Ethena (ENA): A Deep Dive into the Ecosystem

Quick reminder of what Ethena is

Ethena has taken a unique approach to tokenizing a delta-neutral carry trade. While most dollar-denominated assets are tethered to the traditional banking system or real-world assets (RWAs), Ethena issues USDe, a synthetic dollar that is backed by crypto assets such as ETH, stETH, and BTC without the need for overcollateralization.

Ethena is built on the original idea conceived by Arthur Hayes in his article titled “Dust on Crust.” The article criticized the fact that stablecoin issuers still rely on traditional banks that might drop them at any point and instead advocated for a stablecoin backed by derivatives.

→ Check out this breakdown we have published to learn more about Ethena’s inception and its founder’s vision:

Inspired by Hayes’ article and learning from failed projects like Lemma and UXD, Ethena accepted the tradeoffs of opening positions on CEXs while keeping collateral assets with custodians.

This collateral is stored with Off-Exchange Settlement Providers (OES Providers), which are independent custodians such as Copper and CEFFU. This allows to safely manage collateral on CEXs, providing an additional layer of security known as Bankruptcy Remoteness.

Once in circulation, Ethena’s USDe stability is maintained via the concept of tokenizing the cash-and-carry trade. In a cash-and-carry trade, an asset is purchased or held long, and at the same time, a short position is taken in the same asset using a perpetual contract. This allows traders to lock in a stable value while also profiting from the difference in the long and short positions.

Ethena has since gone further to issue multiple stablecoins acting as the connective tissue that ties Decentralized Finance (DeFi), Centralized Finance (CeFi), and Traditional Finance (TradFi) together. Here is a list of stablecoins launched by Ethena:

• USDe: Whitelisted entities can mint USDe by depositing collateral such as USDT and USDC to mint USDe. Once the collateral is deposited, Ethena effectively hedges the position by opening a short position on one of the assets.
• sUSDe: When USDe is staked, the user receives the liquid receipt sUSDe token (staked USDe). sUSDe holders can earn attractive returns (e.g., around 10% APY), organically derived from ETH staking rewards and derivatives market funding rates.
• iUSDe: iUSDe is a “TradFi Wrapped sUSDe,” designed for institutional investors.
• USDTb: USDtb is the first stablecoin issued by Ethena and backed by tokenized U.S. treasuries, which are mostly held within the BUIDL fund by Blackrock.

→ If you want to learn more about the stablecoins Ethena launched, check out our research:

At Ethena’s heart are two primary digital assets: USDe and ENA. While Ethena scales as a top revenue-generating protocol through the USDe growth, the staked version of ENA, its native governance token, offers a direct exposure to a large number of projects building on Ethena.

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Staked ENA: Getting Direct Exposure to The Ecosystem Growth

Ethena’s moat of successfully tokenizing a carry trade is not only remarkable but has also yielded impressive growth in revenue. In the landscape of digital finance, Ethena’s USDe supply has been exponential, with the potential to challenge market leaders such as Tether and Circle.

The protocol is currently amongst the top 10 revenue-generating DeFi protocols and unlike USDT and USDC, Ethena offers high-yield opportunities to token holders.

USDe holders can stake their assets and receive sUSDe while earning rewards. This yield is generated by funding rates on various short positions Ethena has on CEXs, making USDe a compelling crypto-native savings account.

USDe’s inherent yield-generating capability has been able to send the USDe market cap to the staggering $10 billion in just 602 days.

Ethena’s first-mover advantage has also carved out a distinct niche that would be difficult to replicate. USDe supply has the potential to continue going north, as well as to become the highest revenue-generating protocol in all of DeFi. This is implied in ENA’s price action, making staked ENA (sENA) an asymmetric bet offering exposure to this revenue. Furthermore, as most of Ethena’s Fee Switch parameters have been met and others nearing completion, sENA holders are well positioned to capture a portion of the protocol's generated revenue

The ENA token serves as the governance backbone, allowing holders to vote on protocol decisions like risk management, asset composition, grants, exchanges, and more. This governance structure combined with the project’s profitability makes ENA a high-conviction bet.

Besides being a way to get exposure to stablecoins and a bet on the success of Ethena, a number of projects building on top of Guy Young’s protocol decided to allocate a portion of their total supply to ENA stakers. In the next part of the research, we take a closer look at the projects who decided to take advantage of Ethena’s exposure to get featured on the Rewards tab and the logic behind their protocols building on Ethena.

We reached out to each project featured in this part of the research to better understand their motivations.

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Projects building on Ethena

By flawlessly capitalizing on crypto's largest addressable market, Ethena has evolved far beyond a simple yield-bearing stablecoin issuer. In fact, its ecosystem growth now reflects DeFi's second-order effects, with strategic integrations of key projects highlighting the protocol's vast potential and drive to build a complete financial system.

Ethena’s value proposition rests on several elements: a yield-generating asset, a stablecoin, and a new DeFi paradigm.

Ethereal

About Ethereal

Ethereal is a decentralized exchange (DEX) for spot and perpetual trading. With a TVL of $320 million, less than 20 ms latency and approximately 1 million orders per second, it promises to be fast and secure.

Ethereal’s vision is to metamorphose into a DeFi everything app with USDe and Ethena at its center for deep liquidity, while its spot and derivative hedging strategies add valuable ecosystem benefits. Ethereal can also grow into a critical piece of infrastructure at the center of the Ethena ecosystem.

