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Author: Arthur Hayes
The dust on the crust returned to Hokkaido, Japan.The sun is bright and warm during the day, but it is cold and bitter at night.This weather mode has caused a bad snow like “crustal dust”.Below the seemingly beautiful snow, ice and crispy snow hidden.nausea.
With the footsteps of wintering in the spring, I want to revisit the article “Dust on the Curry” published a year ago.In this article, I proposed how to create a legal stablecoin that exists without depending on the Tradfi banking system.My idea is to combine cryptocurrencies with long -term sustainable futures contracts to create a synthetic legal currency unit.I named it “NAKADOLLAR” because I imagined that the “sustainable” short futures contract with Bitcoin and XBTUSD as a way to create a synthetic US dollar.At the end of the article, I promised that I would do my best to support a credible team to put this idea into practice.
One year’s change is really great.Guy is the founder of Ethena.Before creating Ethena, Guy worked at a hedge fund with a market value of $ 60 billion and invested in special fields such as credit, private equity and real estate.GUY’s Defi Summer discovered the Shitcoin problem in 2020, and it was out of control.After reading the book “Dust on Crust”, he had the idea of launching his own synthetic dollar.But just like all great entrepreneurs, he wanted to improve my original thought.He wants to create a synthetic dollar stabilizer using ETH instead of using BTC.At least at the beginning.
The reason why Guy chose ETH is because Ethereum network provides native income.In order to provide security and handling transactions, Ethereum network validators directly pay a small amount of ETH for each block through the agreement.This is what I call ETH pledge yield.In addition, because ETH is now a shrinking currency, ETH/USD long -term, futures and sustainable drop transactions are fundamental reasons compared with the continuous premium compared with the spot.Short -ended sustainable drop holders can capture this premium.Combining ETH’s real -time instead with ETH/USD’s sustainable drop -out short position can create a high -yield synthetic US dollar.As of this week, the annual yield of the spot ETH dollar (SUSDE) is about & gt; 50%.
Without a team that can be executed, no matter how good it is, it would be empty.Guy named his synthetic dollar “Ethena” and has formed a star team to launch the agreement quickly and safely.In May 2023, Maelstrom became the founding consultant. As a exchange, we obtained token to the governance to the token.In the past, I have worked with many high -quality teams, and Ethena’s employees do not take detours and complete the task.12 months after fast entry, Ethena’s stable currency USDE was officially launched. Only 3 weeks after the main online online, the circulation has nearly 1 billion (TVL is $ 1 billion; 1usde = 1 USD).
Let me put aside the knee pads and discuss the future of Ethena and stable coins.I believe that Ethena will surpass Tether to become the maximum stablecoin.This prediction takes many years to achieve it.However, I want to explain why Tethe is the best and worst business in cryptocurrencies.It is the best one because it may be the financial intermediary institution that has the most profits for each employee in Tradfi and cryptocurrencies.The reason why it is the worst is because Tether’s existence is to please his poor Tradfi bank partners.The problems brought by the jealousy of the bank and the guardians of Tether to the Guardian of the US peace system may immediately bring the Tether’s disaster to Tether.
I want to make it clear about those misleading Tether Fudesters.Tether is not financial fraud, nor does it lie in reserve.In addition, I respect those who have founded and operate Tether.However, forgive me, Ethena will subvert Tether.
This article will be divided into two parts.First of all, I will explain why the Federal Reserve (the Federal Reserve), the US Treasury, and the large U.S. banks associated with politics hope to destroy Tether.Secondly, I will explore Ethena in depth.I will briefly introduce how Ethena is built, how it keeps linked to the US dollar, and its risk factors.Finally, I will provide an valuation model for Ethena’s governance tokens.
After reading this article, you will understand why I believe that Ethena is the best choice for the cryptocurrency ecosystem to provide a synthetic US dollar on the public chain.
Note: The fiat currency stabilized by physical support refers to the issuer’s currency holding fiat currency in the bank account, such as Tether, Circle, First Digital (Binance … Binance), etc.Synthetic fiat currency stable coins refer to the coins of cryptocurrencies and short -term derivatives held by the issuer, such as Ethena.
Envy, jealous and hate
Tether (code: USDT) is the maximum stable currency calculated based on tokens.1 usdt = 1 dollar.USDT is sent between wallets on various public chains such as Ethereum.In order to keep hooking, Tether holds $ 1 for the USDT of each circulation unit in the bank account.
