Author: G | Ethena, Founder of Ethena Compiler: 0xresearcher

In May, I described The Ethena 2024 final roadmap explained our vision for creating the most important product in the crypto field - Internet currency - and used it to promote the integration of funds and interest rates in DeFi, CeFi and TradFi.

Looking back, what makes us most proud is the resilience we showed during the half-year market downturn. During this period we encountered many bystanders who were gloating about our misfortune, but there were also some who stood firm and fought alongside us. For this, I am deeply grateful.

I know that it is not easy to choose to support us in the early days of Ethena. It requires taking unique risks, understanding new concepts, and trusting that we can deliver on our promises.

But this is the essence of innovation, challenging the status quo, and promoting industry progress.

The team and I are grateful for your trust. We are honored and working day and night to build better products and repay your trust.

I quit my job a few days after Luna collapsed, founded Ethena, and a few months after the FTX incident, I assembled the team.

We have forged ahead through the 2023 bear market and doubled down on our efforts during the market downturn of the past six months to align Ethena's core product and ecosystem goals Improved by 10 times.

This article will detail our goals for 2025 and focus on the following themes:

Summary of Ethena’s key indicators in 2024

Ethena enters the traditional financial field through customized product sUSDe

Why sUSDe is traditional finance in ETFs What’s the next logical step after that?

Loose profitThe macro benefits brought by the rate environment to USDe

The current situation and future of the crypto-USD landscape

Ethena builds Telegram savings and payment application for one billion users

Ethena network ecosystem application and new chain

Ethena 2024 review

Jumped to the third largest dollar asset in the field in ten months, with supply reaching $6 billion

The fastest growth in history to $5 billion of US dollar assets

Annualized revenue exceeded US$1.2 billion last month

Second only to pump.fun becomes the second fastest crypto startup to reach $100 million in revenue

In December, it became the protocol with the highest per capita revenue in the field

My initial interest in the DeFi protocol was:

Financial services can scale with the marginal cost of software

Capital can use Internet speeds to scale Free global movement

This gives us the ability to create the most profitable entities on the planet at virtually zero cost.

For this goal, Ethena has only existed for one year.

Revenue run rate comparison per employee in December

Ethena is the second fastest company in history to reach $100 million Received startups

Ethena at Officially launched in February 2024.USDe currently has a supply of approximately $6 billion and is one of the fastest growing applications in cryptocurrency history. One year after its founding, USDe is second only to USDT and USDC, which have been operating for nearly a decade.

The fastest USD-denominated asset in history to reach US$5 billion

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Except USDT and USDC, Ethena will exclusively account for 85% of the growth of all on-chain U.S. dollar assets in 2024. In recent weeks, nominal dollar inflows into USDe have exceeded total growth in ETFs, which are among the most successful ETF products in history.

Since October 1, USDe inflows have exceeded ETH and BTC (except IBIT) all aggregate ETFs

In the DeFi field, Ethena has become a key component of other financial applications. More than 50% of Pendle's total locked value (TVL) comes from Ethena; about 25% of Sky's revenue (over $100 million) is related to Ethena; about 30% of Morpho's TVL comes from Ethena assets; Ethena's listing on Aave is The fastest growing asset in 2024, reaching over $1.2 billion in three weeks; most EVM-based perpetual contract exchanges have launched USDe Mortgage assets.

Ethena is also one of the first on-chain products to enter the CeFi market (mainly used as a margin collateral asset for trading derivatives). USDe is currently listed on about 60% of the centralized exchange markets, with only two large exchanges not yet online. In just a few weeks, USDe surpassed USDC balances on Bybit, which speaks volumes about how well this product fits the market.

USDe surpassed USDC on Bybit in less than a month Balance

USDtb also last monthLaunched, backing the stablecoin with BlackRock’s BUIDL treasury funds as collateral. To end users, the product is no different from an ordinary stablecoin because it is designed to share revenue with distribution partners such as centralized exchanges in order to incentivize them to use the product on the platform. We will be announcing exchange integrations throughout January, which will allow these institutions to offer a full suite of USD products to their users through Ethena’s products.

Finally, we see decentralized and on-chain stablecoins starting to use a hybrid model of USDe and real-world asset (RWA) products to support their products. Ethena can now provide the back-end infrastructure to provide two products to publishers, such as Sky, Frax and Usual all using Ethena products in their products.

But the above achievements pale into insignificance in the face of the coming changes.

Ethena's next growth will be driven by its entry into the traditional financial field.

The infrastructure is now in place, the regulatory path for this product is clear in traditional finance, and the scale of the opportunity is far greater than what we have seen so far in cryptocurrency. Everything I've seen so far.

Entering traditional finance: Integration and win-win

Note: The goals listed above The distribution platform is for reference only, and not all institutions are current partners

The fixed income market is the world's largest liquid investment category, with a scale of more than $190 trillion. Most asset managers, sovereign wealth funds, pension funds and insurance funds invest in fixed income products. The entire cryptocurrency market is currently worth less than the debt capital market in Australia, which has less than 0.5% of the world’s population.