→ We have covered Ethereal in our research piece on CLOBs that you can find here:

To fast-track the journey to mainnet, Ethereal will be deployed first on Arbitrum mainnet with a subsequent migration to Converge chain when it launches on mainnet.

Points Program

Ethereal’s Season Zero Program allowed users to earn points by depositing USDe in their pre-deposit vault via the platform’s app. Since launching in February, Season Zero surpassed $1B in deposits from 30,000+ unique users

Season Zero ended on August 14, 2025, and Season 1 has already begun. 15% of the supply of a potential Ethereal governance token will be distributed to sENA holders based upon Ethereal points.

Key details include:

• Points accrue linearly based on deposit size and duration, with no minimum stake and the ability to unstake anytime.
• Epoch 1 is a short transitionary period between Season Zero and the launch of Ethereal Mainnet where users can continue earning Ethereal Points (0.01 daily points per eUSDe). eUSDe is the receipt token for depositing USDe in Ethereal.
• A 30x Ethena Rewards Multiplier boosts returns, a referral program offers extra points for inviting others, and one can maximize points with eUSDe integrations within protocols like Aave, Euler, and Strata.
• Epoch 2 will be the first phase of the Ethereal mainnet rollout, where users who hold USDe can earn Ethereal Points as well as USDe rewards and Ethena Rewards.
• Epoch 3 is a public beta for all Ethereal users to earn Ethereal Points, USDe rewards, and Ethena Rewards for trading and/or holding a balance on Ethereal.
• Epoch 4 kicks off expansion into exciting trading pairs, integrated lending/earning products and community liquidity provision vaults.
• Staking ENA has a 7d unstaking period, and an additional locking (14d unlock period) should increase Ethereal points obtained. However, this is risky considering ENA’s price action and the fact that the 15% ethereal governance token airdrop won’t be adequate compensation.

Founder’s Opinion (@0xAfif)

→ Why choose Ethena's ecosystem to build your CLOB?

USDe is the best reward-bearing USD denominated collateral available onchain with scale. Crypto native collateralization + competitive rewards make it an attractive money lego to build on top of while spot+deriv hedging flows for USDe backing tack on some additional ecosystem synergies.

→ What is the long-term vision for Ethereal and its role in Ethena's ecosystem?

From a product standpoint, the vision for Ethereal is a DeFi everything app with USDe at the center. Ethereal can also grow into a critical piece of infrastructure at the center of the Ethena ecosystem. Ethena has scaled to $10B TVL by effectively acting as a link between CEXs and DeFi through USDe/sUSDe, and we see Ethereal becoming another major piece of this puzzle.

Strata

About Strata

Strata Money, often referred to simply as Strata, is a DeFi protocol built on USDe with a TVL of $194.9M at the time of writing. It functions as a perpetual yield-tranching protocol that allows users to customize their exposure to crypto-native yields by splitting the returns from Ethena's sUSDe into two distinct risk-based tranches.

Inspired by Ethena’s founder Guy Young’s X post, Strata decided on an innovative approach of building structured yield products on USDe's delta-neutral strategy and targeting institutional investors entering DeFi, especially through Converge.

This enables investors to choose between low-risk yields or higher-risk leveraged returns, effectively customizing their yield exposure while ensuring liquidity, composability, and transparency.

During periods of low funding rates, Ethena shifts/reallocates more of its assets towards USDtb. This reallocation directly benefits sUSDe and sUSDe serves as the underlying asset for Strata's main "tranched" products:

• srUSDe (Senior Tranche) is the low-risk layer. It earns consistent, stable returns from Ethena's overall strategy, protected from major downside.
• jrUSDe (Junior Tranche) is the high-risk layer. Holders here "underwrite" (take on) the risk if Ethena's yields underperform compared to SSR yields. In return, they get leveraged upside when Ethena outperforms.

Another innovative upgrade looks to Strata’s plans to create structured yield products based on Ethereal’s market-making vault: srELP and jrELP (Ethereal Liquidity Pool).

Mirroring the USDe tranches, srELP earns stable returns from the yields generated by Ethereal's LP and jrELP underwrites the volatility in profit-and-loss (PnL) from the vault, but in exchange, captures leveraged upside when performance is strong.

We must understand that Strata aims to scale as Ethena launches new yield products, expands to Hyperliquid, or builds on Plasma.

Points Program

With its Season Zero points program already live as of July 22, 2025, many in the community have begun accumulating Strata Points. 7.5% of supply of the Strata governance token will be distributed to sENA holders based upon Strata points.

Key details include:

• pUSDe is the receipt token for depositing USDe/eUSDe in the Strata Points Farm on the Ethereum mainnet.

At the time of writing, the PT APR of the pUSDe Pendle vault is around 15.98%, 7% higher than the “pure” USDe vault with later maturity, although it earns all of the USDE points as well, putting the pure Strata points APR at only 7%.

This seems like a decent potential entry point if you actually believe USDe points are really worth 8.85% and consider buying the YT.

Team’s Opinion (@0xUnQuid, Core contributor)

→ Why did you decide to build on Ethena?

