30s Summary

Ethena’s protocol USDe has become the third biggest stablecoin, stepping ahead of Sky’s DAI. USDe’s market cap currently sits under $6 billion, behind Tether’s USDt and the USD Coin. Ethena gained quick popularity by offering double-digit Annualized Percentage Rates, through a blend of on-chain DeFi smart contracts and off-chain derivative trading. Even with inherent risks, USDe is becoming a popular choice with powerful DeFi lender Aave among its partners. Further, Ethena’s native token, ENA, has seen a 5-fold increase since June. Meanwhile, Sky (previously Maker) has faced criticism after its rebranding and changes to DAI.

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So, you’ve heard of decentralized finance (DeFi), right? Well, Ethena, a protocol in that ecosystem, has a stablecoin called USDe – and guess what? It’s just leapt ahead of Sky’s Dai (DAI) in total market size! That means it’s now the third biggest stablecoin out there, behind only Tether’s USDt (USDT) and the USD Coin (USDC), according to DeFiLlama’s data.

USDe is now sitting pretty with a market cap under $6 billion. That’s a bit behind USDt and USDC, who are a lot heavier with market caps somewhere around $140 billion and $40 billion, respectively. But hey, we still saw some impressive growth!

Meanwhile, poor old DAI — the top stablecoin from Sky (who used to be Maker) — has shrunk to around $4.5 billion, down from over $7 billion earlier this year, again according to DeFiLlama. By comparison, the total market cap for all stablecoins is just north of $200 billion.

Now, the cool thing about USDe is how it got so big, so fast. Ethena figured out a way to attract a ton of money from stablecoin holders who really wanted to earn double-digit Annualized Percentage Rates (APRs). It did this by creating a blended model of on-chain DeFi smart contracts and off-chain derivative trading.

This CeDeFi–a portmanteau of DeFi and Centralized Exchanges (CEXs) – strategy has proved attractive for many. In fact, since February 2024, folks keeping their money in the staked version of USDe, or sUSDe, have enjoyed an average annual yield of 17.5%, and even peaking at 55.9% (March 7, 2024), according to a note by cryptocurrency researcher Messari.

Messari also highlighted the real risk-reward aspect here. Ethena’s CeDeFi approach carries with it inherent risks, like offchain exchanges failing or problems with custodians and settlement providers.

Despite these risks, USDe is rapidly becoming a popular choice. Back in October, the cryptocurrency trading desk Wintermute, started using USDe as trading collateral. Fast forward to June, and sUSDe had partnered up with powerful DeFi lender Aave, quickly becoming the fastest-growing asset on its platform.

Oh, and there’s more good news for Ethena. Its native token, ENA (ENA), has seen a 5x gain since June. On the flip side, let’s talk about Maker. It rebranded as Sky in August, making changes to Dai that have invited some criticism, especially the possible cybersecurity risks and potential for asset freezes. But that’s a story for another day!