Ethena (ENA): A myriad of stablecoins and what they really do

Intro

In the landscape of digital finance, stablecoins have emerged as essential infrastructure for both DeFi and TradFi participants. Most of the market participants agree that these instruments will be the key in the crypto adoption.

Among the new wave of innovators in this space, Ethena Labs has made a groundbreaking entry with its USDe synthetic dollar. However, the protocol has introduced three other types of stablecoins, each focused on a particular sector in the stablecoin diversification.

The goal of this report is to go through these stablecoins, understand what they are used for, and how to access each one of them.

---

What is USDe and how does it work?

Most people assume that Ethena is a “stablecoin”. However, due to its design, it is more of a synthetic dollar, the stability of which is achieved through a delta-neutral hedge of Bitcoin, Ethereum and Solana on centralised exchanges. The stability is also achieved for a portion of these assets through Ethena’s holdings of other stablecoins such as USDC and USDT.

A selected list of users can mint USDe by depositing stablecoins 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.

Example:

• A user deposits $1000 USDT into the protocol
• Ethena buys $1000 of one of the underlying collaterals (BTC, ETH, SOL)
• These $1000 will serve as a collateral for a short position on this collateral worth $1000, therefore achieving a delta neutral strategy

Here is the detailed breakdown of assets backing USDe:

Ethena’s USDe does not require overcollateralization that we often see in decentralised stablecoins across the crypto ecosystem.

As of April 2025, it is also possible for users to deposit fiat through Alchemy Pay to mint USDe. A governance vote has also recently implemented Solana’s SOL in USDe backing. However, Ethereum remains the main venue for USDe holders.

Here is the distribution of USDe on various chains at the moment of publication:

---

What is sUSDe and how does it work?

Any user holding USDe can stake their synthetic stablecoin to earn rewards. This yield is generated by funding rates on various short positions Ethena has on CEX. When USDe is staked, the user receives the sUSDe token (staked USDe) which earns a portion of interest. sUSDe is an ERC-4626 tokenized vault standard token which was introduced to simplify yield-bearing vaults representation on chain and allow a better composability within the ecosystem.

The rewards are accrued every 8 hours and can only be positive or amount to zero. In a case where weekly funding rates turn negative, Ethena’s Reserve Fund would step in to fill the gap to make the returns equal to zero, which has not happened to date. The Reserve Fund itself is funded through a portion of the revenue generated by the protocol.

Today Ethena generates yield through 3 different revenue streams:

• Staking a portion of ETH that serves as collateral. This ETH is staked in LSTs, such as Lido’s stETH. Today these assets represent just 4% of USDe’s backing.
• Funding rates on the derivatives positions in the delta-neutral strategy.
• T-bills portion of rewards from USDtb backing. These are not used yet for yield distribution to sUSDe holders, but might be a source of diversification of revenue.

A portion of these revenues is then distributed to USDe stakers in the form of yield.

---

What is iUSDe and how does it work?

This stablecoin is less known by the DeFi users and might never even touch this stablecoin. Basically, iUSDe is a “TradFi Wrapped sUSDe” as it was put by Ethena Labs CEO, Guy Young in his article Convergence published in January 2025.

Basically the only difference between sUSDe and iUSDe is its limitations to be more compliant with what institutional investors might be looking for. The idea behind this stablecoin is for Ethena to become an arbitrage vehicle between DeFi and TradFi rates. The returns for sUSDe have been negatively correlated to real rates in traditional finance.

From the information currently available for iUSDe, it will be an institutional-friendly version of sUSDe with a mandatory KYC. This stablecoin will also be available on the upcoming Converge chain once it is launched and will be distributed through various partners such as Horizon by Aave Labs and Pendle.

---

What is USDtb and how does it work?

Unlike USDe, which is described as a synthetic dollar, USDtb is the first stablecoin issued by Ethena. Each USDtb is backed by tokenized U.S. treasuries which are mostly held within the BUIDL fund by Blackrock. USDtb was first announced in December 2024, as a flagship product imagined by Ethena and Securitize.

However, it is important to note that USDtb is not directly issued by Ethena, but by another company called Pallas Ltd, which is directed by Pallas Foundation. Ethena Labs and its affiliates act as service providers for those two entities.

Pallas Ltd, then in turn is the sole shareholder and investor in Pallas Fund, which is a private investment fund. Its role is to invest assets backing USDtb and hold the tokenized treasuries backing the stablecoin. The manager of this fund is Athene, an affiliate of Ethena Labs.

Here’s the representation of the management of USDtb:

As of the publication, USDtb is backed by BUIDL and USDC with the full transparency docs available on their website.

USDtb’s goal is to be a liquid alternative for US-treasury-backed assets on-chain and allow for a better future collateralization for USDe and additional yield for USDe stakers.

---

Conclusion

In the interview published by The Gwart show, Ethena Labs’ CEO, Guy Young made it clear that Ethena’s main objective is to allow its stablecoins to fulfill 2 use cases within the crypto ecosystem. Those are:

• Collateral on exchanges to trade derivatives
• Allow people to use the stablecoins for savings and yield generation

Through USDe available as collateral on Bybit, Deribit, Bitget and others, Ethena is fulfilling the first use case. If the stablecoin continues its growth in terms of Market Cap and stability, we might see other exchanges adding support for USDe, or even USDtb for trading on their venues.

For savings sUSDe and USDtb are both great as it allows exposure both ways for crypto enthusiasts: on the one hand, when crypto is going parabolic and funding rates are high, you would obviously opt for sUSDe. On the other hand, if the market goes through turmoil, then you could instead pivot towards USDtb which might offer a more stable and predictable yield.

However, there is one use case he didn’t mention in the interview and that we view as quite obvious for Ethena regarding its recent developments. Tradfi product distribution which goes both ways.

• On the one hand, Ethena will offer a venue for TradFi companies to distribute their products to “crypto bros” or even other TradFi companies willing to go extra lengths and put their assets on-chain.
• On the other hand, Ethena offers a way for DeFi protocols to distribute their solution to traditional finance by implementing permissionned applications and variations of crypto use cases for institutions.

By offering a myriad of stablecoins, Ethena is trying to offset the market variations by focusing on multiple variations of the product that many have qualified as “the best onboarding tool” or the “next billion users”.

If you want to go further into understanding of various Ethena stablecoins, their documentation is very interesting to read through.