We have been Ethena maxis since early 2024. We understood from the beginning that USDe and sUSDe are a new DeFi primitive with effectively unlimited scale, but that scale could be accelerated with complementary products. What attracted us most was that Ethena delivers crypto-native yield at massive scale, uncorrelated to traditional markets, and it has historically outperformed both other DeFi and TradFi benchmarks.

Guy’s tweet inspired us to design a model that takes Ethena’s yield and we can build structured yield products on top. These sit alongside sUSDe, targeting the kind of sophisticated allocators who are increasingly entering DeFi, especially through Converge.

We are accelerated by Ethena and an integral part of the Ethena Network. From there, we realized our model could expand far beyond the initial design, expanding into a suite of Structured Yield Products, especially as Ethena executes on its broader vision around Hyperliquid and other venues. That is when we doubled down on making our architecture modular and extensible. From Ethena's sUSDe to beyond.

→ The looping of USDe across multiple dApps on Ethena has helped the protocol multiply its growth. As you are building a layer on top of Ethena, do you perceive looping as a long-term risk?

We do not see looping as a systemic risk. It is simply an expression of improved capital efficiency. If a rate arbitrage exists, the market will naturally exploit it until rates converge across DeFi. That arbitrage window is temporary, but while it exists, it actually strengthens the product by amplifying returns and reinforcing Ethena’s role at the center of the stablecoin yield market.

→ In an environment where funding rates are high, sUSDe yield outperforms SSR. However, if we enter a period of lower funding rates, do you plan to also integrate USDtb on Strata?

In periods of low funding rates, Ethena dynamically reallocates more toward USDtb within its strategy. That allocation flows directly into sUSDe, which is the foundation of our main tranched products (srUSDe and jrUSDe). We created structured tranches where the senior earns stable returns from Ethena’s strategy, while the junior explicitly underwrites the risk of Ethena underperforming SSR yields in exchange for leveraged upside during outperformance.

As Ethena launches new yield products, we will build structured yield products on  those as well, so our SYPs suite scales in lockstep with Ethena’s. News on this front is coming very soon.

→ What do you think your long-term role and impact will be in Ethena's ecosystem? How do you plan to integrate with other dApps in the ecosystem?

In just one month of Pre-Deposits, we have already integrated with Pendle and several lending markets. Once we are live on mainnet, we will be among the first protocols to launch on Converge, playing a key role in migrating USDe liquidity into the L2. srUSDe will also be one of the first yield-bearing assets to trade on Terminal.

Beyond that, we are building srELP and jrELP (Ethereal Liquidity Pool), a structured yield product based on Ethereal’s market-making vault, similar to HLP. This creates an overcollateralized yield-bearing stable where the senior tranche earns stable returns from ELP yields and the junior tranche underwrites PnL volatility while capturing leveraged upside.

Our long-term role is to be the structured yield layer of the Ethena ecosystem. As Ethena expands to Hyperliquid, we will tranche those strategies and launch more SYPs. As they build on Plasma, we will tranche those as well. All of our products are cross-chain through LayerZero, making them as composable as Ethena’s own suite, but with tailored risk exposures for every new yield primitive Ethena brings to market.

Terminal

About Terminal

Terminal Finance is a decentralized finance (DeFi) protocol designed as a liquidity hub and marketplace for trading institutional assets, tokenized real-world assets (RWAs), and reward-bearing digital dollars, such as yield-bearing stablecoins (YBS). It has a TVL of $280.55M at the time of writing and is deeply integrated with the Ethena ecosystem, serving as a key component for Ethena's upcoming Layer 2 blockchain, Converge.

The platform takes advantage of the yield-bearing properties of sUSDe or wstETH and applies centralized liquidity and yield-skimming mechanisms to optimize capital efficiency, reduce risks, and position itself as a liquidity center for yield-generating Stablecoins.

Points program

While the goal is to launch on Converge mainnet, the Root Access program went live on June 26th, 2025, marking the beginning of our bootstrapping phase for Terminal’s spot decentralized exchange. The program is restricted for users in certain jurisdictions, including the United States, and the plan is to conclude this first session within 3 months of Converge mainnet launch. 10% of supply of the Terminal governance token may be distributed to sENA holders based upon Terminal points.

Key details include:

• Initially it focuses on pre-deposits into three base asset vaults: USDe → tUSDe, WETH → tETH & WBTC → tBTC
• Root rewards accrue linearly based on deposit size and duration, with no minimum stake and the ability to unstake anytime.
• Ethena offers a 30x multiplier, and ether.fi a 3x boost on points earned through the Root Access Program.
• Users can earn additional Roots by referring others. For every referral, they receive 10% of the Roots they accumulate as a bonus, with no impact on their earnings.

Deposits will be used to form trading pairs for Terminal’s launch:

• USDe → Staked as sUSDe to form: USDe/sUSDe
• WETH → Wrapped as weETH to form: WETH/weETH
• WBTC → Staked as eBTC to form: WBTC/eBTC

As Terminal is designed for trading YBS, withdrawals are made in the yield-bearing form

• USDe is withdrawn as sUSDe (the staked version)
• WETH is withdrawn as weETH (the wrapped version from ether.fi)
• WBTC remains withdrawable as wBTC

Yield from sUSDe and weETH during pre-deposit goes to a smart contract on Converge, to be reinvested into Terminal’s core protocol components in a future version.

