Ethena

Ethena is a protocol that issues USDe, a synthetic dollar backed by crypto collateral rather than by cash held in a bank. ENA is the protocol's governance token. The project launched in 2024 and grew quickly, becoming one of the larger dollar-denominated assets in decentralized finance within its first year.

The mechanism behind USDe is a delta-neutral hedge. The protocol holds crypto assets such as ether and simultaneously opens equivalent short positions in perpetual futures on derivatives venues. The long spot position and the short futures position offset each other, so the combined value stays roughly stable in dollar terms even as the underlying asset's price moves.

Where the yield comes from

That structure also generates income. Perpetual futures markets typically pay a funding rate to short positions when the market is net long, and the protocol collects that funding along with staking rewards on the collateral. Users who stake USDe receive sUSDe, which accrues this yield.

The risks are specific to the design. Funding rates can turn negative for extended periods, which turns the income stream into a cost. The hedges are held on centralized derivatives venues, introducing exchange and custody risk that a fully on-chain system would not have. The protocol maintains a reserve fund intended to absorb periods of negative funding.

The ENA token

ENA has a maximum supply of 15 billion, all issued as total supply, with roughly 9.83 billion circulating. It is a governance token used to vote on protocol decisions including risk parameters, supported collateral, and which venues the protocol hedges on. Ethena has also expanded into related products, including USDtb, a more conventionally reserve-backed stablecoin.