shortcomings of prior delta-neutral peg mechanism designs it is necessary to interact with centralized liquidity venues where open interest and trading volume on derivatives are >25x larger than onchain liquidity venues.

However, doing so introduces new custodial risks with exchanges. How does Ethena address this?

The focus is generally on leveraging solutions for the most important qualities of decentralized exchanges, namely:

1. Holding of assets outside opaque centralized servers.

2. Fully auditable and transparent.

3. Permissionless and programmatic withdrawal.

The use of "Off-Exchange Settlement" providers largely addresses these qualities & enables Ethena to create a synthetic dollar that can meaningfully scale without being overly reliant upon a single source of liquidity, a single custodian of funds, etc.

How USDe enables scalability

1. Backing Ratio

USDe is backed at a 1:1 ratio thanks to a delta-neutral strategy, where short BTC, ETH, and SOL futures positions offset any changes in value to the underlying backing assets. Liquid stables, such as USDC, also play a role in improving stability and efficiency, providing more stable backing in volatile conditions.

The result is the most capital-efficient synthetic dollar in the industry.

Other onchain overcollateralized "stablecoins" tend to run minimum collateral ratios of ~150%, with some even higher, requiring more capital to be locked up than the stablecoin it mints. Effective overcollateralization is often over 200%.

While this approach is a good way to ensure stability when using decentralized collateral, the capital inefficiency of doing so means that the stablecoin cannot scale into the billions. The only way to ensure capital efficiency and relative stability using decentralized collateral is to delta hedge any price exposure on trustless crypto collateral.

1. CeFi Liquidity

Unfortunately, decentralized perpetual liquidity isn’t sufficient to allow Ethena to achieve its goal of scaling USDe into the billions. Projects like UXD have tried to solely use decentralized exchanges, but the lack of liquidity severely limited their ability to scale, while others have fallen victim to hacks and exploits of the decentralized exchanges.

With >30x the open interest on perpetual futures on centralized exchanges, a synthetic USD asset that leverages that liquidity has the ability to scale exponentially larger than would be possible on just decentralized exchanges living purely onchain.

However, largely thanks to Hyperliquid, DeFI share of perp open interest is up from 0.6% to start 2024 to 3.1% today.

1. Scalable Backing Assets Base

To further scale, Ethena now uses BTC and SOL, and other tokens as backing assets in addition to ETH and plans to support any crypto asset with a sufficiently liquid derivatives market, subject to Ethena Risk Committee approval via governance. Currently, BTC funding rates mirror those of ETH, with funding being paid to the short side in the range of 7-9% annually on average, with even higher averages for SOL funding rates to date.

BTC, ETH and SOL perpetual futures offer over $65bn of open interest combined into which USDe can hedge, as of January 2025.

Ethena's solution has both Onchain and Offchain composite components & services.

The Onchain components include the smart contracts that enable the minting, redeeming, staking, and unstaking of USDe.

The Offchain components include services that manage the delta hedging positions with respect to deposited backing assets.

In order to access the centralized liquidity, explicit trade-offs need to be made for onchain trust assumptions which are detailed in this section.

Ethena Labs Github

You can read more in the following sections:

Futures Contract

A Futures Contract is a derivative instrument and is an agreement to buy or sell a commodity, currency or other instrument at a predetermined price at a specified time in the future. They are either physically or cash settled.

Margin collateral is either be denominated in underlying cryptocurrencies, allowing traders to speculate on the future value of its products using only crypto collateral, or they can be denominated in USDT/USDC.

Perpetual Contract

In contrast to traditional futures, Perpetual Contracts have no expiry date and include a concept called "Funding". "Funding" incentivizes traders to keep the price of the Perpetual Contract relatively in line with the underlying asset index of which the contract is marked against.

If the Perpetual Contract trades at a higher price than the index, traders that have long positions need to make funding payments to the traders having short positions. This funding payment will make the product less attractive to the long-position holders and more attractive to the short-position holders. This dynamic attempts to drive the perpetual price to trade in line with the price of the index. If the Perpetual Contract trades at a price lower than the index, the short position holders will have to pay the long position holders.

Read more about "Funding": ,

Differences between Futures & Perpetual Contracts

The core differences between Perpetual and Futures can be summarized as follows:

1. Perpetual contracts have no expiry or settlement.

2. The "Funding" mechanism is used to tether Perpetual contracts to their underlying spot index price. This is in contrast to a Futures contract which may trade at significantly different prices to their associated index until expiry where it is settled at a rate very similar to the index price.

3. Each Perpetual contract has its own details including:

Ethena initially launched using Copper’s Clearloop solution before onboarding additional OES providers. Copper is a UK-based custodian that has been the bedrock of institutional digital asset trading since 2018.

Key Points

1. Copper has never been hacked or lost users’ funds in contrast to the $7bn lost in DeFi.

2. Copper users’ funds were wholly available within days of Coinflex’s (exchange) failure.

3. Copper users’ funds are held within a bankruptcy-remote trust, meaning in the event of Copper’s failure, users’ funds are not expected to be part of Copper's estate.

4. Exchanges are also required to post collateral with Copper as to ensure frictionless settlement with each two or four hour cycle.

5. Ethena retains the ability to dispute erroneous exchange settlement requests.

Here is a deck that provides even more detail about Copper's specific solution for Ethena:

Risks of USDe as Synthetic Dollar

Ethena is committed to transparency. It is crucial to highlight the risks associated with USDe, the actions taken to mitigate these risks, as well as plans to further manage and ameliorate these risks.

This section will discuss the following risks:

We would greatly appreciate any feedback or information you would like to see to help the protocol be as transparent as possible. If you believe any risk has not been adequately surfaced please reach out in Discord and notify the contributors.

The reserve fund acts as an additional margin of safety behind USDe to provide a source of capital to pay for periods of negative funding, as well as a bidder of last resort for USDe in open markets.

Composition of Reserve Fund

Stable uncorrelated backing assets to cover funding payments in same currency denomination:

• Stablecoin assets including USDC and USDT for USD-M contracts

• Smaller ETH backing assets allocation for ETH-M contracts

• Other assets as determined by governance

Security of Reserve Funds

Controlled by 4/10 multi-sig with keys held by contributors sitting within Ethena Labs.

