‘Internet bond’ project Ethena integrates with Solana
Plus, VC insight from Rishin Sharma, investor at CoinFund
Ethena Labs founder Guy Young | Ben Solomon Photo LLC for Blockworks
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In my time down south, I’ve seen what feels like a surprising number of Tesla Cybertrucks. And while I’m a bit embarrassed to say it, I actually really like their design.
In an era of car design that is characterized by soul-crushing sameness, it’s refreshing to see something different. Why don’t more companies put out cars that look a little wonky? Anyways:
SOL may back Ethena’s high-yield ‘internet bond’
Ethena, the sort-of stablecoin and yield-bearing “bond” project, has announced its integration with Solana.
With the pairing, Ethena becomes the latest buzzy Ethereum initiative to launch on Solana. The project raised intrigue at the time of its February public launch because of its yields in excess of 20%, which raised questions about its sustainability.
Ethena issues the USDe “synthetic dollar” and sUSDe “internet bond,” which can be thought of as a kind of dollar and US Treasury equivalent that don’t need to touch the traditional banking system. These products will be accessible on Solana, and a successful governance vote would make SOL a backing asset for them as well.
USDe is backed by ether, bitcoin, and now potentially solana, as well as corresponding short perpetual futures (perps) trades that keeps its exposure neutral. It generates yield from staked ether held by the protocol, as well as from funding rates, which are basically payments between long and short positions based on market demand. Since crypto traders historically want to go long on crypto assets, Ethena gets paid for its short positions. USDe can be staked for sUSDe (staked USDe), which passes along this yield.
USDe’s market capitalization of $3.1 billion makes it the fourth-largest stablecoin, trailing only USDT, USDC, and DAI, according to CoinGecko.
One potential issue with Ethena’s scheme is that perp funding rates may shrink at some point, especially if Ethena scales a ton and meaningfully raises the demand for shorts. So, in April, Ethena added bitcoin and its $25 billion of open interest as a backing asset. Then today, it announced that it may be adding Solana.
“We aren’t opinionated on base layers and are just product and user focused — we will go where there is demand,” Ethena founder Guy Young told me, adding that he expects Solana’s $2-3 million in open interest to help “comfortably” add more than $500 million in SOL backing to USDe.
Alongside a few Solana DeFi integrations, Ethena will be looking to deploy USDe on Jito’s restaking product when it launches.
SUSDe’s yield is down in recent months, though it’s still at a not-too-shabby 12.3%, according to Ethena’s website. When I asked about the shrinking yield, Young said he can’t predict future crypto rates, though he noted that funding rates are at around their lowest point in the past year. Ether, bitcoin, and solana all currently have negative funding rates, per CoinGlass’ estimate, and all three have had positive rates for nearly all of the past several months.
As yields have fallen a bit, USDe’s market capitalization has also shrunk from a late-June high of over $3.6 billion to today’s figure of $3.1 billion. With this yield crunch in mind, it makes intuitive sense that Ethena might want to start staking its SOL to add an additional source of yield.
Young said “staking rates on Solana are clearly more interesting than ETH to dollarize into our product,” though he noticed such a decision would be subject to Ethena governance.
Ethena’s launch on Solana is a bit reminiscent of PayPal’s similar recent move — as both are stablecoins that, after launching on Ethereum, made deployments on Solana to try capturing some of the excitement surrounding the ecosystem. Solana boosters may hope this trend continues, and that a launch on the network becomes table stakes for notable projects building on Ethereum.
“[I think] it’s an absolute no-brainer for a project to launch on Solana given the amazing user base and great builders,” Ethena head of growth Seraphim opined in a direct message. “DeFi projects should be less dogmatic and look beyond just Ethereum for growth.”
— Jack Kubinec
Zero In
We cite the funding rate a fair amount on Lightspeed, but it’s worth bringing up again today.
The funding rate, measured here by CoinGlass, can be thought of as a measure of the demand for long and short positions for an asset. When demand to go long on Solana is high, as it was in February and March, funding rates will be positive — and a more positive rate means greater demand.
That demand has been more muted in recent months, and it flipped negative this week following the market shakeout. Ethena probably would be happy to see that figure reverse course at some point.
— Jack Kubinec
The Pulse
It’s a hard world out there for a degen. You spend literally minutes a day researching the tastiest up and coming memes. You’ve got 10 different market fundamentals podcasts on constant rotation, hosted by your favorite would-be frat boy broligarchs. You NEVER turn off animations on Pump.Fun.
You’re doing everything right. And yet, here we are. Maximum pain. It just doesn’t make any sense.
For instance, who among us would have ever doubted the staying power of renowned crypto asset Skibidi Toilet (SKBDI), currently down 75% over seven days? Or how about the penguin (and nothing else) themed memecoin, Peanie? That can’t have peaked yet. Doubtless an 800%+ recovery is in order. And that’s to say nothing of tier 1 memescience wünderkind, TrumpCoin (DJT). Sure, it’s down nearly 98% from ATH, but your hands are diamonds. You know it’ll only take one single validating tweet from the oldest candidate in the US presidential race, and we’re back in business. Please, Donald. Just one tweet, ser. (wait, what’s this? It’s Eric Trump with a steel chair!)
Lots of cope happening on X. @CrashiusClay69 notes that “Despite the bloodbath, $brett remains the 67th largest coin in the world.” Very true-ish. 74th is basically 67th. And down a mere 33%. Or how about Ponke, down 54% over three weeks, which according to @LFGNOW1 is “clearly the most undervalued memecoin.” Or JOHN, only down 82% since May, which @cryptofearsol tells us is currently “the most undervalued memecoin.” Or how about a quick shout for Harambe which, despite taking shots at the end of July to the tune of a 70% downfall, remains (sources allege) the “most undervalued memecoin.” Or Mini, Gracie, Nub, and Rogen, which, I don’t know if you’ve heard, but… pause for dramatic effect… they are all the “most undervalued memecoin” right this very meow.
Nah, but we’re so back though. Definitely backed the right horse with this whole memecoin thing. You gigachads keep going.
— Jeffrey Albus
One Good DM
A message from Rishin Sharma, investor at CoinFund:
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