The most important financial tool in the world for saving and preserving value is the U.S. dollar and its earnings. It sounds simple, but the demand for this product far exceeds the entire cryptocurrency market (including Bitcoin) combined.

That's why, after ETFs, U.S. dollar savings products are the logical next step for these institutions. The futures market is the only market in cryptocurrencies large enough to satisfy their demand for U.S. dollars.

Ethena is ready to offer such a product.

sUSDe for traditional finance - iUSDe

Ethena will launch a new product iUSDe next month, with the goal of promoting sUSDe to traditional finance through a regulated product field.

iUSDe is the same as sUSDe, but adds a simple encapsulation contract and adds some transfer restrictions at the token level, making it easier for traditional financial entities to hold and use it. .

This includes working with partners to provide an independent special purpose vehicle (SPV) managed by a regulated investment manager, allowing shares in the vehicle to be subscribed, allowing traditional Financial institutions are able to effectively participate in the product without having to engage in the crypto space.

We will announce the first batch of iUSDe traditional financial distribution partners this month.

The focus in the first quarter of 2025 will be working with traditional financial distribution partners to enable their customers to reach iUSDe, covering all areas:

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Asset management companies

Private equity funds

Exchange-traded products

Private Investment Trusts

Primary Agents

By establishing connections with traditional finance Bridge, traditional financial institutions can obtain US dollar borrowings at a price difference of SOFR+100-200bps, and funds will flow into Ethena on an unprecedented scale until the spread between the return rate of the sUSDe protocol and the risk-free interest rate narrows to an increasingly smaller level.

In this case, Ethena will play the role of an interest rate arbitrage tool, promoting the integration of capital flows and interest rate markets between DeFi, CeFi and traditional finance.

Traditional finance will be able to price iUSDe as a spread relative to the risk-free rate, while the supply of USDeIt will be adjusted according to changes in crypto local interest rates and act as a balancing item connecting traditional finance and Internet finance.

Based on current market conditions, we find that these capital pools have over $10 billion of incremental iUSDe capacity remaining.

iUSDe’s appeal to traditional finance

Ethena iUSDe is unique in that:

It Combining the only two formats capable of delivering crypto-native real returns on a billion dollar scale.

Their returns show a weak negative correlation with interest rates in traditional finance.

The underlying assets are held by custodian institutions, and these assets can be insured by traditional financial institutions.

Combining the only two scalable sources of native crypto returns into a single USD product provides simple access for asset allocators in traditional finance , able to obtain and harvest excess returns in the crypto field through a single asset.

Highest risk-adjusted USD returns among cryptocurrencies< /p>

When Ethena's iUSDe is compared to an existing traditional fixed income portfolio, unlevered annual U.S. dollar returns last year were about 20%, which was previously Unheard of. As interest rates fall, iUSDe will become more attractive as an alternative.

Comparison between sUSDe and traditional fixed income products

The size of the basis in the crypto market is not fully understood. This is far and away the largest source of potential cash flow in the entire sector. Since Ethena’s launch, basis has grown more than threefold. Importantly, this was large enough to attract the attention of the traditional financial world and become a viable opportunity.

Total open interest reaches $110 billion, with an annualized basis of approximately 20%, allowing Ethena to generate approximately 100The cash flow of USD 100 million is almost 10 times the cash flow of the entire ETH liquid pledge market.

Ethena currently accounts for approximately 7% of open interest. At a $200,000 Bitcoin price, with just 10% of open interest, USDe’s supply would be $25 billion.

The path forward is clear and the task now is to execute and deliver this product to traditional financial markets.

As Bitcoin’s open interest and market share grow, The target supply of USDe is US$25 billion

Positive factors and negative correlation with macro interest rates

sUSDe’s most attractive feature for traditional finance is that Its returns are inversely related to real interest rates. Few other debt products in traditional finance have this feature.

This point is intuitive: as real interest rates continue to fall, speculation in the cryptocurrency market accelerates, while the long-term demand for leverage increases, which will drive financing Interest rates rise, ultimately increasing the returns Ethena receives.

We observed this phenomenon during the zero interest rate (ZIRP) period in 2020/21, when funding spreads exceeded 15%, and in 2024 It started to show up again in the fourth quarter of the year.

The role of interest rate cuts in promoting the growth of sUSDe

More recently, we have observed the exact reaction to rate cuts: a rate cut of about 75 basis points led to an increase in financing rates from about 8% to over 20%, a change that occurred in the past month months of the quarter. This trend is expected to continue as the easing cycle approaches next year.

The compounding effect of the rate cut

The rate cut has of course had a compounding effect on Ethena's growth and fundamentals effect. Not only are falling interest rates driving greater demand for stablecoins, but with RWA’s base rate falling, on a risk-adjusted basis,Ethena becomes more attractive and is able to compensate for the impact of falling real interest rates in traditional fixed income products.

