A Study of DeFi Protocol Playbooks.
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A Study of DeFi Protocol Playbooks.
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Here’s my best guess at how to build $5B in TVL in 15 months:
Ethena’s project is ambivalent to price, as USDe is delta neutral. However, the incentives needed to build USDe perform better in an up-trend.
Most tokens do not have any inherent worth. An incentive token’s capacity to drive TVL is correlated to price, and the depth of liquidity available to sell at that price.
Ethena leveraged partnerships across multiple ecosystems during a period of expansion. This means that USDe yield was subsidized by a basket of incentive tokens -- and these incentives were effective due to broader market conditions.
Launching before number go up, is generally a winning strategy.
Staked ETH, BTC and SOL benefited from sustained volatility and growth.
In an era of noise and deception, Ethena prioritized strong assets, and provided high signal to their users.
Commendable.
Six months after launch, Ethena had earned $105M in protocol revenue, and $54M of that revenue had been distributed to sUSDe holders.
Earning on Volatility means you have found Product Market Fit.
Trade Volume for LPs.
Fees on opening and closing positions.
Commissions on earned Yield in Vaults, LSTs or LRTs.
Premium from Implied Volatility in selling Options.
Basis Trades to capture Funding Rates from Perps.
APR from Borrowing.
Liquidations.
If your yield does not come from one of seven sources above, you are dumping on your holders. What’s worse, you might be a game that nobody wants to play.
The Bybit Hack of February 2025 was a massive win for Ethena, but the preparation against that attack started over a year prior, when Copper was enlisted to provide Off-Exchange Custody for USDe.
When Bybit lost $1.43B, all of Ethena’s funds were safely held Off-Exchange by Copper. The only funds at risk were $30M in uPnL, which were realized within 90 minutes.
$120M USDe was redeemed within hours, and the peg was maintained.
Two weeks later, Bybit listed Ethena’s USDtb, and integrated USDe Mint/Redeem directly on the exchange.
An outstanding performance on an otherwise detrimental stress test, due to preparations set in place a year prior.
ENA Tokenomics describe an allocation as follows:
Another description could be:
55% will be dumped on you later, but don’t worry about it until April 2025.
15% will be dumped on you as needed, but it’s necessary for us to build.
30% will be made available, so you can dump on each other.
And this is how people responded:
Price vs. Market Cap tells the same story, in another way:
The disparity between Price vs. Market Cap == the cost of incentives distribution.
Ethena’s job is to dilute their holders in a way which expands TVL without destroying the goodwill of those holders.
Here are some of the methods used:
Points build anticipation of the TGE.
30% of supply is distributed through seasonal airdrops reduce market impact.
Partnerships
USDe is deployed to multiple ecosystems with their own active Incentives Programs.
USDe is integrated into Restaking Protocols, or paired with assets which have their own Points Programs.
USDe is integrated into DEXs and Money Markets, and Derivatives protocols who each have their own native yields, and Incentive programs.
Allocations agreements are formed with Partners like Derive, who issue out 5% of supply to sUSDe stakers.
USDe is listed as margin on multiple CEXs, allowing traders to earn up to 45% APR by stacking funding rates.
Supply Constriction
The goal of this massive business development campaign was to maximize TVL without nuking the price of ENA.
We call this DeFi Ops.
Spark committed to a purchase of $1.1B USDe/sUSDe. In return, Spark gained access to USDe yield, and all of the efforts in DeFi Composability achieved during the incentive campaigns described above.
Retail talks, while Protocols and Institutions deploy capital.
Users of a given community will copy trade the same strategies that their Treasuries are running, and they can both win while running those strategies. The only difference is, Treasuries run larger strategies.
Build strategies for Treasuries.
Ethena spent a lot of resources in building their credibility:
How they prepared for exchange hacks.
How they handled minor attacks.
How they handled Bybit.
Their commitment to Reports / Attestations, and Proof of Reserves.
On April 11th, Ethena announced Proof of Reserves services would be integrated into USDe by Chainlink, Chaos Labs, LlamaRisk and Accounting Firm, Harris & Trotter.
LlamaRisk’s Dashboard looks clean:
Ethena has invested in their own credibility, and in doing so, they signaled credibility across DeFi, and opened up doors to partnerships with TradFi.
Ethena creates a USDtb stablecoin, which is backed by BlackRock's BUIDL fund -- short-term treasuries and the like. This stablecoin provides an alternative store of value when funding rates are negative, creating greater stability for Ethena.
Ethena’s partnership with Securitize led into an Ecosystem Play:
Converge is a new RWA focused chain, which is a joint venture between Ethena and Securitize. Ethena will migrate their $6B DeFi Ecosystem to Converge, and Securitize will bring an additional $2B in RWAs to the chain.
sENA will be used by validators to provide security to the chain -- of course.
Here’s my best guess at how to build $5B in TVL in 15 months:
Ethena’s project is ambivalent to price, as USDe is delta neutral. However, the incentives needed to build USDe perform better in an up-trend.
