Last updated: October 2026
Ethena is the protocol behind USDe, a “synthetic dollar.” It is designed to hold a value of $1 using crypto collateral paired with short futures positions, rather than dollars in a bank. Its staked version, sUSDe, pays a yield that comes mainly from the funding payments perpetual-futures traders make. ENA is the governance token. In “Ethena crypto” discussions, the three get mixed up constantly, and so do the risks. This guide separates them, works through the hedge with numbers, and covers what happened when USDe briefly traded at $0.65 on one exchange in October 2025.
You’ll find this and every related walkthrough in our DeFi hub.
Key takeaways
- USDe is backed by crypto (BTC, ETH, SOL, liquid staking tokens) and stablecoins, hedged with short perpetual futures so that price moves roughly cancel out.
- sUSDe’s yield is variable. It can be high when traders pay to be long, and it shrinks or turns negative when funding flips.
- USDe supply peaked at roughly $14.7–14.8 billion in October 2025, then contracted sharply after the October 10 market crash.
- ENA (15 billion supply) governs the protocol. A fee-switch framework that would link protocol revenue to ENA has moved through governance, with conditions attached.
History and Founders
The idea traces to a March 2023 essay by BitMEX co-founder Arthur Hayes, who argued for a “Nakamoto dollar” built from crypto collateral and short derivatives. Guy Young, previously an investment professional in traditional finance, founded Ethena Labs to build it. Hayes’s family office became an early backer, alongside Dragonfly, which led the 2023 seed round.
- February 2024: USDe launches publicly with a points campaign (“Shards”) that drives rapid growth.
- April 2024: The ENA token launches with an airdrop to early users.
- Late 2024: Ethena adds BTC as collateral and launches USDtb, a separate stablecoin backed mainly by BlackRock’s tokenized Treasury fund (BUIDL). It also becomes a place to park USDe backing when funding rates are poor.
- 2025: USDe becomes one of the largest dollar tokens, deeply integrated with Pendle, Aave and other lending markets. Supply peaks near $14.8 billion around October 9–10.
- October 10, 2025: During a market-wide liquidation cascade, USDe briefly trades at around $0.65 on Binance’s internal order book, while on-chain markets stay near $1. Binance attributed the problem to its own pricing and paid about $283 million in compensation for losses from several depegs. Redemptions then shrink USDe supply sharply in the following months.
- 2026: Supply partly recovers over the year. ENA governance continues work on a fee switch linking protocol revenue to ENA.
What Is a Synthetic Dollar?
Traditional stablecoins such as USDC hold cash and Treasury bills and promise redemption for dollars. Algorithmic designs like Terra’s UST relied on a sister token’s market value. That design failed in 2022, as our algorithmic stablecoins guide explains. A synthetic dollar takes a third approach. It holds a volatile asset and an equal-sized short position, so the combined value stays roughly constant in dollar terms. No bank account is involved, but there is exposure to derivatives exchanges and custodians.
Not every DeFi dollar uses derivatives; our guide to what Usual (USUAL) is describes a stablecoin backed 1:1 by tokenized short-term US Treasury products.
USDe compared with other dollar tokens
| Token | Issuer | Backing | Native yield to holders |
|---|---|---|---|
| USDe | Ethena | Crypto collateral plus short perps, and liquid stables | Via sUSDe, variable |
| USDtb | Ethena | Mainly tokenized Treasury funds (BlackRock BUIDL) | No (yield supports Ethena) |
| USDC | Circle | Cash and short-term Treasuries | No |
| PYUSD | Paxos for PayPal | Cash and short-term Treasuries | No (platform rewards vary) |
| RLUSD | Ripple | Cash and short-term Treasuries | No |
| USDS | Sky (formerly MakerDAO) | Crypto and real-world-asset collateral | Via the Sky Savings Rate, variable |
Our stablecoin guide compares these models in more depth. The key distinction is that only fiat-reserve coins promise redemption against cash held at regulated institutions.
How USDe Works
The hedge, step by step
- An approved minter, typically a market maker or institution that has passed KYC, deposits $10,000 of ETH (or another accepted asset) and receives about 10,000 USDe.
- Ethena opens a short ETH perpetual futures position worth about $10,000 on major exchanges. The collateral stays with off-exchange custodians (such as Copper, Ceffu and Cobo) under “off-exchange settlement” arrangements.
- If ETH falls 20%, the ETH is worth $8,000 but the short gains about $2,000. If ETH rises 20%, the ETH gains $2,000 and the short loses about $2,000. Either way, the backing stays near $10,000.
- Most retail users never mint. They buy USDe on DEXs or exchanges, where arbitrage keeps the price near $1.
Where the yield comes from
- Funding rates: in perpetual futures, longs pay shorts when demand to be long is high, which is common in bull markets. Ethena is structurally short, so it collects these payments. See our spot vs futures guide for how perps work.
- Staking yield: collateral held as liquid staking tokens earns Ethereum staking rewards.