Team’s Opinion (SB, Core Contributor)

→ Why did you choose Ethena as the ecosystem where you wanted to launch?

sUSDe is the best digital dollar, it just needs a venue to trade. On top of that, sUSDe or wstETH have that very interesting "yield-bearing" property. How do we take advantage of it? Terminal skims all the yield and injects it into a bribe market, making Terminal Finance an extremely efficient venue to bootstrap liquidity for ANY project.

→ tUSDe is essentially a wrapped version of sUSDe, that allows you to earn the interest from the delta neutral strategy Ethena uses. Is it a way to bootstrap your launch without raising funds?

At the moment, the collected yield is not being used to fund project development. The current plan is to allocate part of this capital as incentives for key players in the model we will be rolling out, and eventually, to support project development.

→ We are seeing the end of Season 0 for Ethereal with the first version of the app launching on Arbitrum before Converge goes live. Will you wait until the rollout of the chain or will you go multichain to expand to other ecosystems?

The goal is to deploy on Converge, we are committed to that. Should there be delays, we have a strategy in place not to lose velocity. We believe Terminal Finance doesn’t need to be on Converge to be relevant, thanks to its yield-skimming mechanism among other things.

→ Why did you choose to allocate a portion of the total supply of your token to ENA stakers? What role do you think ENA will play in Terminal's design and more broadly in the crypto ecosystem?

Terminal is supported by Ethena and has worked closely with them. Naturally, the next step to express alignment and solidify its position as Converge core marketplace was to give back to the community.

Similar to how BNB functions within the Binance ecosystem, the ENA token serves as the backbone of the broader Ethena ecosystem. Projects that build using Ethena’s primitives often allocate a portion of their token supply to deepen integration within it. In the future, it’s plausible that some of the protocol’s proceeds could be distributed to ENA holders.

Regarding ENA's role in Terminal, we’re designing a platform to trade it in an efficient and non-custodial way. Nothing more to share for now.

Derive

About Derive

Derive Protocol is an OP Stack rollup that settles perpetuals and options trades. Formerly known as Lyra, it is the largest on-chain options protocol and comprises of a team with a background in equity options and market making, shipping in crypto since 2021. Derive is building options & structured products on USDe, leveraging Ethena liquidity and USDe composability to uniquely enable new financial primitives.

Derive x Ethena

Following strategic alignment with Ethena, 5% of the supply of the Derive $DRV governance token will be distributed to sENA holders based upon Derive points. Points tracking starts Dec 3rd, 2025.

Unfortunately after reaching out to Derive, we did not receive the team’s response to include their opinion and reasons to build on Ethena.

Echelon

About Echelon

Echelon is the premier MoveVM lending protocol & appchain with $343m+ in TVL, building on networks like Aptos, Movement, and Initia. The protocol enables users to access a capital-efficient and secure way to access permissionless leverage via over-collateralized loans.

Partnership With Ethena

Leveraging its existing success, Echelon acts as Ethena's gateway to the MoveVM ecosystem via their upcoming appchain built on Initia. Echelon will also be building a number of Ethena-powered borrow-lend products like sUSDe-based leverage strategies and modular lending markets for related assets like Ethena Pendle PTs.

As part of this partnership, Echelon has committed 5% of its native token to reward the sENA holders.

Team’s opinion (@Wayne0x8)

→ Why did you guys decide to build on Ethena?

We see Ethena as one of the most innovative DeFi protocols with USDe quickly becoming one of the most adopted synthetic stablecoins. By supporting Ethena assets like sUSDe, Echelon can plug into a rapidly growing ecosystem and offer our users access to high stablecoin yields. For us, it’s about aligning with stablecoin adoption and the DeFi opportunities that our users demand.

→ What was your process of choosing Move as your primary market? Is it difficult to implement EVM markets (such as Ethena) and what kind of effect are you looking for when integrating those?

We chose Aptos and the Move ecosystem because of its technical strengths namely high throughput and low latency.

Supporting EVM assets like Ethena does require additional work. Things like bridging, oracle feeds, and risk frameworks must all be carefully designed. By bringing assets like sUSDe, we’re able to expand Aptos’s Defi offering and give users access to more yield opportunities

→ Why did you choose to allocate a portion of your points to ENA stakers?

Alignment and exposure. We’re directly rewarding the community that actively supports Ethena’s and Echelon’s growth. It also allows us to tap into Ethena’s most engaged users and vice versa.

→ Aave has been one of the largest catalysts for the growth of Ethena. Now that they are deployed on Aptos, how do you tackle the competition?

We welcome Aave’s deployment on Aptos. It validates the opportunity here and brings more attention to Aptos DeFi as a whole. Instead of seeing Aave as competition, we see this as a rising tide that lifts all boats. Our edge is onboarding and supporting longer-tail assets and new integrations.

InfiniFi

About InfiniFi

InfiniFi is a fractional reserve stablecoin protocol and creator of the iUSD receipt token, which allows users to deposit stablecoins in exchange for iUSD receipt stablecoins, which can then be staked for different yield options.

For lower risk, users can stake iUSD for siUSD, which is liquid. For higher risk, users can lock up iUSD for liUSD, which is illiquid. InfiniFi deploys the liUSD liquid tranche capital into lower risk return money markets like Aave or Fluid, while optionally deploying the siUSD illiquid tranche into higher risk return strategies.

The exact ratio of these deployments is informed by the preferences of depositors and the yield options they select (siUSD vs liUSD). This model allows InfiniFi to distribute amplified yields for both groups of depositors than if they had pursued their strategies individually.