Without the US dollar bank account, Tether cannot perform its functions of creating USDT, custody supporting USDT, and redeeming USDT functions.
create:Without a bank account, USDT cannot be created, because there are no places to send their dollars in traders.
US dollar hosting:Without a bank account, there is nowhere to keep the USDT USDT.
Raiders USDT:Without a bank account, USDT cannot be redeemed, because there is no bank account to send US dollars to the redeemer.
Having a bank account is not enough to ensure success, because not all banks are equal.Thousands of banks around the world can accept US dollar deposits, but only some banks have the main account in the Fed.Any banks who want to perform the US dollar liquidation through the Federal Reserve to fulfill the obligations of the US dollar agency bank must hold the main account.The Federal Reserve has a complete decision to obtain the owner’s account.
I will briefly explain the operation of the business banking business.
There are three banks: bank A and Bank B headquarters in two non -US judicial jurisdictions.Bank C is an American bank with a main account.Bank A and Bank hope to transfer the US dollar in the fiat currency financial system.They applied to use Bank C as agency banks.Bank C evaluates the customer base of the two banks and approves it.
Bank A needs to remit $ 1,000 to Bank B.The capital flow was transferred from the account of Bank A to Bank C to Bank B’s account from Bank C’s account.
Let’s change a little about the example and join the bank D. It is also a US Bank of America with the main account.Bank A uses Bank C as an agency, and Bank B uses Bank D as an agency.What happens if Bank A wants to remit $ 1,000 to Bank B?The capital flow is that Bank C transferred $ 1,000 from its account from its Federal Reserve account to Bank D in the Federal Reserve.Bank D finally deposited $ 1,000 into Bank B’s account.
Under normal circumstances, banks outside the United States use agency banks globally, and the US dollar can be used worldwide.This is because when the US dollar flows between different jurisdictions, it must be liquidated directly through the Fed.
I have been in contact with cryptocurrencies since 2013. Usually, the banks that crystal exchanges store fiat currencies are not banks registered in the United States, which means that it needs to rely on a bank with a main account to handle the collection of legal currencies.These smaller non -American banks are hungry on banking and cryptocurrency companies because they can charge high fees without paying any deposits.Globally, banks are usually eager to obtain cheap US dollar funds because the US dollar is a global reserve currency.However, these smaller foreign banks must interact with their agent banks to handle the US dollar access to the US dollar withdrawal business.Although the proxy bank tolerates these fiat currencies related to the cryptocurrency business, no matter what the reason, sometimes some cryptocurrency customers will be eliminated from small banks at the request of agency banks.If small banks do not comply with regulations, they will lose their agency relationship and their ability to transfer the US dollar internationally.Banks that lose the ability of dollars in the US dollar are like walking dead.Therefore, if the agency requires, small banks will always abandon cryptocurrency customers.
When we analyze the strength of Tether’s bank partners, the development of this agency banking business is very important.
Tether’s bank partner:
Britannia bank & amp; trust
Cantor Fitzgerald
Capital union
Ansbacher
Deltec Bank and Trust
Among the five banks listed, only CANTOR FITZGERALD is a bank registered in the United States.However, none of these five banks did not have the Fed’s main account.Cantor Fitzgerald is a first -class dealer to help the Fed perform public market operations such as buying and selling bonds.Tether’s ability to transfer and hold the US dollar is completely subject to the fixed agency bank.Considering the scale of Tether’s US Treasury voucher investment, I think that their cooperation with Cantor is essential for continuing to enter the market.
If the CEOs of these banks have not obtained the equity of Tether through negotiations in exchange for bank services, they are fools.When I introduce the per capita income index of Tether’s employees, you will understand the reason.
This covers the reason why Tether’s bank partners perform poorly.Next, I want to explain why the Fed does not like Tether’s business model, and why fundamentally has nothing to do with cryptocurrencies, and it is related to the operation of the US dollar currency market.
Full reserve bank business
From the perspective of Tradfi, Tether is a full reserve bank and is also known as a narrow bank.The full reserve bank only absorbs deposits and does not issue loans.The only service it provides is to remit money.It almost pays for deposit interest, because storeders will not face any risks.If all storage households ask for their money at the same time, banks can immediately meet their requirements.Therefore, it is called “full reserve”.In contrast, the loan amount of some of the preparation banks is greater than the deposit amount.If all the reserve banks are required to refund the deposit at the same time, the bank will close.Part of the reserve bank pays interest to attract deposits, but stores are risky.
