Epicenter brings you in-depth conversations about the technical, economic and social implications of cryptocurrencies and blockchain technologies. Every week, we interview business leaders, engineers academics and entrepreneurs, and bring you a diverse spectrum of opinions and points of view. Epicenter is hosted by Sebastien Couture, Brian Fabian Crain, Friederike Ernst, Meher Roy and Felix Lutsch. Since 2014, our episodes have been downloaded over 8 million times.
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episode 518: Guy Young: Ethena - USDe Synthetic Dollar via Delta-Neutral Staked Ethereum Hedging
Stablecoins represent a safe haven against crypto’s volatility, allowing participants to remain in the market, without off-ramping to fiat. While the major stablecoins are centrally issued (e.g. USDT, USDC, BUSD), there is a pressing need for an algorithmic variant or a synthetic dollar asset. (DAI is somewhere in between since approximately 50% of its collateral is USDC). After Luna’s collapse, many jumped to point out its design flaws, yet such a concept would be crucial for crypto’s decentralisation and self-sustainability. Arthur Hayes proposed an interesting concept of NAKA synthetic dollar (NUSD), backed by Bitcoin and its inverse perpetual swap short. However, yield generation on $BTC is significantly lower than that of $ETH. A sustainable yield would help balance the cases in which funding rates would be negative (a minority in crypto).
We were joined by Guy Young, co-founder of Ethena, to discuss the stablecoin landscape and their synthetic eUSD, backed by staked ETH and its inverse perpetual swap.
Topics covered in this episode:
- Guy’s background and founding Ethena
- The history of stablecoins
- The stablecoin trilemma and transparency
- eUSD synthetic dollar mechanics
- Ethena’s insurance fund and hedging
- Minimising the impact of depegging
- Leveraging centralised liquidity while maintaining self custody through MPC
- User experience
- Risk factors
- CEX vs. DEX: liquidity, infrastructure, UX
- The potential of fixed return rates
- Supply & rates equilibrium
Episode links:
- Guy Young on Twitter
- Ethena Labs on Twitter
- Arthur Hayes' article proposing the Naka synthetic dollar
This episode is hosted by Felix Lutsch. Show notes and listening options: epicenter.tv/518