Ethena and InfiniFi Partnership

InfiniFi’s addition to the Ethena ecosystem stems from a shared principle for capital efficiency and smarter risk exposure. As the yield hub for the DeFi ecosystem, Ethena is the primary place on chain where infiniFi can park liquidity at scale to amplify rewards for users.

InfiniFi selected Ethena assets as their foundation for duration-based return generation, with sUSDe and Ethena PTs forming well over 50% of iUSD's backing.

For every $1 locked it powers $1.60 into Ethena assets, amplifying returns for infiniFi users:

Users seeking sUSDe exposure without the risks associated with locking their assets can stake iUSD for liquid siUSD. This position provides fractional exposure but with the benefits of instant redemption.

sENA holders incentives include 15% Bonus Bytes (infiniFi points) boost, plus reward multipliers across Balancer pools and Pendle positions.

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A broader look at Ethena’s DeFi and Infrastructure Partners

Lucrative yields have helped the USDe find market fit by empowering users to engage in complex financial strategies while earning competitive yields. sUSDe is particularly integral to the leveraged yield strategy, as it can be used to acquire Pendle’s Principal Tokens (PT) and Yield Tokens (YT), while Aave plays a pivotal role in amplifying the potential of this strategy. Its support for PT assets as collateral has unlocked new yield opportunities.

For instance, Sealaunch’s Dune Analytics dashboard tracking Ethena assets on Aave shows roughly $6.8 billion of related positions on the lending protocol, split across $4.2 billion in Pendle principal tokens (PTs), $1.5 billion in USDe, and staked USDe worth $1.1 billion at the time of writing.

Loop Strategy using Pendle and Aave

The looping of USDe across multiple dApps on Ethena has helped the protocol to multiply its growth. By enabling recursive lending and leveraged positions, Aave unlocked new use cases for USDe. This strategy involves an iterative process where users lock sUSDe yield via Pendle to mint fixed-rate principal tokens. They then leverage up on Aave by borrowing other stablecoins against those positions to purchase more USDe/sUSDe and deposit the borrowed funds as further collateral.

The yield is driven by three factors:

• The base yield rate of PT-sUSDe.
• The leverage multiple achieved through Aave.
• The interest rate spread on Aave.

Composability is Ethena’s greatest strength, and that same composability has been instrumental in USDe supply growth. However, it also creates reflexive dynamics that amplify both expansion and contraction cycles, underscoring the importance of robust risk management.

In August, Chaos Labs, Aave’s risk partner, published a comprehensive assessment of the protocol’s growing exposure to USDe. While some reporting focused narrowly on downside risks, the actual analysis was more balanced: it confirmed Ethena’s resilience under stress tests, highlighted its deep liquidity, and emphasized how reflexive flows such as PT repricing and stablecoin debt repayments can help stabilize Aave during downturns.

Here is the the stabilizing factors noted:

• PT Repricing: When yields compress, Pendle PTs tend to rise in value, improving unwind conditions and reducing disorderly exits.
• Loop Unwinds Repay Debt: Liquid leverage loops repay stablecoin debt into Aave when they unwind, directly refilling liquidity and dampening utilization spikes.
• Debt Swaps Support Peg: PT borrowers swapping USDe debt into USDC/USDT create natural buy pressure for USDe, helping stabilize its peg during redemptions.

Chaos Labs stressed that these were recommendations, not verdicts. Their role is to identify potential pressure points so that protocols like Aave and Ethena can scale responsibly. In practice, their findings suggest that as long as liquid leverage positions remain larger than PT/USDe debt, deleveraging phases should provide net stabilizing flows.

We reached out to both Aave and Pendle to get their insights for this research.

Team’s opinion: Charles Yu, Aave Researcher (@fullnodechuck)

→ How has Ethena’s integration with Aave impacted borrowing and lending dynamics within Aave markets, particularly in terms of demand for stables and collateral assets?

Ethena's integration on Aave has been an important driver of growth of borrowing activity on Aave. Leveraged yield strategies (i.e., "looping") has increased borrowing demand of stables, especially when funding rates are positive and Ethena is in growth phase, which have driven higher utilization and borrow rates. In turn, this has sparked more deposits of stables on Aave to take advantage of the higher lending APY.

→ Looping strategies have been a key growth driver for Ethena. How does Aave view these strategies in terms of their impact on liquidity, risk, and stability across the protocol?

Aave is supportive of new composable DeFi primitives enabled by partnerships with protocols like Ethena. The strategies make use of Aave's E-Mode for correlated assets. Our risk managers have actively monitored & managed the Ethena exposure in relation to the rest of the protocol with frequent changes to supply caps on each market for USDe and USDe-related assets (incl. sUSDe and PT-sUSDe assets), as well as changes to LTV levels and interest rate models for each asset. These parameters place a limit on Ethena loop positions and are carefully considered in relation to the amount of stablecoin liquidity available on Aave & external markets to ensure sufficient liquidity buffer during contraction/deleveraging cycles.

→ What role does Aave play in helping protocols like Ethena scale rapidly while maintaining capital efficiency and risk management? What are the key learnings you've got from this partnership?

