Ethena's USDe Stablecoin Makes a Splash on Solana, Eyes SOL as Backing Asset

Ethena Labs has made a significant move by launching its USDe stablecoin on the Solana blockchain, with plans to potentially back it with Solana's native cryptocurrency, SOL. 

USDe: Crypto's First Fully-Backed, Onchain Stablecoin

USDe is marketed as the crypto's first fully backed, on-chain, scalable, and censorship-resistant form of money. The mechanism backing USDe enables sUSDe, the first "Internet Bond," offering a crypto-native, reward-accruing asset derived from staked asset returns (to the extent utilized in backing) and the funding and basis spread available in perpetual and futures markets.

Ethena is not stopping at simply launching USDe on Solana. The protocol has also proposed adding SOL, Solana's native cryptocurrency, as a backing asset for USDe. If the governance proposal is approved, it could open up an additional $2-3 billion of open interest across major exchanges, further enhancing USDe's scalability.

Why Solana? The Metrics Speak for Themselves

Ethena's decision to expand to Solana is backed by solid data. Year-to-date in 2024, SOL funding has outperformed both Bitcoin and Ethereum, even after the latter two assets had ETFs launched. This suggests that SOL could provide a lucrative avenue for generating yield for USDe holders.

Historical Skepticism

While USDe has seen significant growth since its launch, it hasn't been without its critics. Some skeptics have drawn comparisons to the failed Luna stablecoin, citing concerns about high yield returns and the potential for instability. However, Ethena maintains that USDe is fundamentally different, emphasizing its full backing and collateralization.

Solana's DeFi Ecosystem Embraces USDe

The Solana ecosystem, known for moving fast, has quickly embraced USDe. Several major Solana protocols, including Drift, Kamino Finance, and Orca, have already integrated USDe into their platforms. This widespread adoption is a testament to USDe's growing popularity and utility within the Solana ecosystem.

A Bright Future for USDe on Solana

The integration of USDe into Solana's DeFi ecosystem promises a range of benefits for users. Kamino Finance allows users to leverage their sUSDe and USDe holdings by borrowing PYUSD, increasing their exposure to yield while earning Ethena rewards.

On the Drift exchange, users can earn yield on their USDe and sUSDe collateral while trading perpetual contracts, providing a new avenue for passive income generation within the Solana ecosystem.