I wrote an article about the stablecoin USDD launched by Sun Ge before, "A sharp review of USDD: Born out of the popularity of LUNA, the "unstable coin" with constant negative news", which caused a certain response in the circle and was blacklisted by Sun Ge. So, leaving USDD aside, is there still a chance for the stablecoin track?
The stablecoin field of the cryptocurrency market seems to be flourishing, but in fact, there are undercurrents. From the old giants USDT and USDC to the algorithmic stablecoins DAI and FRAX, and the recently popular RWA (real world asset) projects, despite the many choices, three fundamental contradictions have not been resolved: centralized risk, lack of returns, and low capital efficiency . A project called **ENA (Ethena)** is quietly breaking the deadlock with its subversive mechanism design, and has become the only recommended target in the current stablecoin track in my personal opinion. This article will deeply analyze its underlying logic, ecological potential and risk boundaries, and provide a comprehensive reference for retail investors.
The Dilemma of Traditional Stablecoins: An Unfinished Revolution
Fiat-collateralized stablecoins (such as USDT and USDC) have long dominated the market, but their core problem is that trust is completely dependent on the reserve management of centralized institutions. The brief depegging of USDC during the Silicon Valley Bank crisis in 2023 has exposed the fatal weakness of this type of stablecoin - the security of users' assets is essentially still subject to the fragility of the traditional financial system. Even if some projects try to introduce an over-collateralization model (such as DAI requiring a collateralization rate of more than 150%), they have to face the embarrassment of low capital utilization and users having to bear the risk of volatility in collateral assets. What's worse is that this type of stablecoin can hardly provide returns to holders, and its actual purchasing power continues to shrink in the macro environment of high inflation. As for algorithmic stablecoins, the collapse of UST has long proved that the Ponzi model without real yield support is destined to be difficult to escape the curse of the death spiral.
Economic model and product mechanism
Faced with the collective dilemma of traditional stablecoins, ENA has chosen a completely different path - converting Ethereum staking income into the underlying value engine of stablecoins . Specifically, when users pledge assets such as ETH through the ENA protocol, these assets will be automatically deployed to the Ethereum beacon chain or LSD protocol (such as Lido, Rocket Pool), generating an annualized 3%-5% staking income. Unlike ordinary staking, ENA does not keep these income within the protocol, but distributes them to the holders of the stablecoin USDe through smart contracts, thereby creating a stablecoin with its own interest-bearing properties . The revolutionary nature of this design is that it allows stablecoins to get rid of the positioning of "zero-yield tools" for the first time and turn them into active assets for users to fight inflation. This has a relatively clear theoretical discussion in our article "The Problem of Incentive Misalignment in the Crypto Market and the Criteria for Judging Sustainable Token Economic Models", a systematic analysis of the crypto asset token economic model, which can help users briefly judge what kind of economic model has the potential for long-term investment.
To ensure stability, ENA introduced a dynamic hedging mechanism: whenever a user casts USDe, the protocol automatically establishes a reverse position in the derivatives market (such as perpetual contracts) to hedge the price volatility risk of pledged assets (such as ETH). This mechanism enables ENA to operate at a 100% collateralization rate, which increases the capital utilization rate by more than 50% compared to over-collateralization models such as DAI. Historical data has verified its effectiveness - in the drastic fluctuations in ETH prices from $1,200 to $4,000 in 2023, USDe has always been firmly anchored to $1, without any de-anchoring or liquidation events.
What is more noteworthy is that ENA has built a self-reinforcing economic flywheel. USDe holders continue to receive ETH staking income, attracting more capital inflows; part of the fees earned by the protocol from hedging transactions is used to repurchase and destroy ENA tokens, promoting deflation; and ENA pledgers can not only share the protocol income, but also influence the direction of ecological development through governance voting. As of the second quarter of 2024, the TVL (total locked value) of the ENA protocol has exceeded US$1.2 billion, and the circulation of USDe has reached US$800 million. The cooperative ecology covers more than 50 leading DeFi platforms such as Aave, Curve, and Pendle, becoming the liquidity center of the interest-bearing stablecoin track.
Investment potential
The current ecological potential of ENA is resonating with three key trends. The first is the long-term rise in the Ethereum staking rate . Currently, the Ethereum staking rate is only 26%, far lower than the level of more than 60% of competing chains such as Cosmos and Solana. As the Ethereum ecosystem matures and staking tools become more popular, the ETH staking income will become the most important source of "risk-free interest rate" in the crypto market as the staking rate moves towards 50%. As a stablecoin directly linked to this income, ENA will become the biggest beneficiary.
Secondly, traditional institutions are accelerating their layout of RWA (real world assets) . Giants such as BlackRock and Fidelity are vigorously promoting tokenized treasury bonds, bonds and other products, but these institutions need entry tools that combine compliance, income stability and on-chain transparency. With its decentralized architecture and real-time traceable income distribution records, USDe is likely to become the preferred bridge for institutional funds to enter the DeFi world.
Finally, there is the expectation of deep integration of Binance ecosystem . The ENA team has reached a strategic cooperation with Binance Labs, and the technical architecture is fully compatible with Binance Smart Chain (BSC). Once USDe is listed on Binance as a basic trading pair, its liquidity will increase exponentially. Considering Binance's dominance in the spot trading market, this integration is likely to be the "final push" for the ENA ecosystem to explode.
Risk Warning and Retail Investor Participation Strategy
Any innovation is accompanied by risks. The potential challenges of ENA mainly come from two aspects: first, technical vulnerabilities in the Ethereum consensus layer or LSD protocol (such as Lido) may lead to interruptions in staking income; second, when the liquidity of the derivatives market is insufficient, the rising hedging costs may affect the profitability of the protocol. For retail investors, it is recommended to adopt a "combination of long and short" strategy: in the short term, you can pay attention to key events such as the ETH staking rate breaking through 30% and Binance launching USDe trading pairs, and build ENA positions in batches; in the long term, you should continue to obtain protocol income dividends by staking ENA tokens, and participate in governance voting, and deeply bind the dividends of ecological development.
Before the emergence of ENA, stablecoins were either highly centralized or prone to collapse like the algorithmic stablecoin LUNA. You can't imagine that stablecoins can be achieved through the simple operation of "short", and the effect is quite good. When most stablecoins are still involuted in the old paradigm, ENA is opening up a new RWA market through the triangular breakthrough of "profitability + capital efficiency + decentralization". For retail investors, ENA is a great investment target both in terms of economic model and product paradigm. Now ENA is at the bottom, and many people are more afraid to buy it at this time. In fact, the risk is always there. Buy when no one cares, and sell when the crowds are bustling.
