Ethena Labs Founder Addresses Concerns about USDe Stablecoin's High Yield
Summary:
Founder of Ethena Labs, Guy Young, has responded to concerns about the high yield of the company's USDe stablecoin, stating that skepticism is necessary in the maturing crypto industry. The Ethereum-based synthetic dollar currently offers a 27.6% annual yield, which raised questions about its financial viability. Unlike the unsustainable yield offered by the collapsed Anchor Protocol, Young assured that Ethena’s yield is sourced from staking returns and shorting Ether perpetual futures contracts, making it verifiable and more robust.
Ethena Labs founder, Guy Young, defended early concerns over the yield for the company’s USDe stablecoin during an interview with Cointelegraph on Feb. 22. Young suggested these concerns are simply indicative of a maturing industry rebounding from the demise of the Terra-LUNA ecosystem. Referring to the Terra-Luna incident as an immediate, reflexive reaction, he claimed that such skepticism is important to determine the strength of protocols early on, before they grow too large if unstable. After its public mainnet launch on Feb. 19, Ethena’s USDe stablecoin triggered alarm throughout the crypto space. The Ethereum-based synthetic dollar presently provides an annual percentage yield (APY) of 27.6%, as stated on Ethena Labs’ website. This figure raised doubts regarding the protocol’s financial viability because it far exceeded the pre-collapse 20% yield of Anchor Protocol on Terra’s UST. The implosion of the algorithmic stablecoin issuer in May 2022 resulted in massive value loss, totaling tens of billions of dollars. Further differentiating USDe from the Anchor protocol, Young explained that the latter’s yield had no support from any sustainable yield-generation strategy. He elaborated, “Anchor’s yield was a facade. It was simply capital provided by venture firms that powered Anchor and funded the yield, which essentially had no source. Conversely, the yield of Ethena’s USD is public knowledge.” Young revealed to Cointelegraph that the yield from the synthetic dollar results from staking returns and leveraging Ether perpetual futures contracts. Jae Sik Choi, an analyst at Greythorn Capital, observed the critical difference between the unsustainable artificially boosted yield of Anchor protocol and the flexible yield offered by the USDe. He stated, “Anchor paid out an actual ~5.81% yield disguised as a 19.45% yield which was a disaster-in-the-making as the product's yield support was less than the promised yield. Unlike Anchor’s ‘risk-free’ returns claim, the source of the USDe yield is clear – perpetual futures and stETH.” Ethena Labs’ USDe is not alone in its promise of double-digit yields. As highlighted on Pendle's homepage, some of Pendle Finance's staking pools, such as the ezETH pool, pledge a fixed 41% APY for staked Ether. Related: EigenLayer recently attracted a $100 million investment from a16z, according to reports.
Published At
2/22/2024 8:27:50 PM
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