Ethena founder details 2025 project roadmap

Author: G | Ethena, Founder of Ethena Translation: 0xresearcher

In May, I described the final roadmap for Ethena 2024, which explained our vision of creating the most important product in the crypto field - Internet currency - and used it to promote the integration of funds and interest rates in DeFi, CeFi and TradFi.

Looking back, what makes us most proud is the resilience we have shown during the six-month market downturn. During this period, we encountered many gloating bystanders, but there were also some people who always stood firm with us. For this, I am deeply grateful.

I know that it is not easy to choose to support us in the early days of Ethena. You need to take special risks, understand new concepts, and choose to trust - believe that we can deliver on our promises.

But this is the nature of innovation, challenging the status quo, and driving progress in the industry.

The team and I are grateful for your trust, and we are honored and working day and night to build better products to repay your trust.

I quit my job and founded Ethena a few days after the Luna crash, and formed the team a few months after the FTX incident.

We have forged ahead in the bear market in 2023 and doubled down on the market downturn in the past six months, increasing Ethena's core product and ecosystem goals by 10 times.

This article will detail our goals for 2025 and revolve around the following topics:

• Summary of Ethena's key indicators in 2024

• Ethena enters the traditional financial field with customized product sUSDe

• Why is sUSDe the logical next step for traditional finance after ETFs?

• The macro benefits brought by the loose interest rate environment to USDe

• The current situation and future of the crypto-dollar landscape

• Ethena creates Telegram savings and payment applications for one billion users

• Ethena network ecosystem applications and new chains

Ethena 2024 Review

• In ten months, it has become the third largest US dollar asset in the field, with a supply of US$6 billion

• The fastest growth to US$5 billion in US dollar assets in history

• Last month, annualized revenue exceeded 12 $100 million

• Second fastest crypto startup to reach $100 million in revenue after pump.fun

• In December, it became the protocol with the highest per capita revenue in the field

My initial interest in DeFi protocols is that:

• Financial services can be expanded 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 entity on the planet at almost zero cost.

To this end, Ethena has only been in existence for a year.

Revenue run rate per employee in December

Ethena is the second fastest startup in history to reach $100 million in revenue

Ethena officially launched in February 2024. With a current supply of about $6 billion, USDe is one of the fastest growing applications in the history of cryptocurrency. One year after its establishment, USDe is second only to USDT and USDC, which have been in operation for nearly a decade.

The fastest dollar-denominated assets to reach $5 billion in history

Except for USDT and USDC, Ethena alone accounts for 85% of the growth of all on-chain USD assets in 2024. In recent weeks, USDDe's notional dollar inflows have exceeded the total growth of ETFs, which are the most successful ETF products in history.

Since October 1, USDe's inflows have exceeded all aggregated ETFs of ETH and BTC (except IBIT)

In the DeFi field, Ethena has become a key component for other financial applications. More than 50% of Pendle's total locked value (TVL) comes from Ethena; about 25% of Sky's revenue (more than $100 million) is related to Ethena; about 30% of Morpho's TVL comes from Ethena assets; Ethena's listing on Aave is the fastest growing asset in 2024, reaching more than $1.2 billion in 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 (mainly used as a margin collateral asset for trading derivatives). USDe is currently listed on about 60% of the centralized exchange market, with only two large exchanges remaining. In just a few weeks, USDe exceeded the USDC balance on Bybit, which is enough to show the fit of this product with the market.

USDe exceeded the balance of USDC on Bybit in less than a month

USDtb was also launched last month, using BlackRock's BUIDL Treasury Fund as collateral to support the stablecoin. To the end user, the product looks like a regular stablecoin, as it is designed to share revenue with distribution partners like centralized exchanges, in order to incentivize them to use the product on their platforms. We will be announcing exchange integrations in January, so that these institutions can offer their users a full suite of USD products through Ethena’s products.

Finally, we are seeing decentralized and on-chain stablecoins begin to use a hybrid model of USDe and real world asset (RWA) products to support their products. Ethena can now provide the backend infrastructure to provide issuers with both products, such as Sky, Frax, and Usual are using Ethena products in their products.

But these achievements pale in comparison to the changes that are coming.

The next step in Ethena’s growth will be driven by its entry into traditional finance.

The infrastructure is in place, the regulatory path for this product in traditional finance is clear, and the scale of the opportunity far exceeds anything we have seen in crypto to date.

Entering Traditional Finance: Integration and Win-Win

Note: The target distribution platforms listed above are for reference only, not all institutions are current partners

The fixed income market is the largest liquid investment class in the world, with a size of over $190 trillion. Most asset managers, sovereign wealth funds, pension funds and insurance funds have invested in fixed income products. The market value of the entire cryptocurrency market is currently less than the debt capital markets of Australia, and Australia's population is less than 0.5% of the world's population.