Most tokens do not have any inherent worth. An incentive token’s capacity to drive TVL is correlated to price, and the depth of liquidity available to sell at that price.
Ethena leveraged partnerships across multiple ecosystems during a period of expansion. This means that USDe yield was subsidized by a basket of incentive tokens -- and these incentives were effective due to broader market conditions.
Launching before number go up, is generally a winning strategy.
Staked ETH, BTC and SOL benefited from sustained volatility and growth.
In an era of noise and deception, Ethena prioritized strong assets, and provided high signal to their users.
Commendable.
Six months after launch, Ethena had earned $105M in protocol revenue, and $54M of that revenue had been distributed to sUSDe holders.
Earning on Volatility means you have found Product Market Fit.
Trade Volume for LPs.
Fees on opening and closing positions.
Commissions on earned Yield in Vaults, LSTs or LRTs.
Premium from Implied Volatility in selling Options.
Basis Trades to capture Funding Rates from Perps.
APR from Borrowing.
Liquidations.
If your yield does not come from one of seven sources above, you are dumping on your holders. What’s worse, you might be a game that nobody wants to play.
The Bybit Hack of February 2025 was a massive win for Ethena, but the preparation against that attack started over a year prior, when Copper was enlisted to provide Off-Exchange Custody for USDe.
When Bybit lost $1.43B, all of Ethena’s funds were safely held Off-Exchange by Copper. The only funds at risk were $30M in uPnL, which were realized within 90 minutes.
$120M USDe was redeemed within hours, and the peg was maintained.
Two weeks later, Bybit listed Ethena’s USDtb, and integrated USDe Mint/Redeem directly on the exchange.
An outstanding performance on an otherwise detrimental stress test, due to preparations set in place a year prior.
ENA Tokenomics describe an allocation as follows:
Another description could be:
55% will be dumped on you later, but don’t worry about it until April 2025.
15% will be dumped on you as needed, but it’s necessary for us to build.
30% will be made available, so you can dump on each other.
And this is how people responded:
Price vs. Market Cap tells the same story, in another way:
The disparity between Price vs. Market Cap == the cost of incentives distribution.
Ethena’s job is to dilute their holders in a way which expands TVL without destroying the goodwill of those holders.
Here are some of the methods used:
Points build anticipation of the TGE.
30% of supply is distributed through seasonal airdrops reduce market impact.
Partnerships
USDe is deployed to multiple ecosystems with their own active Incentives Programs.
USDe is integrated into Restaking Protocols, or paired with assets which have their own Points Programs.
USDe is integrated into DEXs and Money Markets, and Derivatives protocols who each have their own native yields, and Incentive programs.
Allocations agreements are formed with Partners like Derive, who issue out 5% of supply to sUSDe stakers.
USDe is listed as margin on multiple CEXs, allowing traders to earn up to 45% APR by stacking funding rates.
Supply Constriction
The goal of this massive business development campaign was to maximize TVL without nuking the price of ENA.
We call this DeFi Ops.
Spark committed to a purchase of $1.1B USDe/sUSDe. In return, Spark gained access to USDe yield, and all of the efforts in DeFi Composability achieved during the incentive campaigns described above.
Retail talks, while Protocols and Institutions deploy capital.
Users of a given community will copy trade the same strategies that their Treasuries are running, and they can both win while running those strategies. The only difference is, Treasuries run larger strategies.
Build strategies for Treasuries.
Ethena spent a lot of resources in building their credibility:
How they prepared for exchange hacks.
How they handled minor attacks.
How they handled Bybit.
Their commitment to Reports / Attestations, and Proof of Reserves.
On April 11th, Ethena announced Proof of Reserves services would be integrated into USDe by Chainlink, Chaos Labs, LlamaRisk and Accounting Firm, Harris & Trotter.
LlamaRisk’s Dashboard looks clean:
Ethena has invested in their own credibility, and in doing so, they signaled credibility across DeFi, and opened up doors to partnerships with TradFi.
Ethena creates a USDtb stablecoin, which is backed by BlackRock's BUIDL fund -- short-term treasuries and the like. This stablecoin provides an alternative store of value when funding rates are negative, creating greater stability for Ethena.
Ethena’s partnership with Securitize led into an Ecosystem Play:
Converge is a new RWA focused chain, which is a joint venture between Ethena and Securitize. Ethena will migrate their $6B DeFi Ecosystem to Converge, and Securitize will bring an additional $2B in RWAs to the chain.
sENA will be used by validators to provide security to the chain -- of course.
Revenue is shared with sUSDe stakers.
Supply Sink
Narratives around Economic Security through Restaking are explored.
Economic Security for Bridges are explored through Symbiotic DVNs.
Revenue is shared with sUSDe stakers.
Supply Sink
Narratives around Economic Security through Restaking are explored.
Economic Security for Bridges are explored through Symbiotic DVNs.
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