Tether is essentially a bank with a full reserve in US dollars that provides US dollar trading services driven by public chain.That’s it.No loan, no interesting things.
The Fed does not like the banks that do not like the full reserve, not because their customers are, but because these banks handle their deposits.To understand why the Fed hates the full reserve bank model, I must discuss the quantitative loose (QE) mechanism and its influence.
The bank closed down during the 2008 financial crisis because they did not have sufficient reserve to make up for the loss of bad mortgage loans.The reserve is the fund for banks deposited in the Federal Reserve.The Federal Reserve monitors the scale of bank reserves based on the total amount of loans.After 2008, the Fed ensures that banks will never lack reserve.The Fed achieves this goal by implementing QE.
QE is the process of purchasing bonds from the bank and not remembering the Fed’s reserve bond to the bank.The Fed’s purchase of QE bonds worth trillions of dollars in the Federal Reserve has led to the expansion of the bank’s reserve balance.Good!
Quantitative looseness does not cause crazy inflation as obvious ways of stimulating checks in COVID stimulus checks, because bank reserves stay in the Federal Reserve.Covid’s stimulus measures are directly used to the public to use it at will.If the bank loans these preparations, the inflation rate will rise immediately after 2008 because the money will be in the hands of enterprises and individuals.
The existence of some reserve banks is to issue loans; if the bank does not issue a loan, it will not make money.Therefore, under the same conditions, some reserve banks are more willing to lend the reserve to paid customers instead of staying in the Federal Reserve.The Fed encountered a problem.How can they ensure that the banking system has nearly infinite reserve without causing inflation at the same time?The Federal Reserve chose to “bribe” to the banking industry instead of lending.
Browse banks require the Federal Reserve to pay interest for the excess reserve of the banking system.To calculate the amount of bribery, you can use the total amount of bank reserve held by the Federal Reserve multiplied by IORB.IORB must hover between the lower limit and upper limit of the Federal Reserve fund.Please read my article “Kite or Board” to learn about the reasons.
Loans are risky.The borrower will default.Banks would rather make risk -free interest income from the Federal Reserve, nor are they willing to loan from the private sector and suffer possible losses.Therefore, with the advancement of quantitative easing, the growth rate of unpaid loans of banking systems is inconsistent with the growth rate of the Fed’s balance sheet.However, success is not cheap.When the Fed’s interest rate is 0% to 0.25%, the cost of bribery is not high.But now, the Federal Reserve fund interest rate is 5.25%to 5.50%, and IORB’s bribes spend billions of dollars each year.
The Federal Reserve maintains the “high” policy interest rate to curb inflation; however, due to the increase in the cost of IORB, the Fed becomes unprofitable.The U.S. Treasury and the US public directly fund the Federal Reserve to bribe banks through IORB projects.When the Federal Reserve makes money, we remit these money to the US Treasury.When the Fed loses money, the US Treasury borrowed money to the Fed to make up for its losses.
Quantitative easing solves the problem of insufficient banking reserve.Now, the Fed hopes to reduce the number of banking reserve to curb inflation.This is quantitative tightening (QT).
QT refers to the Fed’s sale of bonds to the banking system to pay for the reserve held by the Federal Reserve.Quantitative easing increases bank reserve, while quantitative tightening reduces bank reserves.With the decline of bank reserves, the cost of bribes of IORB will also decline.Obviously, if the Fed pays high interest rates due to IORB, bank reserves are rising, and the Fed will not be happy.
The full reserve bank model runs counter to the Fed’s established goals.The full reserve bank does not issue loans, which means that 100%of deposits are deposited into the Federal Reserve as the reserve.If the Fed starts to issue a full reserve bank license to banks similar to Tether, it will exacerbate the loss of the central bank.
Tether is not a licensed bank in the United States, so it cannot be deposited directly into the Fed and earned IORB.But Tether can deposit cash into the currency market fund, and the currency market fund can use the reverse repurchase plan (RRP).The reverse repurchase plan is similar to IORB. The Fed must pay the interest rate between the lower limit and upper limit of the federal fund to accurately determine the transaction position of the short -term interest rate.The Treasury Bond (T-Bills) is a zero-interest bond with a period of less than one year, and its transaction yield is slightly higher than the RRP interest rate.Therefore, although Tether is not a bank, its deposit is invested in tools that require the Fed and the Ministry of Finance to pay interest.Tether has nearly $ 81 billion in money market funds and T-Bills.Tether and the Federal Reserve are facing.The Fed does not like.