Aave has played a critical role in Ethena's rapid growth (see our case study on the Aavethena partnership) - over 50% of USDe-related assets (incl. sUSDe & Pendle PTs) are now deposited on Aave, a testament to the flywheel effects of the Aave liquidity engine.

Aave has supported looping strategies for yield-bearing assets (incl. for LST/LRT assets and stablecoin pairs) through E-Mode - this unlocks more flexibility for users and provides liquidity to support asset growth. But the Aavethena partnership really demonstrated Aave's ability to support this level of growth at scale, which strengthens our position in DeFi lending. In addition, Ethena also uses Aave as a venue to manage a portion of its collateral reserves (including USDC and USDtb deposits) and generate yield.

→ Aave Ethena Pendle. Do you think this trio will continue to innovate and bring new strategies to the crypto market? How do you view this partnership?

Yes, Pendle has been a great innovation for the space and together, Aave x Pendle x Ethena have really showcased how powerful the leverage engine can be around USDe, which applies to other yield-bearing stables. We believe that the innovative use cases illustrated here can spark further development of yield-enhancing strategies on Aave, which strengthens our position in DeFi lending. These strategies enabled by this group of partners will play an important role in driving growth for other yield-focused protocols which aim to target new use cases in different settings.

→ How are the looping risks mitigated? What processes are put in place to avoid a liquidation cascade?

Aside from the risk parameters discussed above, just in terms of market dynamics, an increase in utilization would likely result in collateral borrower exits if rising borrow costs make looping strategies less favorable. In addition, any deleveraging/contraction events would likely result in stabilizing counter flows - for example, unwinding looped positions would replenish liquidity in Aave stablecoins and ease upward pressure on stablecoin borrow rates. Debt swaps executed by PT/USDe borrowers to sell stables to buy USDe would also create net buying pressure during times of redemption for Ethena, which also actively manages its reserves through its Dynamic Allocation strategy. Recommend looking at Chaos Labs' Risk Report which covers these market dynamics in detail.

Team’s Opinion: TN Lee, Pendle CEO (@tn_pendle)

→ Ethena and Pendle have had a really close relationship and have grown together. What are the biggest strengths and learnings you’ve got from this partnership? What has contributed to this success?

The success has come from genuine synergy between both protocols, that is stablecoin innovation from Ethena and yield trading from Pendle. Together, we’ve created rails where stability and yield speculation can thrive side by side. A key ingredient has been the constant communication between both teams, aligning on strategy for partnerships, chain expansion, and co-marketing. Beyond that, we’ve been deliberate about planning ahead together, such as shaping a joint roadmap that includes rails to onboard institutional clients through regulated, KYC-enabled platforms. By working closely and anticipating what the next stage of DeFi needs, we’ve managed to grow in step and capture opportunities that might otherwise have been missed.

→ Ethena users often employ looping strategies that interact with Pendle’s yield markets. From your perspective, how has this feedback loop influenced liquidity, trading volume, and pricing efficiency on Pendle?

There has been consistently strong demand for looping PT-Ethena assets across major money markets, which has translated into meaningful TVL growth for both protocols. This, in turn, benefits the broader Pendle ecosystem: higher trading volumes generate more fees for LPs and vePENDLE holders, creating a positive sum outcome across the board. More importantly, the expansion of the PT economy itself reinforces the credibility of Pendle assets as yield-bearing instruments. This demand sets off a powerful flywheel. As looping pressure pushes YT prices lower, it makes YT more attractive for traders, which simultaneously enhances the attractiveness of fixed yield for institutions and whales. The constant churn of swaps keeps LP incentives strong, resulting in deeper liquidity not only for Pendle but also for protocols listed on Pendle, further strengthening the ecosystem and reinforcing its reputation as DeFi’s yield-trading hub.

→ Pendle unlocks the ability to trade and fix yields. How critical do you think this yield-trading layer has been for Ethena’s ability to offer stability and predictable returns at scale?

Pendle’s PTs have become a cornerstone asset for low-risk strategies across protocols, Ethena’s PT-USDe and PT-sUSDe being prime examples. The predictability of PTs makes them especially attractive to funds and more sophisticated players, serving as the starting point for a wide range of DeFi strategies. Ethena’s product design, by nature, is tied to funding rates and broader market performance. By combining this with Pendle’s fixed yield layer, we’ve been able to offer institutions and whales something uniquely powerful: reliable, predictable yield that supports wealth preservation and growth. This has been critical in building confidence at scale. Looking ahead, with Boros maturing, Ethena will gain the ability to hedge funding risk exposure directly on-chain, a natural extension of the relationship and another layer of security that can drive deeper liquidity and adoption.

→ Looking forward, what new opportunities do you see for Pendle and Ethena to deepen its integration (new yield primitives, or risk management tools)?

The future of DeFi won’t only be on-chain, it will increasingly bridge off-chain markets. For Pendle and Ethena, this means expanding into rails that enable regulated institutions to participate with confidence. KYC-enabled, permissioned platforms are already part of the roadmap, opening the door for compliant access to stablecoin fixed yields, including use cases like Shariah-compliant structures. At the same time, Boros will play a crucial role in allowing Ethena to hedge funding risk exposure as liquidity scales, giving institutions the confidence to size up meaningfully. By combining innovation in yield primitives with risk management and regulated onramps, Pendle and Ethena are well-positioned to build the foundational yield layer for both DeFi natives and TradFi entrants."