USDe Open Market Arbitrage Vehicle

Since the solvency of USDe is both transparent and provable during all periods of time, if the open market price of USDe diverges sufficiently from the provable asset value backing USDe in an extreme case then the reserve fund may act as a bidder of USDe in the open market.

Capitalization of Reserve Fund

The reserve fund is funded with a portion of the revenue generated by the Protocol, allowing it to grow alongside the backing of USDe. The amount of Protocol revenue applied towards the reserve fund is subject to governance.

The reserve fund will also be capitalized with funds raised from private placement investors.

Sizing

Ethena Labs conducted detailed modelling in November 2023 on the proposed sizing of the reserve fund under various stressed scenarios to inform the ongoing capitalization of the reserve.

The model tested out various assumptions using a $20m fund size. To note, the Reserve Fund size is $46.6m as of Q4 2024.

The makeup of the assets backing USDe has adapted over time based on observations and market feedback in order to mitigate risk, improve liquidity, and provide diversified revenue sources for the protocol. Additional checks and more transparent decision-making processes regarding asset allocation and overall strategy have been implemented with the Risk Committee.

The Beginning

When the initial framework of Ethena was created in April of 2023, the vision was to primarily use ETH and ETH LSTs with the delta being hedged by perpetual & dated futures contracts. The idea was borne out of Arthur Hayes’ article , outlining a vision for a synthetic dollar backed by BTC. The core team felt this was an idea worth exploring, and as far as backing assets go, potentially improving on the idea with forms of staked ETH as backing to naturally increase revenue and mitigate potential negative funding risk.

At the time, the stETH yield of 6-7% provided an ample buffer for instances when funding rates dipped negative. Funding rates historically average approximately 8% annualized, and so with a spot backing anchored by stETH in a hypothetical scenario it would take almost a 2x funding rate move to the downside before the protocol was exposed to negative revenue. In theory, this was the ideal foundation upon which to build a synthetic dollar. However, as the amount of ETH staked increased, staked ETH yield fell from 6-7% to roughly 3% by the time USDe launched in February 2024. As those yields fell, staked ETH made less sense as the backbone spot asset for USDe from a risk perspective for a few reasons:

The revenue generated by the protocol originates from three sources:

1. Staked asset consensus and execution layer rewards

2. Funding and basis spread

Context

Given that Ethena relies upon "Off-Exchange Settlement" provider solutions to hold protocol backing assets, there is a dependence upon their operational ability. This is the "Custodial Risk" we are referring to.

Counterparty risk is a prevalent issue throughout crypto and has never been more important than it is today. The custodians' business models are built on the safeguarding of assets, vs. the alternative of leaving backing assets sitting on a centralized exchange.

Use Cases

1. Governance

ENA is first and foremost a governance token, governing the Ethena protocol and its critical decisions. ENA holders can vote bi-annually to elect members to a Risk Committee, and in the future additional committees performing critical roles within the ecosystem. In this framework, $ENA governance tokenholders are able to delegate everyday decision-making with respect to key aspects of the ecosystem to sophisticated, expert-level stakeholders - most of whom provide advisory and similar services to other projects and protocols in the industry - while retaining transparency during the process.

Ethena Labs' "Hedging System" has three notable external dependencies (aside from AWS):

1. CeFi Exchanges, such as Bybit.

2. "Off-Exchange Settlement" (OES) providers, such as Copper.

3. Price Feeds, such as Pyth and Redstone.

, non-whitelisted users are able to exchange stablecoins for USDe by accessing external liquidity pools available:

1. The user requests to buy USDe via the dApp interface by selecting a stablecoin asset to exchange for USDe.

2. This transaction is routed using MEV protection through CowSwap to various onchain liquidity pools in exchange for USDe.

3. This abstracts away the complexity for all users allowing stablecoins as an input asset, and causes small imbalances in the onchain AMM pools which triggers an opportunity for market makers to proceed with the mint workflow outlined below.

Overview

The Ethena Staking contract is an extension of the with the added ability for a cooldown period upon unstaking as well as a legally required ability to freeze funds for sanctioned addresses.

Users in permitted jurisdictions can stake & unstake ENA/sENA with Ethena via our UI.

Using the UI, the staking & unstaking ENA/sENA user workflow is:

1. The user requests to stake/unstake ENA/sENA via our dApp interface by clicking "Stake"/"Unstake", which pops up their selected wallet to sign the requested transaction.

2. After the user signs the transaction with their wallet, the transaction is submit to the blockchain.

Overview

A number of measures have been taken to ensure the integrity and resilience of the deployed smart contracts. These measures are designed principally to ensure the safety of protocol assets, but also to ensure reasonable governance occurs.

Below is a list of some, but not all, of the user security measures Ethena Labs has implemented across the deployed smart contracts.

Overview

"Oracles" typically refer to price feeds a protocol utilizes to perform key business logic and functions. Ethena utilizes price feeds from various sources given the importance of real-time data to trading & risk workflows which exist offchain.

The system is split between onchain and offchain components.

Context

Based on Arthur Hayes' example in his article:

Here, we have used an inverse perpetual to explain the different payoff scenarios of a delta-neutral strategy. Ethena will utilize both inverse and linear perpetuals. The payoff outcomes on an inverse perpetual are more intricate and as a result, we focus on explaining those scenarios below.

An Ethereum inverse perpetual which is worth $1 of Ethereum paid out in Ethereum has the following payoff function:

$1 / Ethereum Price in USD

Ethena uses multiple "Off-Exchange Settlement" providers such as , , and .

These are three separate, non-US based & owned, well-regarded & institutionally focused organizations with the sole focus of holding digital assets in custody.

The Risk Committee’s mandate is to generally identify, evaluate, and manage risk within the ecosystem

Members

With regards to the Risk Committee, every 6 months, the terms for all 6 members of the committee will lapse, and their positions will be put up to governance via broad vote for either (i) confirmation for another term or (ii) to be filled by a replacement member.

For the current six month term, the Risk Committee members are as follows:​

The information contained in the following video or on this website is not directed at persons with their habitual residence or registered office in the European Union or the European Economic Area.

Users in permitted jurisdictions can stake & unstake USDe/sUSDe with Ethena via the UI.