Simple example:

For a $100 billion fixed income portfolio, If interest rates fell by 200 basis points, an increase of approximately $15 billion in sUSDe would be needed to keep blended portfolio returns at the same level.

sUSDe’s Demonstrative Impact on a $100 Billion Fixed Income Portfolio< /em>

A higher risk-adjusted dollar return from native crypto resources could divert billions of dollars away from the old financial system to the product types of the Internet system.

Ethena will be the bridge to this transition.

In the first quarter of 2025, this transition will occur.

The future of the crypto-dollar landscape

The current crypto-dollar landscape

The current situation and the future of the crypto dollar will be completely different.

Currently, the application scenarios of stablecoins can be roughly divided into the following categories:

Trading and guarantee: Currently dominated by Tether, the vast majority of spot and perpetual contract pairs are priced in USDT, with a market size of approximately US$125 billion. Ethena has surpassed USDC on the second largest exchange as a derivatives collateral asset.

Value savings tool for developers: providing global access to U.S. dollars for individuals who are not within the U.S. banking system. Currently, the market is mainly dominated by Tether on the Tron network. The scale is approximately US$60 billion.

Savings instruments or investment products: currently dominated by Ethena and Sky, with almost no traditional financialThe system’s participation in on-chain products has a market size of approximately US$15 billion.

Payment scenario: The current market is almost non-existent. Although PYUSD and USDC have shown some performance, they have not yet achieved meaningful integration with traditional payment systems, and the market size is less than 50 billion dollars.

All in all, Tether dominates the two main current application scenarios: trading and developing value storage tools.

The future crypto dollar landscape

< p style="text-align: left;">But I believe that with the entry of the following two categories, the existing pattern will undergo drastic changes:

Traditional finance Enter the savings product application scenario

Fintech companies and Web2 The company enters payment product application scenarios

Although the above two categories are currently the smallest, they have the greatest growth opportunities in the future.

Although Ethena has found product market fit in the two most popular use cases currently, I believe traditional finance enters savings products and Web2 or finance The entry of technology companies into payment application scenarios will bring more than US$50 billion in net new US dollar capital inflows to the market in the next two years.

sUSDe will be the main beneficiary of the former.

As for the latter, we plan to solve payment and savings instrument application scenarios by creating dedicated applications within the Telegram and TON ecosystems without going directly out of business Competing in the field of payment companies.

Products for one billion users

sUSDe’s application in Telegram

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In 2025, we will launch a dedicated sUSDe application scenario within the Telegram application, where users canTransfer, spend and save in a digital banking experience.

Payments will be connected directly to Apple Pay, allowing users to switch between savings assets in sUSDe and direct mobile payments on their phone.

The U.S. dollar with income is the most important savings asset in the world. It is used for wealth preservation. It is also the one that I believe can reach one billion people besides Bitcoin. Only encryption product.

Based on the traffic of more than 900 million Telegram users, we have a distribution platform that can bring this product to the world.

Our common goal is to provide a billion people with a payment and savings product that is as easy to use as sending a message.

Ethena Ecological Network

Ethena's core product goal is simple: with USDe and USDtb, it will become the most important product in the encryption field alongside Tether.

Product and token strategies are tightly integrated through ecosystem applications

In addition to these core products, Ethena will continue to transform from a single asset issuer into a platform that supports the best developers and promotes on-chain financial innovation .

As part of building an ecosystem based on sUSDe, sENA is designed to accumulate value through a token model similar to BNB, in which applications in the ecosystem A portion of the token supply will be reserved and airdropped to sENA holders.

The U.S. dollar will continue to serve as the infrastructure for capital flows on the chain, not only for settlement and payments, but also for all core DeFi primitives such as trading, lending, derivatives goods and leverage.

Today, every DeFi protocol involving the US dollar can be rebuilt around Ethena and improve the economic structure by default.

sUSDe unlocks new possibilities for this wave of innovation, such as fixed-rate lending, leverage strategies in money markets, andRewarded derivatives margin guarantee. However, the full picture of new products that may be built on sUSDe that have not yet emerged is still worth looking forward to.

Ethena Network is our plan to directly support innovative protocols based on Ethena sUSDe applications while aligning with the success of these new protocols through the ENa token.

Two applications we have announced:

Ethereal: one based on our own application A perpetual and spot exchange for the chain, with a full order book hosted by sUSDe and native rewards, Ethena will provide liquidity and hedging flows to the exchange.

Derive: The largest on-chain options and structured product protocol, in which sUSDe is the core mortgage asset of the system.

Ethereal will open its testnet next month, while Derive plans to launch its token within the next two weeks.

These are just the first examples in the entire DeFi ecosystem built on sUSDe, with more applications to be released in the first quarter of 2025.

On-chain details will be released in the first quarter with the Ethereal mainnet.

Ethena Network Application

Thank you again for your support in 2024. Without our users, and those who continue to believe in our vision, Ethena would be nothing.

2024 is the year we launch our first real product and we lay the foundation to be ready for the confluence of macroeconomic tailwinds.

In 2025, we will disrupt the financial system on a much larger scale than today.