The world's most important financial tool for saving and preserving value is the US dollar and its earnings. It sounds simple, but the demand for such a product is far greater than the sum of the entire cryptocurrency market (including Bitcoin).

That's why, after ETFs, US dollar savings products are the next logical step for these institutions. The futures market is the only market in cryptocurrency that is large enough to meet their US dollar needs.

Ethena is ready to provide such a product.

sUSDe for traditional finance - iUSDe

Ethena will launch a new product iUSDe next month, with the goal of bringing sUSDe to the traditional financial sector through a regulated product.

iUSDe is the same as sUSDe, but adds a simple wrapper contract that adds some transfer restrictions at the token level, making it easier for traditional financial entities to hold and use it.

This includes working with partners to provide an independent special purpose vehicle (SPV) managed by a regulated investment manager, allowing subscriptions to the vehicle's shares, allowing traditional financial institutions to effectively participate in the product without having to touch the crypto space.

We will announce the first batch of iUSDe traditional financial distribution partners this month.

The focus in the first quarter of 2025 will be to work with traditional financial distribution partners to enable their customers to reach iUSDe, covering the entire field:

• Asset management companies

• Private equity funds

• Exchange traded products

• Private investment trusts

• Primary agents

By establishing a bridge connecting traditional finance, traditional financial institutions can obtain US dollar borrowing at a spread of SOFR+100-200bps, and funds will flow into Ethena on an unprecedented scale until the spread between the return rate of the sUSDe protocol and the risk-free rate narrows to a smaller and smaller level.

In this case, Ethena will play the role of an interest rate arbitrage tool, promoting the integration of capital flows and interest rate markets between DeFi, CeFi and traditional finance.

Traditional finance will be able to price iUSDe as a spread relative to the risk-free rate, and the supply of USDe will be adjusted according to changes in crypto-native interest rates, acting as a balance between traditional finance and Internet finance.

Based on current market conditions, we find that these capital pools still have more than $10 billion in incremental iUSDe capacity.

iUSDe's appeal to traditional finance

The uniqueness of Ethena iUSDe is:

• It combines the only two forms of crypto-native real returns on a billion-dollar scale.

• Its returns show a weak 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 one USD product provides asset allocators in traditional finance with a simple channel to access and harvest excess returns in the crypto space through a single asset.

Highest Risk-Adjusted USD Returns in Crypto

When Ethena's iUSDe is compared to an existing traditional fixed income portfolio, the unlevered annualized USD return last year was about 20%, which was previously unheard of. As interest rates fall, iUSDe will become more attractive as an alternative.

sUSDe vs. Traditional Fixed Income Products

The size of the basis in the crypto market is not yet fully understood. This is undoubtedly the largest potential source of cash flow in the entire space. Since Ethena launched, the basis has grown more than three times. Importantly, this is large enough to attract the attention of the traditional financial community and become a viable opportunity.

With total open interest of $110 billion and an annualized basis of ~20%, Ethena generates ~$10 billion in cash flow per year, nearly 10 times the cash flow of the entire ETH liquid staking market.

Currently, Ethena accounts for ~7% of open interest. At a Bitcoin price of $200,000, a 10% share of open interest would result in a $25 billion USD supply of USDe.

The path forward is clear, and the task now is to execute and deliver this product to the traditional financial markets.

USDe's target supply is $25 billion as Bitcoin open interest and market share grow

Macro interest rate tailwinds and negative correlation

The most attractive feature of sUSDe to traditional finance is that its returns are negatively correlated with real interest rates. Few other debt products in traditional finance have this feature.

This is intuitive: as real interest rates continue to fall, speculation in the cryptocurrency market accelerates, while the long-term demand for leverage increases, which will drive up financing rates and ultimately increase the returns reaped by Ethena.

We observed this phenomenon during the ZIRP in 2020/21, when funding spreads were over 15%, and again starting to show up in Q4 2024.

Rate Cuts’ Boost to sUSDe Growth

Recently, we observed the exact reaction to rate cuts: a ~75bps cut caused funding rates to rise from ~8% to over 20%, a change that occurred in a few months over the past quarter. This trend is expected to continue as the easing cycle begins next year.

Compounding Effect of Rate Cuts

Rate cuts have certainly had a compounding effect on Ethena's growth and fundamentals. Not only do lower rates drive demand for stablecoins, but as the benchmark rate for RWAs falls, Ethena becomes more attractive on a risk-adjusted basis, compensating for the impact of lower real interest rates in traditional fixed income products.