Aavethena: Liquid Leverage

Besides organic growth resulting from the partnership between Pendle, Aave and Ethena, another set of incentives was announced to boost Ethena’s assets deposits on Aave.

On July 29, 2025, Ethena announced a strategic partnership with Aave, which features  an enhanced yield opportunity and capital efficiency. As a liquidity layer, Aave's collaboration with Ethena allows users to deposit 50% sUSDe and 50% USDe into a single position on Aave, unlocking dual sources of yield: the normal USDe loan interest rate and the annual percentage yield (APY) from sUSDe.

Known as Liquid Leverage, this strategy is particularly appealing to those seeking to maximize yield while maintaining access to their assets. Liquid Leverage addresses the liquidity constraint associated with the 7-day unstaking period for sUSDe, as maintaining a 50/50 mix of USDe and sUSDe ensures that a portion of deposits remains liquid and unaffected by the cooldown.

Users can now access layered rewards without compromising liquidity. This improves the capital efficiency of leveraged strategies on Aave and is currently incentivized to provide a blended return that approximates a yield of a 100% sUSDe position.

Contango: Looping on Ethena’s yields

Contango integrates with Ethena by enabling users to loop sUSDe and USDe against DAI on MorphoBlue marketplace, allowing high leverage (up to 11x) on Ethena's yields. Instead of manually browsing different markets, Contango provides a unified trading interface for users to shop for the best rates and open a position directly on Contango.

Users can borrow cheaply against USDe or sUSDe to reinvest their borrowed stablecoins. The addition of these pairs allows users to farm Ethena points (SATS) and earn from rate differentials (sUSDe yields of 30-60%) and on Contango, leveraging USDe/DAI or sUSDe/DAI is a straightforward process that happens via flash loans under the hood.

Since it taps into money markets, Contango offers some of the industry's lowest funding rates, which are 3x lower and less volatile, on average, than Binance. This contributes to Ethena's growth by making its yields more accessible across multiple markets, amplified for leveraged trading, attracting yield farmers, and increasing USDe TVL.

While the most successful markets have always been wstETH/ETH and weETH/ETH loops from Etherfi, sUSDe and USDe pairs have been gaining more momentum to represent around 10% of the total volume on all stablecoin pairs (DAI/USDC/USDT). In terms of Open Interest (OI), Ethena’s assets represent around 36% of the total OI across all stablecoin pairs on Contango.

Security has always been the top priority for Contango, and by default Contango limits effective leverage with an added buffer to shield users from a sudden swing in price or rates. Additionally, Contango uses a "meta aggregator" (an advanced router), including native minting routes via Enso Finance whenever available, to find the optimal spot execution prices, reduce costs, and access deeper pools.

Team’s Opinion: Mitch, Core Contributor @ Contango (@mitch_contango)

→ You are listed as one of the ecosystem partners on Ethena's dashboard. What was the service that you guys provided to Ethena's users?

Contango provides a unified trading interface to loop Ethena's assets across multiple lending markets and chains. Instead of manually browsing different markets, you can shop for the best rates and open a position directly on Contango. All sats are automatically accrued to your positions.

→ One of the reasons behind Ethena's growth was looping. Mainly people looping USDe on Aave and Pendle.

What are the risks associated with looping and how do you respond to these with Contango?

Some risks are external to Contango: liquidations, depegs, illiquid markets, rate spikes, bad spot execution. But we've gone the extra mile to reduce their impact as much as possible. For instance, by default Contango adds a little buffer to your position so you can't really open at max leverage, to avoid being liquidated right away from a sudden swing in price or rates. We also use a meta aggregator to query the best spot prices in DeFi, including native minting routes via Enso Finance whenever available. Regarding risks related to Contango itself (such as smart contract risk), we've detailed them all here: https://docs.contango.xyz/basics/risks

→ You are listed on Ethereal as one of the partners. Do you expect to onboard other protocols from the Ethena's ecosystem? How do you plan to integrate them if so?

At the moment we're focusing on our upcoming v3, so we've put major integrations in standby, but we still list new assets as long as they're available as collateral on a lending market.

→ Looping has become a big part of crypto. How do you find new markets to deploy your strategies on? Which ones were the most successful so far?

The most successful markets have been wstETH/ETH and weETH/ETH loops, as shown on our Dune dash: https://dune.com/contango_xyz/contango-v2. We tend to favor new PTs for listing, but we list new instruments that show good borrowing liquidity on a money market and good liquidity on spot markets. We obviously prefer yield-bearing assets like stables or ETH and BTC derivatives.

→ More info in Contango’s docs

Plasma: Pay with Tether, Save with Ethena

Plasma and Ethena announced a strategic collaboration in April 2025 focused on integrating USDe into Plasma's ecosystem from the mainnet beta launch. Plasma, an EVM-compatible layer 1 dedicated to stablecoins, is designed to attract stablecoin users by offering zero-fee Tether USDT transactions. This, combined with USDe's yield-bearing capabilities, is the vision behind "Pay with Tether, Save with Ethena."

Plasma enters a market where stablecoins already settle billions of dollars daily and by incorporating USDe, users will be able to invest in yield-bearing stablecoins from within Plasma upon its launch.

The platform aims to expand ecosystem liquidity and usability while broadening its range of stablecoin-centric financial services; this is mutually beneficial for Ethena as it enhances the utility of USDe. The launch of USDe rewards on the Plasma mainnet test version is a testament to the commitment.