Using the UI, the staking & unstaking USDe/sUSDe user workflow is:

1. The user requests to stake/unstake USDe/sUSDe via our dApp interface by clicking "Stake"/"Unstake", which pops up their selected wallet to sign the requested transaction.

2. After the user signs the transaction with their wallet, the transaction is submit to the blockchain.

3. Upon successful confirmation of the transaction, the user receives sUSDe/USDe as their USDe/sUSDe is atomically swapped.

Important to Note

• Users do NOT need to do anything but hold sUSDe to receive rewards.

• Rewards aren’t earned directly by sUSDe holders; rather, it accumulates within the staking contract, which results in the "value" of sUSDe rising over time. Users are able to unstake their sUSDe at any time, at which point they receive an amount USDe reflecting the staked amount plus any increase in value of sUSDe from the time the user staked until unstaking.

• The amount of sUSDe a user will receive when staking USDe will depend on the current value of

Context

Users are able to receive rewards by staking their USDe and receiving sUSDe atomically in return.

Overview

The amount of sUSDe a user receives is determined by how much USDe was transferred as well as when it was transferred. Ethena's sUSDe utilizes a reward-bearing "Token Vault" mechanism, the same as or .

The protocol does not rehypothecate, lend out, or otherwise utilize deposited USDe for any purpose. There is no need for any such action, as the USDe backing mechanic inherently creates value in the system.

This mechanism simply enables Ethena to provide rewards to ecosystem participants without users having to do any action to "earn" it. The USDe value of sUSDe grows on its own. When a user unstakes his or her USDe, the user receives an amount of USDe equal to the initial amount staked plus their share of rewards deposited in the staking contract as rewards while that user's USDe was staked, as reflected in the USDe value increase of sUSDe.

Important Notes

• The amount of sUSDe you receive when you stake USDe is likely to be less in number, but valued at the equivalent amount of USDe. This is a result of the "Token Vault", reward-bearing mechanism and the ratio defined below in the worked example.

• The value of USDe will remain worth the market trading price of USDe while sUSDe will grow in USDe value as the protocol deposits rewards in the staking contract daily.

• If the protocol were to suffer a loss due to funding or another reason, Ethena's reserve fund is intended to bear the cost, rather than the staking contract.

Calculation & Worked Example

sUSDe:USDe ratio = (total sUSDe supply) / (total USDe staked + total protocol revenue deposited in USDe terms)@c

Ethena's "Hedging System" is composed of a number of offchain application services that enable many critical aspects of the user experience, including:

• Calculating & publishing indicative prices for minting & redeeming USDe.

• Returning pricing to mint & redeem USDe requests.

• Ensuring the integrity of the system in real time.

The "Hedging System" ingests & interacts directly with the protocol's onchain smart contracts as well as the Ethereum blockchain.

Responsibilities

At a level lower of detail, the "Hedging System" performs the following functions (but is not limited to):

• Ingests market data from CeFi Exchanges, "Off-Exchange Settlement" providers, Pyth and Redstone. This data includes order book updates, public trade information, as well as private portfolio, positions, orders, and trade information.

• Normalizes and validates the integrity of market data.

• Calculates the risk exposure of the portfolio relative to defined risk limits and goals.

Hedging FAQ

"Minting" USDe refers to the creation of new synthetic dollars. "Redeeming" USDe is the reversal process, of exchanging synthetic dollars for the assets that collateralize them.

The methods of minting vary depending on the type of stablecoin/synthetic dollar. Here we will explore the novel Ethena synthetic dollar minting process.

The Ethena synthetic dollar minting system encompasses the following design principles:

How does it work?

1. Users request a price from the Ethena Pricing API.

2. Users can generate a signed order and optionally submit it to Ethena's minting server.

   • Note: at this stage, users have complete control over their assets - they have the freedom to create, hold, and sign the price at their discretion. The approval to transfer assets only happens when the user willingly signs the order.

By blending centralized and decentralized elements in this way, Ethena achieves a relatively high level of trustlessness. Users always retain control over their assets prior to mint and their orders will be processed exactly as specified. And while Ethena has some control over order acceptance, the blockchain's transparency and cryptographic guarantees mean users can confidently engage with the protocol, knowing their transactions are secure and unalterable.

Slippage

Slippage occurs when the price at which a trade is executed differs from the expected price, usually due to market volatility or trade size.

Ethena has designed its minting process to minimize slippage for users. Before submitting a minting transaction, users receive a "price" from the Ethena Pricing API that includes a predefined slippage range. The user then signs this price, confirming their acceptance of the potential variation within the specified range.

When the transaction is executed, the smart contract logic ensures that the final minting settlement price falls within the signed slippage range. This approach provides users with a level of certainty about the price they will receive and makes the transaction predictable.

Slippage management is a key part of Ethena's minting design strategy, aiming to provide users with a more stable and transparent transaction experience.

Audit

The Ethena Minting Contracts are regularly audited. See the section for up-to-date information.

Quick Answers

Q: Am I only able to get USDe via minting USDe with Ethena?

No, you can acquire USDe initially via decentralized protocols such as Curve and Uniswap as well as buy & sell USDe on Centralized Exchanges such as Binance, OKX and Bybit.

Context

Ethena utilizes derivatives positions to offset the delta of the protocol backing assets. These derivatives positions are traded upon CeFi exchanges such as Binance, Bybit, Bitget, Deribit, and Okx. As such, in the event an exchange were to suddenly become unavailable such as FTX, Ethena would need to manage the consequences. This is the "Exchange Failure Risk" we are referring to.

What happens in the event of a failure of an exchange?

Ethena retains complete control and ownership of the assets via Off-Exchange Settlement providers with no backing assets ever being deposited with any exchange. This limits Ethena's exposure to idiosyncratic events on any one exchange to the outstanding PnL between Off-Exchange Settlement providers' settlement cycles.

Copper's Clearloop runs a settlement cycle daily.

As such, in the event of an exchange failure, Ethena would delegate the backing assets to another exchange and hedge the outstanding delta that was previously covered by the failed exchange. In the event of an exchange failure, the derivatives positions are considered closed with Ethena holding/owing no further obligation to the exchange estate.

