Update Feb. 26, 2 pm UTC: This article has been updated to correct Greythorn Capital to Greythorn Asset Management.
The initial concerns around Ethena Labs’ USDe stablecoin yield are a natural sign of a maturing industry recovering from the collapse of the Terra-LUNA ecosystem, Guy Young, the founder of Ethena Labs, told Cointelegraph in an exclusive interview on Feb. 22.
Ethena’s USDe stablecoin caused widespread concerns in the crypto community after it launched on the public mainnet on Feb. 19. The USDe Ethereum-based synthetic dollar currently offers a 27.6% annual percentage yield (APY), according to Ethena Labs’ homepage.
The 27% yield caused concerns about the protocol’s economic sustainability, as it was considerably higher than the 20% yield offered by Anchor Protocol on Terra’s UST before the algorithmic stablecoin issuer collapsed in May 2022, erasing tens of billions of dollars of value in a few days.
Unlike USDe, the Anchor protocol’s yield was completely artificial, with no sustainable underlying yield-generation mechanism, according to Ethena Labs’ Young. He said:
In contrast, Ethena Labs’ USD yield is publicly verifiable. Young told Cointelegraph that the synthetic dollar’s yield is generated via staking returns and shorting Ether perpetual futures contracts.
According to Jae Sik Choi, an analyst at Greythorn Asset Management, Anchor protocol’s artificially inflated yield was unsustainable, unlike the dynamic yield promised by USDe:
Ethena Labs’ USDe isn’t the only product promising double-digit yields. According to Pendle’s homepage, some staking pools on Pendle Finance, like the ezETH pool, offer a 41% fixed annual percentage yield (APY) for staked Ether.