Elixir Unveils Yield-Bearing Stablecoin to Challenge Ethena

On July 31, Elixir Labs introduced deUSD, a new "synthetic U.S. dollar asset" designed to offer a decentralized alternative to Ethena’s USDe. The launch of deUSD is scheduled for September, with the stablecoin set to deploy on the Elixir network.

The Elixir network, known for facilitating liquidity in decentralized orderbook exchanges, has garnered significant interest, amassing a $300 million total value locked (TVL) since its Apothecary points program commenced three months ago. This program allows users to earn points by minting elxETH, an Ether-backed token supported by platforms such as dYdX, Vertex, and SynFutures.

Mechanism and Features of deUSD

DeUSD will leverage the 70,000 staked ETH backing elxETH, alongside ETH shorts, to establish a delta-neutral position. This setup aims to derive yield from both staking rewards and short funding rates.

Philip Forte, Founder and CEO of Elixir Labs, highlighted that deUSD is designed with transparency and resilience, aiming to minimize reliance on basis-related market trends and unstable yield sources. Elixir has also indicated that it has $1 billion in liquidity ready to back deUSD, with potential future support for additional collateral assets.

Users of deUSD can stake the token to earn extra liquidity provider incentives on top of the yield from the underlying basis position.

Comparison with Ethena’s USDe

Elixir’s deUSD is positioned as a competitor to Ethena’s USDe, which combines staked ETH exposure with a delta-neutral short position to generate yield from short funding rates and Ether staking. USDe currently offers an annual return of 11%, although Ethena initially claimed yields could exceed 20%. Analysts have raised concerns about the sustainability of USDe's yield mechanism during prolonged bearish market conditions.

Elixir asserts that deUSD is less vulnerable to negative funding rates compared to USDe. The new stablecoin aims to maintain value stability even in times of extreme negative funding by reducing basis trade exposure and investing in U.S. Treasuries via MakerDAO's sDAI. As basis trading profitability improves, deUSD’s exposure to funding rates is expected to increase.

Additionally, Elixir promotes greater decentralization than USDe, highlighting its combination of decentralized execution with verifiable proof, open-source code, and liquidity in a non-custodial, on-chain manner free from centralized entities.

Pendle’s Support and Integration

Pendle, a leader in yield tokenization, has committed to supporting deUSD by launching yield and principal tokens for the new stablecoin. Pendle will also tokenize Elixir’s Apothecary points program, referred to as "potions."

Users of the Apothecary points program can now choose to either mint deUSD or withdraw their ETH deposits as support from decentralized exchanges becomes available.

In summary, Elixir’s deUSD aims to offer a competitive, decentralized alternative to Ethena’s USDe, with features designed to address sustainability and decentralization concerns. The upcoming launch and integration with existing platforms like Pendle signal a notable development in the stablecoin and yield-bearing asset landscape.