Capital preservation is front of mind for Ethena. In the event of extreme circumstances, Ethena will always work to protect the value of the backing assets & USDe stable peg.

How is the exchange failure risk managed?

As with all parts of Ethena' workflows, Ethena is agnostic to each provider at each step of the workflow.

• Ethena diversifies the risk and mitigates the potential impact of exchange failure by utilizing multiple exchanges.

• Ethena is continually integrating with new sources of liquidity in an effort to limit the protocol's exposure to each source.

• Ethena actively monitors the ecosystem with investors, advisors, and friends across the industry, taking a proactive approach to de-risking exchange exposure if associated risks are perceived to have changed.

Ethena's strategy involves a portfolio allocation across different instruments and venues:

• 7% liquid cash (no intraday risk)

• 3% deliverable futures

• 90% perpetual futures, allocated as:

  • Binance (50%): Daily settlement, 3 funding cycles

Ethena distribution across hedging venues can be viewed in our

Monthly attestations are completed with the custodians to validate the existence, control, and value of the backing assets of USDe.

These attestations continue to demonstrate that NONE of the backing assets of USDe reside directly on any of our exchange partners.

• November 2025

• October 2025

• September 2025

The section of the Ethena dashboards contain all monthly attestations to date.

Given USDe's underlying peg stability mechanism is for the protocol to be long spot assets & short a derivatives position, a common question has been:

"How does a change in the price of BTC affect the underlying backing composition?"

This is a great question in that it allows discussion in more detail about the composition of assets in the Ethena backing in different BTC price scenarios.

Overview

Ethena is required to implement safeguards in order to provide connective tissue between DeFi and centralized liquidity venues. The multisig is used to minimize these trust assumptions for core onchain functions.

Our FAQ aims to answer every question we've been asked on Ethena and USDe.

Link to the full FAQ .

While the Ethena protocol attempts to minimize trust assumptions across all areas of the infrastructure, certain trust assumptions need to exist in order to access centralized liquidity and enable the scaling of the underlying product.

As the protocol develops further, there are specific plans to gradually reduce trust assumptions on certain entities.

Summary of Major Trust Assumptions

At a high level, the "Hedging System" is composed of broadly five services:

1. Portfolio Management System

2. Market Data Parser Service

3. Reference Data Service

Please consider information in this Risk Disclosure Statement (“Statement”) as a general overview of the risks associated with the services offered by Ethena Labs and its affiliates (the “Services”) made for your awareness only. We do not intend to provide investment or legal advice through this Statement and make no representation that the Services described herein are suitable for you or that information contained herein is reliable, accurate or complete. We do not guarantee or make any representations or assume any liability regarding financial results based on the use of the information in this Statement, and further do not advise to rely on such information in the process of making a fully informed decision whether or not to use the Services. The risks outlined in this Statement are not exhaustive and this Statement only outlines the general nature of certain risks associated with crypto assets, and does not discuss in detail all risks associated with holding or trading crypto assets. Users should undertake their own assessment as to the suitability of using crypto assets and associated Services based on their own investigations, research and based on their experience, financial resources, and goals. You should not deal with crypto assets unless you understand their nature and the extent of your exposure to risk.

Note that specific disclosures and terms of service will apply with respect to various offerings of Ethena Labs, which will be published separately. Users should refer to those terms in addition to the disclosures herein when deciding whether to utilize the Services.

For the purpose of this Statement “you”, “your”, and “User” mean a user of our services and “we”, “us”, “our”, or “Ethena”, means Ethena (BVI) Limited. Users are strongly advised to read this Risk Disclosure Statement carefully before deciding to start using the Services.

RISK OF LOSS IN TRADING CRYPTO ASSETS CAN BE SUBSTANTIAL AND YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH ACTIVITY IS APPROPRIATE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD BE AWARE OF THE FOLLOWING:

Staking is controlled by the StakedUSDe smart contract. Stakers can interact with it directly or through the Ethena dApp UI.

• When staking, a user transfers USDe into the contract and receives sUSDE (staked USDe) in return, another ERC20 token.

• Over time, additional USDe is transferred in as rewards.

Logos

A more extensive collection of assets in Figma can be viewed .

Context

Ethena conducts several validations to ensure both the user and the protocol can honour the signed order before it is submitted to the blockchain.

When users mint or redeem USDe, after the user has signed the order with their wallet, Ethena retains "last-look" ability. This enables Ethena to be sure the price agreed between Ethena & the user wouldn't impose a loss on the protocol. This is principally motivated to ensure neither Ethena nor the user is adversely affected in highly volatile markets.

Validations

Context

Given Ethena uses derivatives positions, such as perpetual contracts, to hedge the delta of the backing assets, the protocol is exposed to "Funding Risk".

"Funding Risk" relates to the potential of persistently negative funding rates. Ethena is able to earn revenue from funding, but could also be required to pay funding.

While this is a direct risk to the protocol revenue and backing, the data presented below demonstrates that negative funding periods tend not to persist and revert to a positive mean.

Negative funding rates are a feature, rather than a bug of the system. USDe has been built with this in mind.

We acknowledge that historical data before Ethena's launch does not reflect Ethena's impact on the market. We are monitoring updated funding rate dynamics and will provide updates to this section as we collect the new data.

How Ethena manages Funding Risk

An Ethena reserve fund exists and will step in on occasions when the combined revenue between LST assets, such as stETH, the funding rate for a short perpetual position, the basis from short dated futures as well as potential rewards from holding liquid stables, is negative. This seeks to protect the spot backing underpinning USDe. Ethena does not pass on any "negative revenue" to users who stake USDe for sUSDe. Ethena also adopts a dynamic allocation approach to the assets backing USDe. In periods of low or negative funding, more of the backing assets of USDe will be shifted into liquid stables earning approximately the U.S Treasury rate. This aims to reduce the exposure to negative funding rates and thus reduce the possibility of the Reserve Fund being drawn from. See the Dynamic Allocation section for more details.

Positive Bias

BTC and ETH funding rates have exhibited natural positive bias and contango, with an average annualized rate of between 7.8% - 9% over the last 3 years on an open interest or volume-weighted basis, including the 2022 bear market.

Below represents the 30d moving average of funding rates, indicating that positive bias is evident, particularly in 2021 and 2023.

