Synthetic dollar developer Ethena Labs has received approval for the USDeFRAX liquidity pool with Frax Finance to diversify the yield of the FRAX stablecoin.
Ethena Labs’ Singularity roadmap proposal is as follows: Approved And using the protocol, we were able to create a USDeFRAX POL with a cap of $250 million on the defi stablecoin exchange curve.
Going forward, USDe’s issuer and Frax Finance plan to provide dense on-chain dollar liquidity, despite concerns that Ethena Labs’ product is strikingly similar to Terraform’s algorithmic stablecoin UST.
Phantom developer Andre Cronje pointed out USDe risks arising from the asset’s peg system, which relies on collateral positions to maintain parity with the US dollar. This mechanism is similar to the design of UST, the decentralized architecture that ultimately crippled Terra’s $60 billion ecosystem.
After the synthetic dollar creator onboarded Bitcoin (BTC) to help maintain the peg, CryptoQuant founder Ki Young Ju echoed Cronje’s concerns about potential cryptocurrency contagion. UST and Terraform also utilized BTC as a reserve asset before the DeFi projects crashed in May 2022.
Ethena Labs’ USDe market capitalization exceeds $2 billion.
USDe may be considered a controversial DeFi stablecoin, but the asset has attracted user demand since its launch in February, with supply exceeding $2 billion. According to DefiLlama, Ethena Labs has only offered tokens pegged to the US dollar on Ethereum’s mainnet.
The protocol suffered a $290,000 security exploit nearly a month after its launch, but the problem was quickly resolved. Experts were unable to identify the underlying vulnerability at the time, and Ethena Labs moved forward to expand USDe integration.
The stablecoin provider airdropped 750 million free tokens on its governance token ENA for early supporters and participants.