- Treasury yield: the share of backing held in USDtb or other liquid stablecoins earns short-term rates.
Yield goes to sUSDe holders (USDe staked in Ethena’s vault). It is variable. The old version of this page cited “20–30%+” yields, which only applied in strong bull-market periods. In quiet or bearish markets it has been far lower. Unstaking sUSDe has a cooldown, historically 7 days, unless you sell sUSDe on a DEX instead.
sUSDe is one of the yield-bearing assets listed on Pendle, and our step-by-step guide to using Pendle explains how to buy its PT or YT tokens.
Tokenomics
- USDe: the synthetic dollar. It is minted and redeemed by whitelisted entities and freely traded by everyone else.
- sUSDe: staked USDe that accrues protocol yield. It is widely used on Pendle to split principal from yield, and as collateral in lending markets.
- ENA: 15 billion maximum supply. Roughly 30% went to core contributors and 25% to investors (both with vesting), with the rest for ecosystem development, airdrops and the foundation. ENA is used for governance, and staked ENA (sENA) can earn allocations from ecosystem projects.
- Reserve fund: a buffer funded by protocol revenue, meant to cover periods of negative funding.
Whether ENA earns revenue directly depends on the fee switch. Reports in September 2026 said a framework had been approved that would fund ENA buybacks from protocol revenue once conditions, including a USDe supply threshold, are met. Check Ethena’s governance forum for the live status.
How these fundamentals could translate into price is covered separately in our Ethena price prediction, with scenario tables for 2026 through 2030.
For the governance token specifically, our step-by-step guide on how to buy Ethena (ENA) explains exchange routes and how ENA differs from USDe.
How to Get USDe, sUSDe or ENA
- ENA: listed on most large exchanges. Buy it there or swap on Ethereum DEXs.
- USDe: swap USDC or USDT for USDe on Curve or Uniswap on Ethereum, or on supported L2s, or buy on centralized exchanges that list it.
- sUSDe: stake USDe on Ethena’s official app, or buy sUSDe directly on a DEX to skip the deposit step. Remember the unstaking cooldown when you want to exit.
- Before committing, compare sUSDe’s current yield with lower-risk options in our guide on earning interest on stablecoins. Ethena’s mint and redeem functions aren’t available to US persons, and retail access varies by country.
Pros and Cons
- Pro: A dollar token with a native yield that doesn’t depend on a bank.
- Pro: Collateral stays in segregated custody, and the hedge has been transparent through public dashboards and attestations.
- Pro: It held its peg on-chain during the extreme October 2025 crash, and redemptions were processed.
- Con: Yield depends on funding rates and falls in bear markets, or turns negative.
- Con: Counterparty risk with custodians and derivatives exchanges.
- Con: Mass redemptions shrink the system quickly, and liquidity on individual venues can break, as on Binance in October 2025.
- Con: Not decentralized: minting, redemption and hedging depend on Ethena Labs and its partners.
Risks to Understand Before Using sUSDe
| Risk | What could happen | Mitigation |
|---|---|---|
| Negative funding | Shorts pay longs, so yield falls and the reserve fund is drawn down | Watch the funding rate and reserve fund on Ethena’s transparency page |
| Exchange or custodian failure | Part of the hedge or collateral becomes inaccessible | Ethena spreads positions across venues and custodians, but cannot eliminate this risk |
| Venue-specific depeg | USDe trades below $1 on one platform, triggering liquidations of positions that use it as collateral there | Avoid high leverage with USDe as margin |
| Smart-contract risk | Bugs in the staking or DeFi integrations | Use official apps and audited integrations, and keep allocations moderate |
For a broader framework, read our explainer on stablecoin depegging.
FAQ
Is Ethena like Terra/UST?
No, although the high yields invite the comparison. UST was backed by its sister token LUNA, which created a reflexive death spiral. USDe is backed by real collateral (crypto and stablecoins) hedged with short futures. Its risks are different: negative funding, exchange or custodian failure, and liquidity crunches. Those are serious, but they’re not the same as UST’s design flaw.
Is the yield sustainable?
It is real but cyclical. Funding rates are usually positive when markets are bullish and can turn negative in downturns. Then yields drop and Ethena’s reserve fund absorbs the shortfall. Expect the yield to move with market conditions. Treat any headline rate as a snapshot, not a promise.
What happened to USDe on October 10, 2025?
During a market-wide crash, USDe briefly traded around $0.65 on Binance’s order book because of thin liquidity and Binance’s own pricing for collateral. On-chain pools and Ethena’s redemption process kept it near $1. Binance compensated affected users. Large redemptions followed, shrinking USDe supply from its peak of nearly $15 billion.
Do I need ENA to earn yield?
No. Yield goes to sUSDe holders. ENA is the governance token, and its link to protocol revenue depends on the fee-switch framework being active. You can hold sUSDe without ever touching ENA.
Crypto is volatile and risky; this is education, not financial advice. Do your own research.