Tether confronts the Federal Reserve because Tether pays 0%of USDT balance, but can earn interest about the upper limit of the Fed’s fund interest rate.This is Tether’s net interest difference (NIM).It is conceivable that Tether is overjoyed to the Federal Reserve ’s interest rate hike, because in less than 18 months (March 2022 to September 2023), NIM increased from 0%to nearly 6%.
Tether is not the only stable coin issuer who compete with the Federal Reserve.Circle (code: USDC) and all other stable coins that accept the US dollar parallel and issue token are doing the same thing.
If the bank abandons Tether for some reason, the Fed will not help much.In fact, the Federal Reserve’s cheese will be larger than Sam Bankman-Fric in Tiffany Fong.
What about Yellen?Is there any holiday for her financial department and Tether?
Tether too big
US Finance Minister Janet Yellen needs a well-operated U.S. Treasury market.In this way, she can borrow the necessary money to pay for tens of trillion dollars per year.After 2008, the scale of the US Treasury market expands together with the fiscal deficit.The larger the scale, the more fragile.
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The US government securities liquidity index chart clearly shows that the liquidity of the US Treasury market has declined since COVID (the larger the number, the worse the liquidity condition).Just sell a small amount to disrupt the market.The disrupting market I said refers to the rapid decline in bond prices or rising yields.
Tether is now one of the holders of US Treasury 22nd National Congress.If Tether has to quickly sell the bonds he holds for some reason, it may bring confusion to the global bond market.The reason why I was global is because all statutory debt instruments are priced according to the US Treasury curve to some extent.
If Tether’s bank partners abandon Tether, Yellen may intervene in the following ways:
Perhaps she will stipulate that it will give Tether a reasonable time to continue as a customer so that it will not be forced to sell assets to quickly meet the redeeming requirements.
Perhaps she will freeze Tether’s assets so that she cannot sell anything until she thinks that the market can absorb the assets held by Tether.
But Yellen will definitely not do to help Tether find another long -term bank partner.Tether and the growth of similar stablecoins in the cryptocurrency market have brought risks to the US Treasury market.
If Tether decides to buy bonds that no one wants, that is, the long -term bonds with a time limit of more than 10 years, rather than a short -term bill that everyone wants, Yellen may stand on their side.But why does Tether take this period of risk to earn less money than short -term Treasury bonds?This is because the yield curve inverted (long -term interest rate is lower than the short -term interest rate).
The most powerful arms of the American -style Heping Financial Machines prefer Tether not to exist.And all this has nothing to do with cryptocurrencies.
Tether is too rich
Maelstrom’s talented analysts produced the following speculative balance sheet and profit and loss statements for Tether.They combined the information disclosed by Tether with their judgments to make this report.
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Below is a form of eight banks of “Big to Inlerable” (TBTF). These banks are in charge of the US economic and political system, as well as their net income in fiscal 2023.
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Cantor Fitzgerald is not a bank, but a first -level dealer and trading banks.There are only 23 first -level dealers banks.Therefore, in the “total deposit” column, this number of Cantor represents the asset value of its balance sheet.I obtained the net income and total number of employees from Zippia.
The income of each employee of Tether is $ 62 million.No bank can be comparable to it on the list.Tether’s profitability is another example that explains how cryptocurrencies will affect the biggest wealth transfer in the history of human civilization.
Why do these TBTF banks do not provide a stable currency linked to the fiat currency?Each employee’s income is higher than these banks, but without these banks and other similar banks, Tether cannot exist.
Rather than asking Tether to cancel the banking business, maybe one of these banks can buy Tether.But why do they do this?Of course not for technology.Due to the transparency of the public chain, the code for deploying the smart contract Tether clone is already on the Internet.
If I am a CEO of the Bank of America who supports Tether, I will immediately revoke their bank accounts and provide competitive products.The first American Bank of America, which provides stablecoins, will quickly occupy the market.As a user, holding Morgan Chase Coins is less risk than holding Tether.The former is the responsibility of “big but not pouring” bank, which is essentially the responsibility of the empire.The latter is the responsibility of a private company and is despised by the entire American banking system and its regulatory agencies.