Charting the distribution of funding rates per contract, one can further see the positive bias per exchange, with the coloured box per contract indicating the middle 50% of datapoints. That middle 50% of funding data is predominantly positive values on most exchanges.

Margin of Safety

Using LST collateral, such as stETH, as collateral for USDe, provides an additional margin of safety for negative funding in the form of the ~3% annualized returns earned on stETH.

A reward-accruing liquid stables allocation also aims to provide an additional margin of safety, including the dynamic allocation approach mentioned above.

Looking at annualized funding rate values, one observes 17.5% and 15.9% of days had a sum negative return for ETH and BTC perpetual futures respectively, with an average return over the entire period of 9.15% for ETH versus 7.80% for BTC.

Combining annualized staked ETH income and ETH funding rate values, one observes only 8.84% of days had a sum negative revenue. This excess revenue could be seen as an upper bound to protocol revenue.

There has only been one quarter in the last 3 years where the average sum return was negative and this data was polluted by the ETH PoW arbitrage period which was a one-off event that dragged funding deeply negative.

Mean-reversion

Funding rates have displayed mean-reverting characteristics, which is to say they may dip negative but those rates do not persist and don't drift lower over time. Positive baseline funding on some of the biggest derivative exchanges, with over 50% of open interest (Binance & Bybit), help keep funding rates naturally positive.

Reversion to a positive mean can be seen in the longest consecutive days of either positive or negative funding rates. Negative funding rates revert quicker thanks to the dynamics described above, with the longest streak of consecutive days with negative funding lasting just 13 days.

The longest streak of positive funding days has been 176 days, set between late 2023 and early 2024 and charted below.

For a more detailed explanation on the distribution of funding rates as it relates to USDe, please read this Twitter from the Ethena Labs founder on the topic.

Following on from Collateral Custody & Security, both Ethena's onchain and offchain composite services interact & engage with "Off-Exchange Settlement" providers in a number of ways.

Overview

Given the peg stability mechanism of USDe, Ethena's "Treasury Management" system increases and decreases the sizes of delta hedging derivatives positions as users mint and redeem USDe. As the supply of USDe increases, the delta will change and more short derivative positions are entered into to eliminate backing asset price exposure, and vice versa when USDe supply shrinks.

In the process of minting & redeeming USDe, users transfer & request backing assets in exchange for/from USDe. In addition, given USDe's peg stability mechanism, Ethena needs to be able to:

• Safely & securely custody protocol backing assets.

• Transfer backing assets between smart contracts & users.

• Delegate/Undelegate backing assets between "Off-Exchange Settlement" providers and centralized exchanges.

Ethena also needs to be able to transfer rewards to the Staking Smart Contract & the "Off-Exchange Settlement" provider plays a role.

Example Internal Workflows

Some workflow examples to highlight how different components of the system interact with "Off-Exchange Settlement" providers:

• Upon a user successfully minting USDe, the transferred asset is transferred by the Minting smart contract directly to the "Off-Exchange Settlement" provider.

• Upon a user successfully minting USDe, the internal hedging system needs to open an additional short derivatives position to hedge the increased delta exposure of the newly transferred asset from the user. As such, the "Off-Exchange Settlement" provider is instructed to delegate funds to the exchange.

• Upon a user successfully redeeming USDe, the user receives protocol backing assets from the Minting smart contract. The minting smart contract needs to be actively monitored and refilled with protocol backing assets from an "Off-Exchange Settlement" provider.

"Off-Exchange Settlement" Provider Benefits

"Off-Exchange Settlement" providers provide unique benefits critical to many aspects of the user experience:

1. Ethena is able to prove the existence and control of protocol funds onchain.

   • Protocol backing assets remain onchain with solutions provided by regulated and trusted parties. These entities are non-US based.

   • This enables users to enjoy the benefits of the ability to verify the existence and control of assets onchain, while also enjoying the benefits of high governance & security protections used by institutional participants.

Custody FAQ

Roles in EthenaMinting contract

Overview

The Ethena minting contract has been designed to offer a safe and secure platform for the creation of USDe. Its atomic operations ensure that tasks are either fully completed or reverted, leaving no room for partial executions. Its immutable nature guarantees that its critical rules and operations cannot be easily altered, ensuring consistency and trust in the process. It has these key pieces of functionality:

1. Minting: Minters can mint USDe by providing assets and receiving USDe tokens in return. The backing assets are transferred to "Off-Exchange Settlement" providers based on a predefined route. The minting process is subject to a maximum limit set by the contract.

2. Redemption: Redeemers can redeem their USDe by providing them as input and receiving the underlying assets back USDe in return. The redeemed USDe tokens are burned from the user's balance. The redemption process is subject to a maximum limit set by the contract.

3. Signature Verification

Roles in smart contracts are what control lower level operations and function calls. It's a security feature, like AWS IAM, that allows the authors of smart contracts, and the users using them once deployed to the blockchain, to be certain of how they can operate.

Roles in the Ethena Minting contract

There are five roles in the Ethena Minting contract. You can view the deployed Ethena Minting contract on the Ethereum blockchain here.

Ethena enables the creation and redemption of a delta-neutral synthetic dollar, USDe, crypto's first fully-backed, onchain, scalable, and censorship-resistant form of money.

The mechanism backing USDe enables sUSDe, the first "Internet Money" offering a crypto-native, reward-accruing asset, derived from liquid asset rewards (to the extent utilized in backing) and the funding and basis spread available in perpetual and futures markets.

Peg Stability Mechanism

Ethena does not use any material leverage to margin the delta hedging derivatives positions beyond the natural state as a result of exchanges applying slight discounts to the value of backing assets to the extent used as backing and margin collateral on the initial hedge and issuance of USDe.

Key Information

1. Users are able to acquire USDe in permissionless external liquidity pools.

2. Approved parties from permitted jurisdictions who pass KYC/KYB screening are able to mint & redeem USDe on-demand with Ethena contracts directly following whitelisting. See Supplemental USDe Terms and Conditions.

3. There is minimal reliance upon traditional banking infrastructure as trustless backing assets are held and stored within the crypto ecosystem.

