Guy Young: Ethena - USDe Synthetic Dollar via Delta-Neutral Staked Ethereum Hedging. Ep. 518
Channel: Epicenter Podcast
Date: 2023-10-20

Stablecoins represent a safe haven against crypto’s volatility, allowing participants to remain in the market, without off-ramping to fiat. While the major stablecoins are centrally issued (e.g. USDT, USDC, BUSD), there is a pressing need for an algorithmic variant or a synthetic dollar asset. (DAI is somewhere in between, since approximately 50% of its collateral is USDC). After Luna’s collapse, many jumped to point out its design flaws, yet such a concept would be crucial for crypto’s decentralisation and self-sustainability. Arthur Hayes proposed an interesting concept of NAKA synthetic dollar (NUSD), backed by Bitcoin and its inverse perpetual swap short. However, yield generation on $BTC is significantly lower than that of $ETH. A sustainable yield would help balance the cases in which funding rates would be negative.

We were joined by Guy Young, co-founder of Ethena, to discuss the stablecoin landscape and their synthetic eUSD, backed by staked ETH and its inverse perpetual swap.

Topics discussed in this episode:
0:00 - Introduction
0:31 - Guy’s background and founding Ethena
3:27 - The history of stablecoins
7:06 - The stablecoin trilemma and transparency
10:42 - eUSD synthetic dollar mechanics
15:50 - Ethena’s insurance fund and hedging
19:47 - Minimising the impact of depegging
21:46 - Leveraging centralised liquidity while maintaining self custody through MPC
27:39 - User experience
30:38 - Risk factors
37:25 - CEX vs. DEX: liquidity, infrastructure, UX
41:38 - The potential of fixed return rates
45:59 - Supply & rates equilibrium

Links mentioned in this episode: 
- Guy Young on Twitter: https://bit.ly/401lPTz
- Ethena Labs on Twitter: https://bit.ly/40bBGPy
- Arthur Hayes' article proposing the Naka synthetic dollar: https://bit.ly/45GfHRG

This episode is hosted by Felix Lutsch. Show notes and listening options: https://epicenter.tv/518
#ethena #usde #ethereum