Ethena Labs, the synthetic stablecoin protocol, has recently integrated with several centralized exchange wallets, including Binance, Bybit, OKX, and Bitget, as of April 10. In order to incentivize users, Ethena developers announced that those who lock their USDe stablecoins in exchange Web3 wallets for a minimum of 7 days will receive a 20% reward boost. These rewards, known as “Ethena sats,” can be converted to the platform’s native ENA token at the end of each campaign. To earn sats, users need to deposit Ethena USDe stablecoins into their exchange wallets, connect to the Ethena decentralized finance (DeFi) protocol, and stake their holdings. As of now, the protocol has a total value locked of $2.274 billion, generating an annualized revenue of $178 million.
The protocol’s ecosystem rewards have gained significant attention and usage. According to blockchain analytics firm Lookonchain, since the start of Ethena Staking Season 2, the top 10 wallets have withdrawn a total of 37.5 million ENA ($51 million) and staked them.
Less than a month after launching its USDe stablecoin on March 8, Ethena became the highest-earning decentralized application in the crypto market by offering a 67% annual percentage yield (APY) on USDe. Currently, the protocol offers an APY of 24% on its stablecoins. However, it is important to note that these yields come with risks, as they rely on the trading income of complex Ethereum derivatives to fulfill the promised returns.
Addressing concerns about the high yield, Guy Young, the founder of Ethena Labs, dismissed comparisons to the failed Terra stablecoin, TerraUSD (UST), stating that such comparisons were knee-jerk reactions. He emphasized that Ethena’s yields are organic and sustainable, unlike Anchor’s yield, which he claimed was completely fabricated.
Ethena’s verifiable yields are derived from various sources, including Ethereum consensus layer inflation rewards, execution fees paid to Ether (ETH) stakers, maximal extractable value fee captures acquired by Ether stakers, and trading income provided by Ethena Labs. The firm opens short derivative positions when it receives long-position collateral assets for minting USDe, and the difference in value between these positions is then distributed to USDe holders as yield.
In related news, Frax Finance recently allocated $250 million of USDe to dive into DeFi liquidity.