I have no reason to believe that a US Bank is conspiring to overthrow Tether.But this is insignificant.Why is the owner of Tether’s dolls in Bahamas, and 100 % of Tether’s existence depends on the admission of the US banking system, but can make more earning more than Jamie Dimon within several trading days?What makes you feel excited, um …
With the advancement of cryptocurrency bull markets, any stocks related to cryptocurrency business will rise sharply.Due to the panic of the market’s non -performing loans in commercial real estate, the stock price of a Bank of America is declining. If it enters the encrypted stable currency market, its valuation will be increased.This may be all the motivation for a Bank of America to compete directly with Tether and Circle.
If Circle’s IPO is progressing smoothly, the banking system is expected to face challenges.Stable currency companies like Circle and Tether have no competitive moat, their transaction price should be lower than profit.Circle can be successfully listed in itself.
There is no higher mountain than this …
I just explained why the US Bank of China destroyed Tether was easier than defeating Caroline Ellison in the Mathematics Olympic Contest.But as a cryptocurrency ecosystem, why should we create another stable currency linked to fiat currency?
Thanks to Tether, we know that the encrypted capital market is eager to be a stable currency linking with fiat currency.The problem is that the services provided by the bank are bad, because there is no competition, the bank cannot do better.Using Tether, anyone with Internet connection can use US dollars all day long.
Tether has two main problems:
Users cannot get any division from Tether’s NIM.
Even if Tether works according to chapters, the US Banking system may be closed overnight.
In all fairness, users of any currency usually do not share coinage tax income.Holding US dollar cash does not allow you to share the profits of the Federal Reserve … but there will definitely be lost.Therefore, the holder of USDT should not expect any NIM of Tether.However, a user group should be compensated, that is, cryptocurrency exchanges.
The main case of Tether is the financing currency of cryptocurrency transactions.Tether also provides a way to transfer legal currencies in the trading venue almost instantaneously.As a cryptocurrency exchange exchange, it brings utility to Tether, but they do not get any returns.None of the Tether govern tokens that can be purchased can provide holders with claims for NIM.Unless the exchange obtains the equity in the early days of Tether, it cannot share the success of Tether.This is not a sad story about why Tether pays the exchange.On the contrary, this prompting the exchange to support stable currency issuers, transferred most of NIM to the holder, and provided the exchange with the opportunity to purchase tokens at a low valuation at the beginning of the issuer’s development.
It is very simple. If you want to surpass Tether, you must pay most of NIMs to the stable coin holder and sell cheaply to the exchange to the exchange.This is the way the vampire squid attacks the stable currency supported by the fiat currency.
Ethena follows this game.USDE holders can directly hand over USDE to Ethena custody and earn most NIM.The major exchanges invest in Ethena’s early financing wheels.Ethena’s investors include Binance Labs, Bybit Via Mirana, OKX Ventures, Deribit, Gemini and Kraken.
As far as the market share of these exchanges is concerned, they cover about 90%of the unstraach contracts in major exchanges.
How does it work?
Ethena is an artificially synthesized legal encryption.
ETH = Ether coin
STETH = lido pledged ETH derivation tool
Eth = STETH
ETH = STETH = $ 10,000
ETH / USD permanent drop -down contract value = $ 1 ETH or STETH = 1 / ETH or STETH US dollar value
hook up
USDE is a stable currency issued by Ethena, which aims to link with the US dollar at 1: 1.
Ethena has various authorized participants (APs).Authorized participants can cast and burn USDE according to the proportion of US dollars of 1: 1.
coin:
Currently, STETH LIDO, Mantle Meth, Binance WBeth and ETH are acceptable.Ethena will then automatically sell ETH/USD permanent drop contracts to lock the US dollar value of ETH or ETH LSD.The protocol will then cast an equal amount of USDE, which matches the value of the US dollar permanently dropped by the short -term drop.
For example:
AP is stored in 1 STETH, worth $ 10,000.
Ethena sells 10,000 ETH/USD permanent drop contract = $ 10,000/$ 1 contract value.
AP received 10,000 USDE because Ethena sold 10,000 ETH/USD permanent drop -down contract.
combustion:
To burn the USDE, AP stores USDE into Ethena.Then, Ethena will automatically make up some ETH/USD permanent drop -out short position, thereby releasing a certain amount of USDE value.The protocol will then burn the USDE and minus the execution fee based on the total value of the unlocked US dollar, and return a certain amount of ETH or ETH LSD.
