Saturday, September 30, 2023

Ethena, a pioneering protocol aiming to develop a stablecoin independent of the traditional banking system, recently completed its seed round, securing an impressive $6.5 million in funding. The funding round, led by Dragonfly Capital, saw the participation of prominent figures like former Bitmex CEO Arthur Hayes, as well as derivatives exchanges such as Deribit, Bybit, Okx, Gemini, and Huobi. The primary objective of Ethena is to bring into existence a stablecoin that operates entirely outside the scope of conventional financial institutions.

The inspiration for Ethena’s innovative stablecoin protocol stemmed from Arthur Hayes’ article titled “Dust on Crust.” In this article, Hayes expounded on the construction of a stablecoin using delta-neutral techniques, derivatives, and on-chain collateral. Ethena has adopted the concept of the “Nakadollar,” originally proposed for Bitcoin by Hayes, and adapted it to the Ethereum blockchain. Their vision is to create the world’s first crypto-native yield-bearing stablecoin that is completely independent of any reliance on the traditional banking system.

Ethena identifies a substantial market potential for its stablecoin, estimating it to exceed 130 billion. They perceive their permissionless savings return product as offering “the largest market opportunity that crypto can provide for the world.”

The protocol intends to issue its financial instruments in two phases. The initial phase entails the launch of “usde,” an on-chain collateral derivatives-based stablecoin product, slated to be available by Q3 2023, funded by the recent capital raise.

The subsequent phase involves the issuance of what Ethena refers to as the “internet bond.” This bond is designed to function similarly to a traditional U.S. treasury bond, but it will not be linked to any central bank or financial institution. Instead, it will be built on staked Ethereum deposits and usde, thus creating “the first globally accessible and permissionless crypto savings instrument.”

Dragonfly general partner Tom Schmidt emphasized the importance of a truly decentralized, stable, and capital-efficient stablecoin product, particularly given the increasing global adoption of stablecoins for savings and remittance purposes. Schmidt expressed excitement about partnering with Ethena to realize their groundbreaking vision.

In conclusion, Ethena’s ambitious goal of creating a banking system independent stablecoin has garnered significant attention and support from prominent investors and industry players. The protocol’s unique approach, utilizing Ethereum-based technology and derivatives, has the potential to revolutionize the stablecoin market and provide a substantial opportunity for cryptocurrency users worldwide. Share your thoughts on Ethena and its innovative vision in the comments section below.

Frequently Asked Questions (FAQs) about stablecoin protocol

What is Ethena?

Ethena is a protocol that aims to develop a stablecoin independent of the traditional banking system. It seeks to create a decentralized stablecoin that operates on the Ethereum blockchain.

How much funding did Ethena raise in its seed round?

Ethena raised $6.5 million in its seed funding round.

Who led the seed round funding?

The seed round was led by Dragonfly Capital, a prominent venture capital firm.

What inspired the creation of Ethena’s stablecoin protocol?

The creation of Ethena’s stablecoin protocol was inspired by an article written by former Bitmex CEO Arthur Hayes titled “Dust on Crust.” The article explores techniques to construct a stablecoin using delta-neutral methods, derivatives, and on-chain collateral.

What is the goal of Ethena’s stablecoin?

Ethena’s goal is to develop a stablecoin that is not reliant on the traditional financial system, providing a truly independent and decentralized crypto-native yield-bearing stablecoin.

What is the “Nakadollar” concept used by Ethena?

The “Nakadollar” concept was originally proposed by Arthur Hayes for Bitcoin. Ethena has adapted this concept to the Ethereum blockchain, aiming to create a stablecoin that utilizes the idea of delta-neutral techniques and on-chain collateral.

How does Ethena plan to issue its financial instruments?

Ethena plans to issue its financial instruments in two phases. The first phase involves rolling out “usde,” an on-chain collateral derivatives-based stablecoin product. The second phase includes the issuance of the “internet bond,” which will behave similarly to a traditional U.S. treasury bond but will be independent of central banks or financial institutions.

What is the potential market for Ethena’s stablecoin?

Ethena views its permissionless savings return product as having a potential market value of more than 130 billion, considering it as “the largest market opportunity that crypto can provide for the world.”

Who are some of the notable participants in Ethena’s seed funding round?

Apart from Dragonfly Capital, former Bitmex CEO Arthur Hayes, and derivatives exchanges like Deribit, Bybit, Okx, Gemini, and Huobi also participated in Ethena’s seed funding round.

Why is a decentralized, capital-efficient stablecoin important?

With the increasing adoption of stablecoins worldwide for savings and remittance-related uses, a decentralized, capital-efficient stablecoin product, like Ethena’s, becomes crucial to address market demand and provide a reliable financial instrument.

What does the future look like for Ethena’s stablecoin protocol?

Ethena’s stablecoin protocol envisions a future where its stablecoin, “usde,” and the “internet bond” will revolutionize the crypto market, offering a globally accessible and permissionless crypto savings instrument. The protocol aims to bring this vision to life with the funding and support it has received in its seed round.

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