Original title: Ethena 2025: Convergence.
Original author: G | Ethena, Founder of Ethena.
Original text compiled by: 0xresearcher.
In May, I described the final roadmap for Ethena 2024, explaining our vision for the most important product in the crypto space—Internet currency—and promoting the integration of funds and interest rates across DeFi, CeFi, and TradFi.
Looking back, what we are most proud of is the resilience shown during the six-month market downturn. During this time, we encountered many gloating onlookers, but there were also some who stood firmly by our side. For this, I am deeply grateful.
I am well aware that choosing to support us in the early days of Ethena was not an easy decision. It required taking on special risks, understanding a brand new concept, and choosing to trust—believing that we could deliver on our promises.
But this is the essence of innovation, challenging the status quo, and driving industry progress.
The team and I are grateful for everyone's trust, and we are honored to work day and night to build better products to repay that trust.
A few days after the Luna crash, I resigned from my job, founded Ethena, and assembled a team months after the FTX incident.
We forged ahead during the bear market of 2023 and doubled our efforts over the past six months of market downturn, elevating Ethena's core product and ecosystem goals by tenfold.
This article will detail our goals for 2025 and revolve around the following themes:
· Summary of Ethena's key metrics for 2024.
· Ethena through customized products.
· sUSDe's entry into traditional finance.
· Why is sUSDe a reasonable next step for traditional finance after ETFs?
· The macro benefits brought by the loose interest rate environment for USDe.
· The current state and future of the crypto dollar landscape.
· Ethena builds a Telegram savings payment application for a billion users.
· Ethena Network ecosystem applications and new chains.
Ethena 2024 Review.
· Jumped to the third-largest dollar asset in the field within ten months, with a supply of $6 billion.
· The fastest growth to $5 billion in dollar assets in history.
· Last month's annual revenue exceeded $1.2 billion.
· Second only to pump.fun, becoming 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.
What initially interested me about DeFi protocols was:
· Financial services can scale through the marginal cost of software.
· Capital can flow freely around the world at internet speed.
This gives us the ability to create the most profitable entities on earth at almost zero cost.
To achieve this goal, Ethena has only existed for a year.
Comparison of each employee's income run rate in December.
Ethena is the second fastest startup in history to reach $100 million in revenue.
Ethena officially launched in February 2024. Currently, the supply of USDe is approximately $6 billion, making it one of the fastest-growing applications in cryptocurrency history. One year after its establishment, USDe is second only to USDT and USDC, which have been operating for nearly a decade.
The fastest in history to reach $5 billion in dollar-denominated assets.
Excluding USDT and USDC, Ethena dominates 85% of all on-chain dollar asset growth in 2024. In recent weeks, the nominal dollar inflow of USDe has exceeded the total growth of ETFs, all of which are the most successful ETF products in history.
Since October 1, USDe inflows have surpassed all aggregated ETFs of ETH and BTC (excluding IBIT).
In the DeFi space, Ethena has become a key component of other financial applications. Over 50% of Pendle's total locked value (TVL) comes from Ethena; about 25% of Sky's revenue (over $100 million) is related to Ethena; approximately 30% of Morpho's TVL comes from Ethena assets; Ethena's launch on Aave is the fastest-growing asset of 2024, reaching over $1.2 billion in just three weeks; most EVM-based perpetual contract exchanges have launched USDe collateral assets.
Ethena is also one of the first on-chain products to enter the CeFi market (primarily used as collateral for trading derivatives). USDe is currently launched on about 60% of centralized exchange markets, with only two large exchanges yet to go live. In just a few weeks, USDe has surpassed USDC's balance on Bybit, illustrating the product's market fit.
USDe surpassed Bybit's USDC balance in less than a month.
USDtb was also launched last month, supported by BlackRock's BUIDL Treasury Fund as collateral. For end-users, this product is indistinguishable from ordinary stablecoins, as it is designed for distribution partners like centralized exchanges to share profits, incentivizing them to use the product on their platforms. We will announce exchange integrations in January, allowing these institutions to offer a full suite of dollar products to their users through Ethena.
Finally, we see decentralized and on-chain stablecoins beginning to use a hybrid model of USDe and real-world asset (RWA) products to support their own products. Ethena can now provide backend infrastructure, offering two products for issuers, such as Sky, Frax, and Usual, all of which use Ethena products in their offerings.
However, the above achievements seem insignificant in the face of the impending transformation.
Ethena's next growth step will be driven by its entry into the traditional finance sector.
The infrastructure is now in place, and the regulatory path for this product in traditional finance is clear, with opportunities far exceeding anything we have seen in the cryptocurrency space to date.
Entering traditional finance: a win-win merger.
Note: The target distribution platforms listed above are for reference only, and not all institutions are current partners.