For example:
AP is stored in 10,000 USDE.
Ethena buy back 10,000 ETH/USD permanent drop contract = 10,000 US dollars/$ 1 contract value
AP receives 1teth = 10,000 * 1 dollars / 10,000 STETH / USD to reduce the execution fee
To understand why the USDE transaction price should be slightly higher than the US dollar on the stable currency trading platform such as CURVE. I will explain why users want to hold USDE.
USDE yield
The combination of ETH pledge yield and ETH/USD perpetual drop -off funds is equivalent to high synthetic US dollar yields.To get this yield, USDE holders can pledge directly on Ethena applications.It only takes less than a minute to start earning benefits.
Because SUSDE is very high at the time of release, users with lower yields with lower yields will be transferred to Susde.This will bring the buyer’s pressure and push the price of USDE in the curve pool.When the USDE’s transaction premium is large enough, the AP will intervene and set the difference.
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As you can see, the yield of SUSDE is much higher than that of SDAI (host Dai) and one month of US Treasury bonds.Source: Ethena Ethena
Imagine: 1 usde = 2 usdt.If AP can create 1 USDE with ETH or STETH worth 1 USDT, they can earn risk -free 1 USD profits.The process is as follows:
Meet the US dollar to the exchange.
Sold $ 1 for ETH or STETH.
Start in ETH or STETH on Ethena applications, and then receive 1 USDE.
Save USDE on Curve, and then sell at a price of 2 USDT.
The transaction sells 2 USDT for $ 2 and then withdraws the US dollar to the bank account.
If the user believes that Ethena is safe and the yield is real, in this assumption example, the USDT in circulation will decline, and the USDE in circulation will rise.
USST
There are too many people in the field of cryptocurrencies that Ethena will fail like UST.UST is a stablecoin attached to the Terra/Luna ecosystem.Anchor is a decentralized currency market protocol in the Terra ecosystem, which provides 20%annual yield for those who hold US.People can deposit into USS, and then Anchor will lend the deposit to the borrower.
Any stable currency issuer must persuade the user why it is to a new product from the usual Tether.High income is the reason for promoting users.
UNA is supported by Luna and Bitcoin purchased by Luna.LUNA is the governance tokens of the ecosystem.Foundation has a large number of LUNA.Due to the high price of LUNA, the foundation sells LUNA in exchange for UST to pay the US high interest rate.Interest rates are not paid in real objects in the US dollar, but you earn more UST tokens.Although the UST has a linked relationship with the US dollar, the market believes that if more UST is held, more US dollars will be held.
As ANCHOR locks the total value of USST, its USST interest expenditure has also increased.Foundation continues to sell LUNA to subsidize Anchor’s USSTE return.The income comes from the market that LUNA should be worth billions of dollars.
When the price of LUNA began to fall, the death spiral of the algorithm stable currency began.Because LUNA is cast and burned to maintain the hook of USD and USD 1: 1, as the value of Luna falls, it is becoming more and more difficult to maintain the US dollar hook.Once an anchor’s mechanism is broken, all interests accumulated on Anchor will become worthless.
Ethena yield rate
The way USDE generates income is completely different from USS.Ethena holds two assets that can generate benefits.
Pledged ETH:
ETH uses lido (STETH) and other mobile pledge derivatives for pledge.ETH is stored in lido.Lido runs the verification node of capital deposits as capital, and remitted ETH paid by Ethereum network to STETH holder.
Sustainable swap exchange:
Sustainable drop is a series of continuous short -term futures contracts.Most of the financing interest rates are reset every 8 hours.The capital interest rate is based on the premium or discount of perpetual contract relative to the spot.If the option is 1%compared to the spot premium within the first 8 hours, the capital interest rate of the next period is+1%.If the capital interest rate is positive, the long -term payment is short; if the capital interest rate is negative, the long -term payment is short.
Ethena holds a permanent drop -out -and -inch inch to lock the US dollar value held by the ETH.Therefore, if the funds are positive, Ethena will get interest income.If it is negative, you need to pay interest.Obviously, as a USDE holder, we hope that Ethena will get interest, not paying interest.The question is, why is ETH/USD’s long -term transaction premium?