Mechanic Example

1. A whitelisted user provides ~$100 of USDT or USDC and receives ~100 newly-minted USDe atomically in return less the gas & execution costs to execute the hedge.

2. Slippage & execution fees are included in the price when minting & redeeming. Ethena earns no profit from the minting or redeeming of USDe.

3. The protocol opens a corresponding short perpetual position for the approximate same notional dollar value on a derivatives exchange.

Generated Revenue

The Ethena protocol generates three sustainable sources of revenue from the backing assets.

The protocol revenue is derived from:

1. The funding and basis spread from the delta hedging derivatives positions.

2. The rewards earned from liquid stable backing assets.

3. Staked ETH assets receiving consensus and execution layer rewards.

Revenue from staked assets is floating by nature and denominated in the native asset - for example, liquid staked ETH tokens are typically denominated in ETH.

The funding and basis spread can be floating or fixed depending upon if the protocol uses non-deliverable or deliverable derivatives positions to hedge the backing asset delta.

Rewards from liquid stables depends on where the assets are held and the rates offered by external stakeholders. These rates may vary based on the institution or platform managing the stables. For example, certain platforms may offer fluctuating interest rates on deposits, which can affect the overall returns.

The funding and basis spread has historically generated a positive return given the mismatch in demand and supply for leverage in crypto as well as the existence of positive baseline funding. If funding rates are deeply negative for a sustained period of time, such that the staked asset revenue cannot cover the funding and basis spread cost, the Ethena "reserve fund" is designed to bear the cost.

Risks

The protocol is exposed to including but not limited to:

1. Smart Contract Risk

2. External Platform Risk

3. Liquidity Risk

4. Custodial Operational Risk

Ethena recognizes these risks and actively attempts to ameliorate & diversify these risks as much as possible. In practice, this means the system uses multiple providers for each step of the workflow and actively monitors all partners and market conditions.

Please refer to the section for more information.

There is one presently available trade strategy available to users to profit from a price dislocation of USDe in external markets from what it is actually worth:

Cross Market Arbitrage: purchasing or selling USDe into the protocol mint & redeem contract when USDe price has diverged from $1.

Trade Strategies

It's important to keep in mind:

• USDe is backed strictly by the protocol backing assets.

• USDe is able to be minted & redeemed on demand by authorized, whitelisted users. This means that at any time, approved users are able to ramp in & out.

  • about 0.50% of backing assets are typically held in stablecoin form and available in the Minting Smart Contract to enable on-demand redemptions. This balance is systematically replenished from the 4% of the backing assets of USDe held in stablecoins that are readily available from multiple custodians.

• The value & amount of USDe's underlying backing is generally unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc., though fluctuations in those markets may cause temporary dislocations in the secondary market price of USDe as the market's "reference assets" for the target peg.

• The value of the reserve underpinning USDe is generally unaffected by the removal of liquidity in volatile markets.

1. Cross Market Arbitrage

This strategy enables any user approved to mint/redeem to profit from the difference between the price/amount users' are able to mint/redeem USDe with Ethena & the value of USDe in an external market. An external market includes all centralized & decentralized spot markets such as "USDe/USDC" and AMM Protocols such as Uniswap or Curve.

If USDe is worth LESS in an external market than from Ethena directly, a user could:

1. Buy 1x USDe at 0.95 from Curve using USDT.

2. Redeem 1x USDe at 1.00 from Ethena receiving USDT.

3. Profit.

If USDe is worth MORE in an external market than from Ethena Labs, a user could:

1. Mint USDe using USDT from Ethena.

2. Sell the USDe in the Curve pool for > 1.00 for USDT.

3. Profit.

Overview

Several measures have been taken to ensure the integrity and resilience of the deployed smart contracts. These measures are designed principally to ensure the safety of protocol assets, but also to ensure reasonable governance occurs.

Below is a list of some, but not all, of the user security measures Ethena has implemented across the deployed smart contracts.

Measures

1. Only whitelisted user wallet addresses are able to successfully mint & redeem USDe. This seeks to ensure that only non-malicious actors are able to call the aforementioned functions.

2. Provided backing assets are only able to be sent from the Ethena Minting contract to whitelisted wallet addresses of our OES provider partners. This ensures protocol backing is not able to be diverted to improper wallets and protocol funds enjoy the legal and governance protections without interruption.

   • Updating the whitelisted addresses in the Ethena Minting contract requires a multi-sig transaction by members of both Ethena & external responsible parties.

Overview

Ethena upgraded the Mint and Redeem Contract from the to the on the 8th of July 2024 at approximately 10am UTC.

Ethena gathered feedback from all key stakeholders, requested buy-in, and scheduled the deployment at a date & time that was optimal for whitelisted API users. This upgrade represented a breaking change to existing whitelisted users' trading systems.

Both versions of the contract were written by the same engineering team and have both successfully passed .

The updates to the Mint and Redeem Contract were principally motivated by:

USDe.sol is the contract of USDe. It extends ERC20Burnable, ERC20Permit and Ownable2Step from OpenZeppelin. There's a single variable, the minter address that can be modified by the OWNER. Outside of Ownable2Step contract owner only has one custom function, the ability to set the minter variable to any address.

The minter

Last Revised on August 2025

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This section applies to you if you are able to avail yourself of certain rights under GDPR.

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In particular, you have the right to object at any time to the processing of your data (in particular in the case of so-called profiling) based on Art. 6 (1) sentence 1 (f) GDPR (data processing on the basis of a balancing of interests) or Art. 6 (1) sentence 1 (i) GDPR (data processing in the public interest) in accordance with Art. 21 (1) GDPR. We will then no longer process your personal data for these purposes, unless we can demonstrate compelling legitimate grounds for the processing which override the interests, rights and freedoms of the data subject, or the processing serves to establish, exercise or defend legal claims.

If your personal data is processed for direct marketing, you can also object to the processing of your data for the purpose of direct marketing at any time in accordance with Art. 21 para. 2 GDPR, including profiling, insofar as it is related to such direct marketing. If you object, your personal data will no longer be used for these direct marketing purposes.

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HOW TO CONTACT US

​Should you have any questions about our privacy practices or this Privacy Policy, please email us at .

.

