Unraveling Ethena– Internet Bond Explained
Unraveling Ethena-- Internet Bond Explained

Ethena Finance emerges as a pioneering platform endeavoring to create value through the utilization of "delta neutral" strategies. What does this imply? Essentially, it means they aren't exposed to market volatility but rather generate profit through an alternative means. Let's delve into how the platform operates and explore the concept of "shards," the system of points ensuring potential airdrop rewards.

How Does Ethena Operate?

The core of Ethena's functionality revolves around Usd.e, also known as the "Internet Bond" (an asset collateralized by other stablecoins). While it's inaccurate to label it a stablecoin strictly, the aim is theoretical stability. How does it maintain a constant value, and where does the platform's profit originate? Essentially, they employ delta neutral strategies, going "long" and "short" on Eth simultaneously. Here's how it works:

Deposit ETH into the Lido pool: acquiring stETH (spot/long position + staking APR).
Open "short" positions on ETH perpetual contracts on exchanges (short + funding).
Long + Short = Delta Neutral

Regardless of ETH market movements, they remain unexposed to ETH. If ETH price increases, they profit from the stETH funding position (where longs pay shorts). Conversely, if ETH price decreases, they profit from perpetual DAE shorting + funding/staking. Through this mechanism, Usd.e should ideally maintain stability. Clearly, the system operates as long as funding remains negative (longs paying shorts).

Participating in the Airdrop

By engaging in the ecosystem, participants receive shards convertible into their token in May. Yes, it's an airdrop. Here's how to get shards:

Withdraw Usdc (or Usdt) via Ethereum Mainnet on your Metamask.
Access Ethena and in the "buy" section, use Usdc (or Usdt) to purchase Usd.e. You earn shards (5X per deposit. If you buy $500 of Usd.e, you'll earn 500x5 = 2500 shards per day). This is the "buy and hold" strategy (no lock-up time).
You can choose to lock up Usd.e, receiving 10X shards (lock-up time? 7 days).
By staking Usd.e to get sUsd.e (internet bond synthetic), you'll receive 1X in shards per deposit ($500 guarantees 500 shards per day).
Lastly, you can utilize Curve Finance pools to obtain 20X shards. However, due to high demand, they might be depleted today.
Understanding the Risks

It's crucial to acknowledge the investments in Ethena: Binance Labs, Dragonfly, Arthur Hayes (former CEO of Bitmex), Deribit (the largest Options platform), Okx, Bybit, and several major exchanges. It's highly probable they'll launch their token with an airdrop for liquidity providers. However, you should comprehend the risks:

Smart contract (we know a DeFi platform can be hacked).
Usd.e functions well when funding remains negative (which usually happens, but there's no 100% guarantee it always will).
Personally, I've allocated a small percentage of my portfolio because I don't want to miss out on a significant airdrop. As of today, there are few users (26k), and there could be a massive airdrop. Nevertheless, you should grasp the risks as it's a life-changing yet experimental project, so conduct your research (DYOR).