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Institutional partners

Securitize (Converge)

Ethena announced plans to move its DeFi ecosystem to Converge, a new EVM-compatible  blockchain it is building in partnership with Securitize.

With Converge, Ethena aims to make DeFi more accessible to institutions by providing compliant settlement and custodial service. The goal isn’t to become yet another Layer 1 but to  further strengthen its competitive edge as a full stack.

The market opportunity lies in the rapid growth of the RWA sector and integration between TradFi and DeFi. Turning the stablecoin issuance business model on its head, Ethena led the rise of yield-bearing stablecoins but Converge will unify stablecoin minting, yield earnings, a compliance base layer, and an ecosystem of dApps, effectively creating a full-stack moat.

Additionally, an already structured ecosystem gives Ethena a “cold-start” advantage.

The vision is for Converge to be a settlement layer that delivers competitive, transparent, and high-performing financial products to both retail and institutional users, centered on USDe & USDtb and secured by ENA. It is expected that  many various DeFi protocols, such as Aave, Pendle, Maple, Morpho, and Ethereal, will invent incentive programs to attract TVL onto the new chain.

Similar to what Binance has done in know-your-customer (KYC) trading, Converge will integrate a native KYC wrapper and provide access to Ethena and Securitize’s whitelisted investment products.

→ OAK Research has published a comprehensive report on the Converge blockchain, which you can access here :

Securitize, Anchorage (USDtb)

Announced in December 2024 as the first product imagined by Ethena and Securitize. USDtb is a yield-bearing dollar token primarily backed by BlackRock’s BUIDL and crypto collateral rather than traditional reserves to maintain its $1 peg. It is the first-ever stablecoin with a clear pathway to becoming compliant with the recently enacted GENIUS Act (America’s new law to regulate the issuance of stablecoins).

This would be achieved by partnering with the federally regulated crypto bank Anchorage, which will mint and redeem USDtb tokens directly in the U.S. under the GENIUS Act's compliance standards. A move that aims to create a clear way for institutions to hold and use the token within regulated financial channels.

It is important to clarify that USDtb is not directly issued by Ethena. Instead, it is issued by Pallas Ltd., which operates under the direction of the Pallas Foundation. Ethena Labs and its affiliates serve solely as service providers to these two entities.

As Ethena becomes a bridging layer for CeFi, TradFi, and DeFi, it has also demonstrated that it is becoming more antifragile over time.

HyENA

If two things have found product-market fit in DeFi, they are demand for leverage and yield.

In perpetual trading, every position has a collateral asset attached to it, whether it is from stablecoins, funding rates, or hedging strategies. And if there is liquidity and yield, USDe can be found there (source: HyenaTrade on X).

This positions Ethena favorably, as it can thrive in an environment where liquidity flows freely, adapting and thriving. In other words, Ethena can adapt to ever-evolving market conditions, capitalizing on whatever the latest and most trendy narrative is.  With USDe already live on both Hyperliquid exchange & HyperEVM: HyperCore users who hold at least 100 USDe can earn daily rewards auto-airdropped on top of their USDe spot exchange balances

Ethena sees a big opportunity in using Hyperliquid’s HIP-3, and has already secured the HUSD ticker for potential use. It is expected that the team will collaborate with Hyperliquid to launch HyENA Trade, a perp-DEX built on Hyperliquid’s infrastructure with USDe as the core collateral asset.

For Ethena, this means increased utility for USDe and a new Revenue source from builder fees. Instead of being just a synthetic dollar backed by delta-hedged ETH, USDe is now positioned as the margin backbone for an entire perpetuals market.

This would be a massive win-win for both teams, as HIP-3 shares 50% of market fees with the deployer, and if USDe captured just 25% of Hyperliquid’s trading flow, at a 50% take rate, this could bring in $110M - $120M in cost-free annual revenue.

For plain USDe holders, this is about demand and stickiness. For sUSDe stakers, it’s a chance for the hedging engine to scale if perp demand grows and funding remains positive.

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Conclusion

Ethena’s trajectory over the past two years reveals a compelling evolution. It is no longer defined solely by USDe but also by an expanding ecosystem of DeFi protocols powered by an audacious vision.

Together, they position Ethena as a platform that supports the Internet-Bond Alternative: A crypto-native reserve asset that rivals traditional bonds by generating yield through delta-hedged positions. This vision is not merely aspirational but is being operationalized through strategic partnerships, integrations, and incentive alignment, all geared towards a broader ecosystem growth

Much of Ethena’s success stems from the deliberate attempt to serve as a connective tissue for CeFi, TradFi, and DeFi. The team continues to innovate with upgrades like Converge Chain, USDtb, and Hyenatrade, which empower them to build a scalable, censorship-resistant, and fully on-chain alternative to the global financial system.

Simultaneously, Ethena’s approach to ecosystem investment programs and incentives has activated a flywheel where revenue, investment, and growth form a self-reinforcing cycle. USDe is everywhere, and it is more than just a synthetic dollar. The ENA token does not just govern the protocol; it governs an economic engine.

Ethena’s story now represents a broader ambition to redefine what is possible for decentralized finance. Ethena is not only primed to emerge as a successful ecosystem but also as a pioneer in how decentrally governed on-chain entities can build long-term, sustainable value.