ETH is now a shrinking currency.The dollar is inflation currency.If ETH decreases in the future and the US dollar increases, the long -term transaction price of ETH/USD should be higher.This means that the transaction price of any leverage long -term derivatives (such as sustainable drop) should be higher than the spot.Fund should be positive in most cases, which means that Ethena received interest.The data proves this.
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What causes ETH to change from flinch to inflation?If the network usage rate of Ethereum decreases sharply, then the Ethereum GAS burning in each block will be greatly reduced.In this case, ETH block rewards will consume greater than ETH GAS.
What caused the dollar from inflation currency to a shrinking currency?American politicians need to stop spending money for re -election.The Fed must reduce its balance sheet to zero.This will cause the US dollar credit currency circulation to shrink seriously.
I think neither of these situations may happen; therefore, in the foreseeable future, in most times, it is reasonable to have reason to expect financing interest rates.
USDE is not disc.
The combination of ETH pledge yields with the perpetual drop -off funds of positives only generate USDE yields.The yield is not based on the value of Ethena governing the token.The way USDE and USST generate income are completely different.
Summarize!
Ethena has the risk of exchange transactions.Ethena is not decentralized, nor does it try to decentralize.Ethena holds an empty head drop -out position on the derivatives Central Exchange (CEX).If these CEXs cannot pay for the loss of the swap position for various reasons or the mortgage that cannot be returned, Ethena will suffer capital loss.Ethena tries to reduce the risk of direct transactions on direct exchanges by depositing funds in a third -party custodian agency (such as Tether):
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Tether’s trading risk is borne by Tradfi Bank.Ethena’s trading risk is borne by derivatives CEX and cryptocurrency custodians.
CEX is an investor in Ethena, which has vested interests not to be attacked by hackers and ensure the normal payment of derivatives.Derivative CEX is the most profitable cryptocurrency company, and they want to maintain this state.It is not a good business to harm customers.With the development of Ethena, the non -liquidation contract of derivatives will also increase, thereby increasing CEX’s handling fee income.All motivations are consistent.CEX hopes that Ethena will do well.
Tether’s products help the operation of the cryptocurrency capital market.The existence of cryptocurrencies is to relieve the intermediary status of Tradfi Bank.Tradfi Bank hopes that cryptocurrencies will fail.Fundamentally, Tether’s banking business accelerated the demise of Tradfi.The incentive mechanism is inconsistent.Tradfi Bank does not want Tether to do well, and so is their regulatory agencies.
Ethena is for us, by us, also known as Fubu.
Tether is “for us, from them”, also known as “Fubar”.
LSD smart contract and reducing risks
Ethena holds ETH LSD.It is facing the risk of smart contracts.For example, lido may have a problem, resulting in STETH’s text worthless.In addition, there is risk of bargaining.When the Ethereum node network validator violates certain rules, bargaining will occur.As a punishment, Ethereum capital held by the verifiedan will be reduced, that is, a significant reduction.
Negative funds
As I mentioned earlier, the interest rate of the permanent drop may be negative for a long time.The capital interest rate may have negative value, so that Ethena’s net asset value is lower than the issued USDE.In this way, the US dollar will break through the pledge mechanism down the euro.
Ethena smart contract risk
Like Tether, Ethena also runs smart contracts on the public chain.There may be vulnerabilities in the code, resulting in unexpected behaviors, and eventually caused losses to USDE holders.Under normal circumstances, hackers will try to manufacture a ton of stablecoin for free, and then replace them with another cryptocurrency on platforms such as Uniswap or CURVE.This will cause the hook relationship to be broken because the supply of stablecoins has increased, but the assets supporting stablecoin have not increased accordingly.
However, Ethena’s intelligent contract is relatively simple, and most of the complexity work is concentrated in the linked project.The coin/redemption turn on the chain is only about 600 rows of code, and only approved participants can interact with the most sensitive contracts on the chain, which helps reduce the risk of preventing malicious and unknown traders interacting with them.
Growth limit
The amount of circulation of USDE can only be as large as the total amount of non -level contracts in ETH futures and sustainable exchange contracts in the exchange.The circulation supply of legal stable coins with physical support is about 130 billion US dollars.The total value of the ETH WeCang contract of all exchanges of Ethena trading is about $ 8.5 billion, and the total value of the ETH unable -position contract of all exchanges is about $ 12 billion.You can use the BTC contract of $ 31 billion in US $ 3 without liquidation contracts.The total value of Ethena’s BTC and ETH unconventional contracts is about $ 43 billion. Under the current market conditions, Ethena cannot occupy the first place.Although Ethena starts from ETH, BTC and SOL are also easy to add to their systems, which is just a sorting problem.
