Ethena Labs Proposes SOL for USDe's Collateral
2024-10-14

Ethena Labs, the entity responsible for developing and maintaining USDe, has proposed bringing onboard {{SOL}} as part of the synthetic stablecoin's mix of collateral that forms its treasury.
USDe differs from stablecoins such as Tether's {{USDT}} or Circle's {{USDC}} because it's a synthetic stablecoin and not backed by fiat assets at a 1:1 ratio. The stablecoin maintains its $1 peg by collateralizing stablecoins and leveraging a hedged cash-and-carry trade, which involves taking futures positions with large open interest available to stabilize value, supported by a reserve fund to manage risk in fluctuating market conditions.
If the proposal is approved by Ethena's Risk Committee – which is independent of Ethena Labs – SOL will be gradually integrated as a collateral asset for USDe, with an initial allocation target of $100-200 million in SOL positions. This initial allocation would represent roughly 5-10% of SOL's open interest, similar to its 3% stake in BTC's global open interest and 9% in ETH.
The proposal also considers using liquid staking tokens (LSTs) like BNSOL and bbSOL, similar to how Ethena utilizes ETH LSTs, which currently represent one-third of its ETH allocation.
Recently, Ethena announced that it had allocated $46 million of its reserve fund for USDe to tokenized real-world asset investments in BlackRock's BUIDL, Mountain's USDM, Superstate's USTB, and Sky's USDS, aligning with DeFi's trend toward yield generation from asset-backed tokens.