Ethena Labs scores $250m allocation for USDeFRAX pool

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Ethena Labs, a company specializing in creating synthetic dollars, was given approval by the US authorities to collaborate with Frax Finance and establish a USDeFRAX liquidity pool. This pool aims to increase the earnings from the FRAX stablecoin for both parties involved.

At Ethena Labs, the proposed Singularity Roadmap was accepted, empowering the protocols to establish a USDeFRAX Pool on Curve’s decentralized finance exchange. This new pool comes with a $250 million limit for its USDeFRAX stablecoin.

Ethena holds the FRAX team in high regard as exceptional constructors within the Decentralized Finance (DeFi) sphere. We’re thrilled to collaborate with them over the next few months and contribute to the expansion of the Onchain Dollar economy.

— Ethena Labs (@ethena_labs) April 8, 2024

Going ahead, the issuer of USDe and Frax Finance aim to provide a substantial amount of on-chain dollar liquidity, even as some raise questions about the resemblance between Ethena Labs’ product and Terraform’s algorithmic stablecoin, UST. In simpler terms, they intend to offer a large amount of on-chain dollars for transactions despite the fact that there are concerns over the similarities between a new product from Ethena Labs and an existing one from Terraform.

Andrei Cronje, a developer on Fantom, warned about the potential risks of USDe, which keeps its value linked to the U.S. dollar through collateralized positions. This system is similar to how UST (Decentralized Stablecoin of Terra) was designed, but ultimately led to the downfall of Terra’s $60 billion ecosystem. In simpler terms, USDe’s stability relies on these collaterals, just like UST did, and the failure of this mechanism in the case of Terra caused significant damage.

After the person responsible for generating synthetic dollars brought Bitcoin (BTC) on board to support its value, Ki Young Ju of CryptoQuant expressed similar worries as Cronje about the possibility of a crypto market crisis. In April 2022, UST and Terraform likewise utilized Bitcoin as a backup asset before their decentralized finance (DeFi) project collapsed.

Ethena Labs’ USDe crosses $2b market cap

USDe, which is a stablecoin in the decentralized finance (Defi) world and has been a subject of debate, has managed to attract user interest and reach over $2 billion in circulation since its launch in February. According to DefiLlama, Ethena Labs made their U.S. dollar-linked token available exclusively on Ethereum‘s main network.

Almost a month after its launch, the protocol experienced a significant security breach costing $290,000. However, this problem was promptly addressed. At that time, specialists were unable to identify the root cause of the vulnerability. Subsequently, Ethena Labs has been working on enhancing USDe integration further.

Early supporters and participants of the stablecoin project received 750 million complimentary governance tokens, called ENA, distributed by the stablecoin provider as a token of appreciation.

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2024-04-08 21:24