At Ethena, the integrity of our smart contracts is paramount. We maintain this by conducting comprehensive audits, which help identify potential vulnerabilities, logical errors, or inefficiencies. These rigorous audits, carried out by industry experts, fortify our security and seek to increase trust in the platform.

Approach to Audits

Ethena has undertaken a multi-phased audit program to ensure the highest level of security on the procotol.

Phase 1: conducted initial audit with Zellic on the v1 of the protocol where no critical or high level vulnerabilities were found. Phase 2: architecture design review and economic risk factor analysis with Spearbit's Kurt Barry former Lead Engineer at MakerDAO

Phase 3: phased audit with industry leading firms: - - & Phase 4: independent audit with with individual experience of over 50 audits

Phase 5: public audit with

Phase 6: economic and financial risk audit by

Phase 7: upcoming public bug bounty program with

Reports

Zellic Audit on v1 of contracts

Our initial audit on the first version of the contracts was performed by and was a success in that no critical, or high vulnerabilities were identified. The small and medium-level feedback and optimisations were reviewed and patched during the audit cycle.

Quantstamp Audit on v1 of contracts

Attached is the audit report by Quantstamp completed on 18 Oct 2023. No critical or high level issues were identified.

Spearbit Audit on v1 of contracts

Attached is the audit report by Speabit completed on 18 Oct 2023. No critical or high level issues were identified.

Independent Audit by Pashov on v1 of contracts

Attached is the audit report by Pashov completed on 22 Oct 2023. No critical or high level issues were identified.

Public Code4rena Audit on v1 of contracts

Attached is the audit report by Code4rena completed on 13 Nov 2023. No critical or high level issues were identified.

Independent Audit by Pashov on ENA and LP staking contracts

Attached is the audit report by Pashov completed on December 22nd 2023.

Independent Audit by Pashov on V2 of contracts

Attached is the audit report by Pashov completed on May 23th 2024.

Economics Audit and Risk Analysis by Chaos Labs on System Design

Independent Audit by Pashov on Staked ENA (sENA)

Attached is the audit report by Pashov completed on 2 Sept 2024. No critical or high level issues were identified.

Quantstamp Audit on USDTB

Attached is the audit report by Quantstamp completed on 25 Oct 2024. No critical or high level issues were identified.

Cyfrin Audit on USDTB

Attached is the audit report by Cyfrin completed on 31 Oct 2024. No critical or high level issues were identified.

Independent Audit by Pashov on USDTB

Attached is the audit report by Pashov completed on 20 Oct 2024. No critical or high level issues were identified.

Context

While Ethena currently uses spot ETH and BTC as backing assets for short derivatives positions, Ethena uses a certain amount of staked Ethereum spot assets and liquid stables as backing assets as well (6% ETH LST's and 7% liquid stables as of January 2025 per the Positions dashboard).

As a result of the protocol sometimes using a different asset than the underlying (ETH or BTC) of the derivatives positions, and exchange partners operating on a "No Loss" principle, exchanges retain the discretion to forcibly close positions when there is a considerable difference in value between the two assets.

This is called "Liquidation" across the space and only occurs when a user no longer has sufficient collateral to meet the margin requirements of the position. In this context, this is the "Liquidation Risk" being referred to.

This section aims to demonstrate how unlikely a liquidation event is, considering Ethena uses very minimal leverage. Further, at present, the composition of backing assets includes comparatively low amounts of LSTs. However, we felt it was necessary to address the possibility of liquidation and make users familiar with the extreme circumstances that would lead to such an event.

Overview

At a high level, exchanges' risk engines ensure each user has sufficient "Maintenance Margin", to margin existing positions. Many exchanges now offer incremental liquidation as to reduce the cost to the user & the exchange, where a position is slowly closed vs immediately in-full.

Spread

Given the importance to the protocol of the value of the staked Ethereum backing assets trading in line with ETH, it's worth sharing historical data for context.

Lido's stETH's Spread History

Since the Shapella upgrade of the Ethereum network, wherein one of the features was that enabled users to unstake their stETH, the stETH/ETH discount has never been more than 0.3%.

Prior to Shapella, the discount reached 8% at its widest. Users' ability to unstake their stETH for ETH on-demand as well as via swapping in external markets, such as Curve, has ensured that stETH is valued extremely closely to stETH.

Exchange stETH Spread History

While each exchange's risk & liquidation engines are different, the above graph demonstrates the difference between the "Mark Price" and the "Index Price" for stETH & an exchange partner's ETHUSD Perpetual in 2023. The "Mark Price" is how the exchange partner values an ETHUSD Perpetual position while the stETH "Index Price" is that of the stETH spot asset collateral.

This graph demonstrates that for 2023 the widest the spread has been is -3.27% with a median of -0.50%. This further illustrates that the value of the staked Ethereum collateral does not diverge from the value of the perpetual position by an amount that would be anywhere near liquidation, let alone a cause of proactive risk management action from Ethena. In addition, while stETH historically held a dominant market share amongst ETH LSTs, that share has declined dramatically as alternatives such as Mantle's mETH have been introduced to the market, enabling further diversification across assets.

Worked Example: ETHUSD Perpetual

Ethena plans to integrate with all major CeFi Exchanges. It makes sense to demonstrate Ethena's capacity to respond & under what scenarios Ethena's portfolio could be liquidated if the spread between stETH & our derivatives position widened abnormally.

The modelling below aims to demonstrate how unlikely "Liquidation" is to occur. Such a scenario relies upon a series of unlikely events & a series of assumptions to hold that are unlikely to in reality.

An exchange determines a users' "Maintenance Margin" requirement for a position and if the value of the users' collateral falls below this requirement, the user's position begins to be incrementally liquidated.

From the table above, you'll notice that the "MMR" increases as the size of the derivatives position increases. This results in increasing "Maintenance Margin" requirements as the position size grows.

Ethena does NOT trade with any material leverage, measured on an exchange-by-exchange basis, and as a result even with a position size >$100m, the position size grows approximately equally with the amount of USDe circulating, the amount of "Maintenance Margin" required is only half of the backing assets that will be delegated to the exchange.

In the tables below, we will demonstrate the available capacity even if the spread begins to widen & at what point Ethena would begin to be incrementally liquidated. The first column contains the discount scenarios between stETH and ETH, where ETH's value is worth anywhere from 0% to 65% more than stETH.

