Ethena Labs chooses Solana (SOL) as the next collateral for USDe: the ecosystem continues to expand

As reported yesterday by Seraphim C, Head of Growth at Ethena Labs, the project might soon add Solana (SOL) as a collateral token for USDe.

The research group of Ethena has, in fact, published a governance proposal to enable SOL in the mix of guarantees for the loan requests of the stablecoin.

If approved, the proposal could increase the utility of Solana while simultaneously reducing potential selling pressures on the bull market.

At the same time, Ethena would become one of the largest perps traders of SOL, increasing the APY of USDe.

Let’s see all the details below.

Ethena Labs and the proposal to add SOL (Solana) to the collateral of USDe

Ethena, a well-known yield protocol built on the Ethereum blockchain, might soon integrate with the Solana ecosystem and add SOL to the USDe collateral.

This is what was publicly reported yesterday by Seraphim C in his capacity as Head of Growth of Ethena Labs, the entity responsible for the development of the project.

At the moment, the synthetic stablecoin USDe can only be requested by providing collateral in BTC or ETH, with the protocol implementing a delta hedging strategy.

However, if the current governance proposal on Ethena passes unanimously, we will also see SOL being enabled in the mix of guarantees.

Clearly, this integration helps to improve the DeFi landscape of the Solana blockchain.

At the same time, the Ethena protocol is positioning itself to become one of the main perps trader of SOL, attracting a large number of potential depositors.

In this initial phase, Ethena aims to gradually add the SOL asset to its pool of collateral tokens. The set goal is to attract a minimum allocation of 100-200 million dollars in SOL.

This amount represents approximately 5-10% of the open interest of SOL on the futures markets, similar to the specular share of 3% for BTC and 9% for ETH.

The proposal also considers the use of liquid staking tokens (LST) such as BNSOL and bbSOL. The mechanism is similar to the way Ethena uses ETH LST, which currently represent a third of its ETH allocation.

At the moment, the collateral APY is at 1.91%, with a notional value of 2.44 billion dollars.

It is also worth highlighting how Ethena had allocated a fund of 46 million dollars in USDe to tokenize some investments in real-world assets.

The money will be used to support the assets BUIDL di BlackRock, USDM di Mountain, USTB di Superstate e USDS di Sky.

Some interesting data for Ethena and the stablecoin USDe

Thanks to the advertising of Solana and the SOL brand, Ethena could attract a wave of new liquidity, and increase its position in the DeFi market.

The protocol, launched just at the beginning of the year, reached in a few months a record TVL of 3.6 billion dollars, before losing ground to the current value of 2.4 billion.

The initial growth was driven by the first airdrop program, which brought significant investments to the platform. After the release of the first distributions in ENA, the governance token of Ethena, there was, however, a capital outflow.

Now with Solana it is possible that the project’s reserve loot will be expanded, given the remunerative opportunities for SOL holders. 

This would inevitably lead to an increase in Ethena’s TVL, enough to regain some ground in recent months.

At the same time, there are those who are against the proposal and believe that the price instability of SOL could be a double-edged sword for Ethena.

In all this, USDe, which represents a synthetic stablecoin different from USDT or USDC, aims to maintain the peg by leveraging advanced hedging techniques.

For each deposit in ETH or BTC that enables the minting of USDe, a 1X leveraged short position is opened so that the peg stand compensates for the price erosion of possible declines.

The stablecoin, in a more or less linear way to the guarantees, boasts a capitalization (coincides with the circulating supply) of 2.6 billion dollars. It represents the 5th largest stablecoin in the crypto market in this sense.

The minting activities on Ethena were particularly high at the beginning of the year and between the months of May and June. From July onwards, there was low on-chain activity, in parallel with the crisis of the entire cryptographic sector.

The holders of USDe are currently 12,600.

Source: https://dune.com/noxiousq/ethena-usde

The evolution of the DeFi landscape for Solana

If Ethena’s proposal is positively received by the community, Solana will see its DeFi ecosystem further improve and will add new utility to SOL.

The historic rival blockchain of Ethereum has been on the rise since November 2022 ever since it broke away from the fraudulent monopoly of FTX.

From that moment on, it has added over 5.3 billion dollars in the various protocols built within it, bringing the TVL to the current level of 6 billion dollars.

Although it is not the highest value recorded by Solana (with the record reached in 2021), it still represents an excellent milestone.

The crypto network is in fact in 3rd place in the ranking of chains with the most TVL on DefiLlama, behind only Tron and Ethereum.

A good part of the credit for Solana’s success is due to the wide range of successful protocols developed within it.

The various Jito, Jupiter, Kamino, Marinade, Raydium, Marginfi, Sanctum, Drift have contributed enormously to the evolution of Solana’s DeFi.

SOL acts as a key resource for all blockchain activities, both as a gas token and as a yield-token.

Fundamental for the growth of the ecosystem is also the support of developers, incentivized by various programs of the Foundation dedicated exclusively to their work.

Thanks to the code developers, Solana has introduced revolutionary products in the Web3 sector, both on the hardware and software side.

The project is on the right track to continue this growth trend, especially after the latest possible integration with Ethena.