The fixed income market is the largest category of liquid investments globally, with a size exceeding $190 trillion. Most asset management firms, sovereign wealth funds, pension funds, and insurance funds invest in fixed income products. The entire cryptocurrency market's market capitalization is currently less than that of Australia's debt capital market, despite Australia having less than 0.5% of the global population.
The most important financial tools for saving and value preservation in the world are the dollar and its yields. It sounds simple, but the demand for this product far exceeds the total of the entire cryptocurrency market (including Bitcoin).
This is why, after ETFs, dollar savings products are a reasonable next step for these institutions. The futures market is the only market in cryptocurrency large enough to meet its dollar demand.
Ethena is ready to offer such products.
sUSDe aimed at traditional finance—iUSDe.
Ethena will launch the new product iUSDe next month, aiming to push sUSDe into the traditional finance sector through a regulated product.
iUSDe is similar to sUSDe but includes a simple wrapping contract that adds some transfer restrictions at the token level, making it easier for traditional financial entities to hold and use.
This includes collaborating with partners to provide independent special purpose vehicles (SPVs) managed by regulated investment managers, allowing traditional financial institutions to effectively participate in this product without directly engaging with the crypto space.
We will announce the first batch of iUSDe traditional financial distribution partners this month.
The focus for the first quarter of 2025 will be to collaborate with traditional financial distribution partners to enable their clients to access iUSDe, covering all fields:
· Asset management companies.
· Private equity funds.
· Exchange-traded products.
· Private investment trusts.
· Major agents.
By establishing a bridge connecting traditional finance, traditional financial institutions can obtain dollar loans at a spread of SOFR + 100-200 bps, and funds will flow into Ethena on an unprecedented scale until the return rate of the sUSDe protocol narrows to a smaller spread compared to the risk-free rate.
In this scenario, Ethena will act as a tool for interest rate arbitrage, facilitating capital movement and interest rate market integration 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 USDe will adjust based on changes in crypto-native interest rates, acting as a balancing item connecting traditional finance and internet finance.
According to current market conditions, we find that these capital pools have over $10 billion of incremental capacity in iUSDe.
The appeal of iUSDe to traditional finance.
The uniqueness of Ethena iUSDe lies in:
· It combines the only two forms capable of achieving real crypto-native returns at a billion-dollar scale.
· Its returns show a weaker negative correlation with interest rates in traditional finance.
· Its underlying assets are held by custodians, which can be insured by traditional financial institutions.
Integrating the only two scalable native crypto return sources into a dollar product provides a simple channel for asset allocators in traditional finance to capture and harvest excess returns from the crypto space through a single asset.
The highest risk-adjusted dollar returns in cryptocurrency.
When comparing Ethena's iUSDe to existing traditional fixed-income portfolios, the unleveraged dollar annual return rate was about 20% last year, which was unheard of before. As interest rates decline, iUSDe will become more attractive as an alternative.
Comparison of sUSDe with traditional fixed income products.
The scale of basis in the crypto market has not been fully understood. This is undoubtedly the largest potential cash flow source in the entire field. Since Ethena's launch, the basis has grown more than threefold. Importantly, this scale is enough to attract the attention of traditional finance, becoming a viable opportunity.
The total open interest reached $110 billion, with an annualized basis of about 20%, generating approximately $10 billion in cash flow for Ethena each year, which is nearly 10 times the cash flow of the entire ETH liquid staking market.
Currently, Ethena accounts for about 7% of open interest. At a Bitcoin price of $200,000, if it only accounts for 10% of open interest, the supply of USDe would reach $25 billion.
The path forward is clear, and the current task is to execute and deliver this product to the traditional financial market.
With the growth of Bitcoin open interest and market share, the target supply of USDe is $25 billion.
Macroeconomic interest rate favorable factors and negative correlation.
The most attractive feature of sUSDe to traditional finance is that its returns exhibit a negative correlation with real interest rates. There are almost no other debt products in traditional finance that have this characteristic.
This is intuitive: as real interest rates continue to decline, speculative activity in the cryptocurrency market accelerates, while the long-term demand for leverage increases, which will drive financing rates up and ultimately enhance the returns Ethena receives.
We observed this phenomenon during the zero-interest-rate policy (ZIRP) period of 2020/21, when financing spreads exceeded 15%, and this phenomenon began to reappear in the fourth quarter of 2024.
The driving effect of interest rate cuts on sUSDe growth.
Recently, we observed the exact response to interest rate cuts: a reduction of about 75 basis points led to financing rates rising from about 8% to over 20%, a change that occurred in the past few months of the last quarter. With the arrival of a loose cycle next year, this trend is expected to continue.
The compound effect of interest rate cuts.
Interest rate cuts have undoubtedly had a compound effect on Ethena's growth and fundamentals. The decline in interest rates not only spurred the expansion of stablecoin demand but also made Ethena more attractive from a risk-adjusted basis as the benchmark interest rates for RWA decreased, offsetting the impact of declining real rates in traditional fixed-income products.