Our example exchange partner values stETH in backing assets value terms 1:1 with ETH. This means it assigns the same backing assets value of holding 50,000 stETH as it does 50,000 ETH.

This unlikely scenario assumes, and will be detailed further down this page, that Ethena does not take any proactive risk management measures to address this mark abnormality & reduce position size before liquidation is required. Ethena will take proactive risk management steps to protect the value of backing assets.

Some exchanges apply a discount to the value of stETH backing assets depending upon how the derivatives contract is margined & the depth of stETH liquidity in their spot order books. These discounts typically range from 1-0.85 stETH:ETH and are perpetually improving given the low-risk nature of this trade & integrity of the collateral.

To cover all scenarios, you'll notice that even with a stETH:ETH rate of 0.85 the spread needs to diverge to greater than ~25% - 41% to be exact. This scenario has never happened before and for the aforementioned reasons, is extremely unlikely to ever come close. As mentioned before, these scenarios also rely upon the unreasonable assumption that Ethena would not proactively intervene to manage risk.

Preserving the value of backing assets is of the utmost importance to the protocol and as a result, "Liquidation" is something the protocol never wishes to endure. Ethena core contributors work closely with exchange partners to constantly improve the assigned backing assets value of stETH & LSTs.

Internal Risk Management Processes

Ethena principally trades systematically across multiple exchanges as we accommodate users minting & redeeming USDe, our need to cycle positions across exchanges to realize unrealized PnL, as well as our active need to manage liquidation risk across exchanges. The Ethena core team features globally distributed team members who are manually able to intervene & are available 24/7 with experience in system maintenance from Wintermute, Flow Traders, Genesis Trading, DRW, and Tower Research. Ethena’s core team members tasked with manually intervening, if necessary, are both the creators and maintainers of the protocol's systematic trading system and are extremely familiar with all exchanges' risk engines & differences as a result of trading & technology backgrounds in the space (Deribit and Paradigm Liquidity). Given one of the core value propositions of USDe is to remain relatively stable, Ethena never wishes to be or to come close to being liquidated. The steps below detail how Ethena would intervene in the case of a market abnormality as well as are realistic assumptions when evaluating the risk to the backing assets of USDe.

To mitigate "Liquidation Risk" as a result of the aforementioned risk scenarios:

• Ethena would systematically delegate additional backing assets to improve the margin position of hedging positions in the event either risk scenario eventuates.

• Ethena is able to cycle backing assets delegated between exchanges temporarily to support specific situations.

• Ethena has access to the reserve fund that can be rapidly deployed to support hedging positions on exchanges.

Common "Liquidation" Concepts

Given we all have different backgrounds and histories in the space, it feels appropriate to quickly cover concepts such as an exchange "Insurance Fund" and "ADL". These terms directly relate to the function of exchanges' risk & liquidation engines.

Exchange Insurance Funds

An "Insurance Fund" is a concept of all CeFi Exchanges wherein a proportion of trading & liquidation fees are deposited to insure users of the exchange against potential losses or failures of the exchange's risk & liquidation engine.

In the early days of crypto, markets were dramatically more volatile and less liquid. With a greater prevalence of high-levered traders, this resulted in many large profits, but also large losses. Given exchanges operate on a "No Loss" principle, these large losses had to be managed in a manner that didn't bankrupt the exchange or cause the user in profit to wonder if they'll actually get paid. As a result of dramatic increases in the sophistication of exchange risk & liquidation engines, "ADL", available liquidity, and reduction in available leverage, possible losses even in the most extreme circumstances are covered multiple times over by the exchange's reserve funds.

Auto Deleveraging (ADL)

Auto Deleveraging "ADL" refers to when an exchange forcibly closes a user's profitable position at the bankruptcy price of a bankrupt user to end the risk exposure to the exchange.

ADL typically only occurs after an exchange's reserve fund has been depleted and is unable to cover the outstanding shortfall. It's important to note that not all exchanges use ADL as a mechanism, such as Deribit.

These days, ADL is extremely unlikely to be triggered given the aforementioned reasons in the "Insurance Fund" section, but primarily because of the present-day size of exchange reserve funds to absorb losses.

It's important to keep in mind that if ADL were to occur, the users whose profitable positions were closed, would be able to immediately open those positions again. All users are able to mitigate the chance of being selected for ADL, typically based upon users' with positions in the most profit, by frequently realizing unrealized PnL. Ethena actively plans to do this as a part of standard risk management to note.

To note, some exchanges ascribe a haircut to the value of staked Ethereum assets used to margin derivatives positions.

Core Contracts

Mint and Redeem Contract V1: https://etherscan.io/address/0x2cc440b721d2cafd6d64908d6d8c4acc57f8afc3

Mint and Redeem Contract V2: https://etherscan.io/address/0xe3490297a08d6fC8Da46Edb7B6142E4F461b62D3

Staking Contract: https://etherscan.io/address/0x9d39a5de30e57443bff2a8307a4256c8797a3497

USDe Token Contract: https://etherscan.io/address/0x4c9edd5852cd905f086c759e8383e09bff1e68b3

sUSDe Token Contract: https://etherscan.io/address/0x9d39a5de30e57443bff2a8307a4256c8797a3497

sUSDe Rewards Distributions:

USDe to sUSDe Staking Rewards Distributor Contract:

ENA Token Contract:

sENA Token Contract:

sENA Token Contract:

rsENA Token Contract:

Token Contracts on Other Chains

Beyond Ethereum mainnet, Ethena tokens are available on the following chains:

• TON

• Aptos

• Berachain

• Solana

With the exceptions of Solana, ZKSync, and Zircuit, token addresses on all chains are identical, as summarized below:

Liquidity Pool Contracts

USDC x USDe Curve Pool:

crvUSD x USDe Curve Pool:

FRAX x USDe Curve Pool:

mkUSD x USDe Curve Pool: DAI x USDe Curve Pool:

FDUSD x USDe Curve Pool: sDAI x sUSDe Curve Pool:

USDT x USDe Uniswap v3 Pool:

Multisig Wallets

Dev

• 4/8 signers.

• Owner of Ethena's deployed mainnet smart contracts & able to modify contract parameters.