Although the above situation is true, please remember, I said that Ethena will be crowned as king after many years.With the development of cryptocurrencies as an asset category, the total amount of unst liqute contracts will grow in index level.Some people think that cryptocurrencies, as an asset category, will reach $ 10 trillion in this round of this cycle.Given that ETH is the second largest cryptocurrency in the legal market value, at this level, ETH’s unbound contract may exceed $ 1 trillion, which is not ridiculous.
Ethena will grow with the growth of cryptocurrencies.
Insurance fund
The role of insurance funds is to reduce economic losses caused by the above risks.If the capital interest rate becomes negative or the US dollar depreciation, the fund will bid in the open market.The fund consists of stable currency (USDT and USDC), STETH and USD/USD LP position.At present, the capital of insurance funds comes from the funds raised by Ethena Labs and some of the income generated by USDE, but these income is not pledged.In the future, with the increase of USDE’s circulation, the fund will use long -term yield as capital.When writing this article, the insurance fund is $ 16 million.
Neither USDT and USDE are no risks.But the risks are different.Tether and Ethena may eventually fail, but the reasons are different.
As people start to believe that the return of USDE is not flickering, more and more USDEs in circulation.
The next step is part of this kingdom.This is where the upcoming Ethena govern tokens play a role.
Evaluate Ethena
Like other currency issuers, Ethena’s life and death depend on its currency income.This is the difference between the cost of creating currency and the actual product that currency can buy.I want to propose a simple model to evaluate the value of Ethena based on these foreign exchange income.For those who may buy Ethena to govern the tokens in the next few months, at least try to build a model to valuation of the protocol.
Any released USDE can be pledged and earns ETH pledge and sustainable capital income.At present, Ethena distributes the income generated by the assets that support SUSDE, and the income generated by the assets that support the unpacking USDE is sent to an insurance fund.I estimate that the long -term distribution ratio will be: 80%of the income generated by the protocol is attributed to the pledged USDE (SUSDE), and the income income is 20%of the Ethena protocol.
Ethena agreement annual income = total income * (1-80% * (1 -Susde supply/USDE supply))
If 100%USDE is pledged, the SUSDE supply = USDE supply:
Ethena agreement annual income = total income * 20
Total income = USDE supply *(ETH pledge income + ETH sustainable drop capital)
ETH pledge yields and ETH perpetual falling funds are variable interest rates.Recent history can help us understand the possibility of the future.
ETH pledge yield -I assume that the PA yield is 4%.
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ETH sustainable drop-off funds-I assume that PA is 20%.
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Pickup percentage-At present, only 28%of USDE has been pledged.I expect this proportion to rise over time.I assume that 50%of USDE will be pledged in the future.
The key part of this model is that the ratio of completely diluted valuation (FDV) to income should be used.This is always a guessing game, but I will propose some future paths based on comparable Defi stable currency projects.
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Guided by these times, I created the following potential Ethena FDV.
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The horizontal axis is a USDE supply with a billion -dollar unit.The vertical axis is FDV/Rev multiplier.
ONDO is the latest and popular currency in stable currency.Its FDV is about $ 6 billion, with a revenue of only 9 million US dollars and a transaction multiple of 630 times.WOOWZERS!Can Ethena’s valuation reach a similar height?
Ethena’s $ 820 million assets generated 67%of their yields this week.Based on the $ 50%of the US dollar against the euro supply rate, Ethena’s annual annualized revenue was about $ 300 million.If the valuation similar to ONDO is used, the FDV is US $ 189 billion.Does this mean that the FDV when Ethena was launched will be close to $ 2,000 billion?No, but this does mean that the market will pay huge amounts of funds for Ethena’s future income.
Yachtzee!
story
If you have no other impression of this article, please remember this:
Ethena is for us, by us, also known as Fubu.
Tether is for us, by them, also known as Fubar.
Do you do more or short USDE or the final Ethena govern tokens, and you are determined by yourself.I hope this article can explain Ethena’s mission and why it is critical to the success of cryptocurrencies.
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