Simple Example:

For a $100 billion fixed income portfolio, if rates fall by 200 basis points, approximately $15 billion of sUSDe will need to be added to keep the hybrid portfolio return at the same level.

sUSDe's Demonstration Impact on a $100 Billion Fixed Income Portfolio

A higher-level risk-adjusted dollar return from a native crypto resource is the type of product that can divert billions of dollars from the old financial system to the Internet system.

Ethena will be the bridge to this transition.

This transition will occur in the first quarter of 2025.

The future of the crypto-dollar landscape

The current crypto-dollar landscape

The current status and future of the crypto-dollar will be completely different.

Currently, the application scenarios of stablecoins can be roughly divided into the following categories:

1. Trading and collateral: Currently dominated by Tether, the vast majority of spot and perpetual contract pairs are priced in USDT, with a market size of approximately $125 billion. As a derivative collateral asset, Ethena has surpassed USDC on the second largest exchange.

2. Value Savings Tools for Developing Countries: Provides global access to US dollars for individuals not in the US banking system. Currently, it is mainly dominated by Tether on the Tron network, with a market size of about $60 billion.

3. Savings tools or investment products: Currently dominated by Ethena and Sky, with almost no participation of the traditional financial system in on-chain products, and a market size of about $15 billion.

4. Payment scenarios: Currently, the market is almost non-existent. Although PYUSD and USDC have some performance, they have not yet achieved meaningful integration with the traditional payment system, and the market size is less than $5 billion.

In summary, Tether dominates the two main application scenarios at present: transactions and value storage tools for developing countries.

The future crypto-dollar landscape

But I believe that with the entry of the following two categories, the existing landscape will undergo dramatic changes:

1. Traditional finance enters the application scenario of savings products

2. Financial technology companies and Web2 companies enter the application scenario of payment products

Although the above two categories are currently the smallest in scale, they have the greatest growth opportunities in the future.

Although Ethena has found product-market fit in the two most popular use cases, I believe that traditional finance entering savings products and Web2 or fintech companies entering payment use cases will bring more than $50 billion in net new USD capital 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 solve the payment and savings tool use cases by creating dedicated applications within the Telegram and TON ecosystems, without directly participating in the competition in the payment company field.

Products for a billion users

sUSDe in Telegram

In 2025, we will launch a dedicated sUSDe application scenario within the Telegram app, where users can transfer, spend and save in a mobile digital bank-like experience.

Payments will be directly connected to Apple Pay, and users can switch between sUSDe savings assets and direct mobile payments on their phones.

The yielding US dollar is the world's most important savings asset for wealth preservation, and I believe it is the only crypto product other than Bitcoin that can reach a billion people.

Based on the visits of more than 900 million users of Telegram, we have a distribution platform that can bring this product to the world.

Our common goal is to provide a payment and savings product that is as easy to use as sending messages to one billion people.

Ethena Ecological Network

Ethena's core product goal is simple: with USDe and USDtb, it will become the most important product in the encryption field alongside Tether.

Product and token strategies are closely integrated through ecosystem applications

In addition to these core products, Ethena will continue to transform from a single asset issuer to a platform that supports the best developers and promotes on-chain financial innovation.

As part of building an ecosystem based on sUSDe, sENA is designed to accumulate value through a token model similar to BNB, where applications in the ecosystem will reserve a portion of the token supply and airdrop it to sENA holders.

The US dollar will continue to serve as the infrastructure for on-chain capital flows, not only for settlement and payment, but also across all core DeFi primitives such as trading, lending, derivatives, and leverage.

Today, every DeFi protocol that touches the dollar can be rebuilt around Ethena and achieve improved economic structure by default.

sUSDe unlocks new possibilities for this round of innovation, such as fixed-rate lending, leveraged strategies on money markets, and reward-bearing derivatives margin guarantees. However, the full picture of new products that may be built on sUSDe that have not yet appeared is still worth looking forward to.

Ethena Network is our plan to directly support innovative protocols based on Ethena sUSDe applications, while aligning with the success of these new protocols through the ENa token.

Two applications we have announced:

• Ethereal: A perpetual and spot exchange built on its own application chain, with a full order book of sUSDe and native rewards, and Ethena will provide liquidity and hedging flow for the 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 a token in the next two weeks.

These are just the first examples of the entire DeFi ecosystem built on sUSDe, and more applications will be released in the first quarter of 2025.

On-chain details will be released in Q1 along with the Ethereal mainnet.

Ethena Network Application

Thank you again for your support in 2024. Ethena would be nothing without our users and those who continue to believe in our vision.

2024 is the year we launch our first real product, and we lay the foundation to be ready for the confluence of macroeconomic tailwinds.

In 2025, we will disrupt the financial system at a scale far beyond what we are today.