Redefining Stablecoins with Ethena’s Latest Innovation
Ethena Labs, the innovative developer behind the ethereum-based synthetic dollar protocol, has just unveiled a groundbreaking new fiat stablecoin known as UStb. This stablecoin, backed by the prestigious BlackRock USD Institutional Digital Liquidity Fund (BUILD) in collaboration with Securitize Markets LLC, presents a unique and compelling alternative to the existing USDe stablecoin on the market.
Launched in March 2024 on the public ethereum blockchain, BUILD represents BlackRock’s foray into the world of tokenized funds, providing investors with the opportunity to earn interest in U.S. dollars through Securitize Markets LLC. Specializing in the tokenization of real-world assets (RWA), Securitize Markets LLC has facilitated the rapid growth of BUILD, establishing itself as the largest tokenized U.S. Treasury fund with assets under management exceeding $522 million.
Stability Ensured: The Power of Collateralization
UStb will enjoy full collateralization by BlackRock’s BUILD and Securitize, ensuring its stability and reliability as a fiat stablecoin. Operating in a manner reminiscent of traditional stablecoins, UStb will offer users and exchange partners a familiar and secure asset to engage with.
In a recent post, Ethena Labs highlighted the differentiated risk profile of UStb compared to USDe, allowing users and exchange partners the flexibility to select the option that aligns best with their risk tolerance. Notably, one of the concerns raised by the community regarding USDe is how the protocol responds to negative funding rate environments. Despite bearish conditions over the past six months, USDe has not experienced a single week of negative funding.
Furthermore, Ethena’s governance will have the capability to adjust the backing composition of USDe, potentially incorporating UStb during periods of weak funding to mitigate risks effectively.
Expanding Partnerships and Enhancing Offerings
As Ethena builds upon its existing partnerships with centralized exchanges like Bybit and Bitget, the introduction of UStb into the mix presents exchange partners with a valuable choice between two stablecoin offerings, USDe and UStb. This move reflects Ethena’s commitment to providing innovative solutions that cater to the diverse needs of users and market participants.
Stay tuned for more updates from Ethena as they unveil additional details regarding UStb’s timeline and new exchange integrations in the near future. The evolution of stablecoins continues to drive advancements within the digital asset space, and Ethena remains at the forefront of this transformative journey.
USDe: Pioneering Synthetic Stability with Unique Risks
Introduced in February 2024, USDe emerged as a synthetic dollar that rapidly gained traction, positioning itself as the fifth-largest stablecoin by market capitalization, as per DefiLlama data. With a circulating supply of $2.54 billion as of Sept. 26, USDe has solidified its presence in the stablecoin landscape.
Unlike traditional stablecoins that rely on direct fiat or asset backing, USDe utilizes derivative hedging strategies to maintain its U.S. dollar peg. By leveraging assets like bitcoin (BTC), Ether (ETH), Solana (SOL), and other crypto assets as collateral, USDe employs an arbitrage-based model for token minting and redemption, generating yields through a cash-and-carry strategy.
However, this innovative approach introduces certain risks, including exposure to derivatives markets, exchange counterparty risk, and collateral volatility, which could impact its peg stability during adverse market conditions.
During a broader crypto market selloff on Aug. 5, USDe underwent a stress test with nearly $100 million in redemptions. While the stablecoin briefly dipped to $0.997, it swiftly rebounded to its $1 target, demonstrating its resilience and robustness.
In response to a security breach involving its domain registrar account, Ethena Labs temporarily disabled the frontend on Sept. 18 to address the issue promptly and ensure the security of user funds.