Simple example:
For a $100 billion fixed income portfolio, if interest rates decrease by 200 basis points, approximately $15 billion of sUSDe needs to be added to maintain the mixed portfolio's returns at the same level.
The demonstrative impact of sUSDe on a $100 billion fixed income portfolio.
A more advanced risk-adjusted dollar yield brought by native crypto resources is a type of product that can channel billions of dollars from the old financial system to the internet system.
Ethena will become the bridge for this transformation.
This transition will occur in the first quarter of 2025.
The future of the crypto dollar landscape.
The current landscape of crypto dollars.
The current and future state of the crypto dollar will be drastically different.
Currently, the application scenarios for stablecoins can be roughly divided into the following categories:
1. Trading and collateral: Currently dominated by Tether, with the vast majority of spot and perpetual contract pairs quoted in USDT, the market size is approximately $125 billion. Ethena has already surpassed USDC as a collateral asset for derivatives on the second largest exchange.
2. Value storage tools for developing countries: Providing a global dollar channel for individuals outside of the US banking system, currently dominated by Tether on the Tron network, with a market size of approximately $60 billion.
3. Savings tools or investment products: Currently dominated by Ethena and Sky, with almost no participation from the traditional financial system in on-chain products, the market size is approximately $15 billion.
4. Payment scenarios: Currently, there is almost none in the market, although PYUSD and USDC have shown some potential, but meaningful integration with traditional payment systems has yet to be achieved, with a market size of less than $5 billion.
In summary, Tether dominates the current two main application scenarios: trading and value storage tools in developing countries.
The future landscape of crypto dollars.
But I believe that with the entry of the following two categories, the existing landscape will undergo dramatic changes:
1. The entry of traditional finance into savings product application scenarios.
2. Fintech companies and Web2 companies entering payment product application scenarios.
Although these two categories currently have the smallest scale, their growth opportunities in the future are the greatest.
Although Ethena has already found a product-market fit in the two most popular application scenarios, I believe the entry of traditional finance into savings products and Web2 or fintech companies into payment application scenarios will bring over $50 billion of net new dollar 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 address the payment and savings tool application scenarios by creating dedicated applications within the Telegram and TON ecosystems, without directly competing in the payment company field.
Products aimed at a billion users.
Application of sUSDe in Telegram.
In 2025, we will launch a dedicated sUSDe application scenario within the Telegram app, allowing users to transfer, consume, and save in an experience similar to a mobile digital bank.
Payments will connect directly with Apple Pay, allowing users to switch between savings assets in sUSDe and direct mobile payments on their phones.
Yielding dollars are the world's most important savings assets for wealth preservation, and I believe they are the only crypto product that can reach a billion people, aside from Bitcoin.
Based on the access of over 900 million users on Telegram, we have a distribution platform that can bring this product to the world.
Our shared goal is to provide a payment and savings product that is as easy to use as sending a message to a billion people.
Ethena Ecosystem Network
Ethena's core product goal is simple: to stand alongside Tether as the most important product in the crypto space with USDe and USDtb.
Product and token strategies closely tied 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, the design of sENA aims to accumulate value through a token model similar to BNB, where applications within the ecosystem will reserve a portion of the token supply for airdrops to sENA holders.
The dollar will continue to serve as the infrastructure for on-chain capital movement, not only for settlement and payment but also involving all core DeFi primitives such as trading, lending, derivatives, and leverage.
Today, every DeFi protocol involving dollars can be rebuilt around Ethena, achieving economic structure improvements by default.
sUSDe unlocks new possibilities for this round of innovation, such as fixed-rate lending, leveraged strategies in money markets, and collateralizing derivatives that carry rewards. However, the full scope of new products that may be built on sUSDe remains to be seen.
Ethena Network is our plan to directly support innovative protocols based on Ethena sUSDe applications while aligning the success of these new protocols with the ENa token.
The two applications we have announced:
· Ethereal: A perpetual and spot exchange based on self-owned application chains, with a complete order book that includes sUSDe and local rewards, Ethena will provide liquidity and hedge liquidity for this exchange.
· Derive: The largest on-chain options and structured products protocol, with sUSDe as the core collateral asset of the system.
Ethereal will open its testnet next month, and Derive plans to launch its token in the next two weeks.
These are just the first examples in the entire DeFi ecosystem built on sUSDe; more applications will be released in the first quarter of 2025.
On-chain details will be released in the first quarter alongside the Ethereal mainnet.
Ethena Network Application.
Thank you again for everyone's support in 2024. Without our users and those who always believe in our vision, Ethena would be nothing.
2024 is the year we launch our first real product; we have laid the groundwork to prepare for the convergence of favorable macroeconomic winds.
In 2025, we will disrupt the financial system at a scale far beyond what we currently see.
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