YZi Labs, the family office of Changpeng Zhao, former CEO of Binance, is increasing its investment in Ethena Labs, the company behind the USDe synthetic dollar. The move signals a deepening commitment to Ethena's vision of a crypto-native stablecoin and its potential to reshape the digital dollar landscape. The specific amount of the investment has not been disclosed.
Ethena and USDe: A Crypto-Native Approach
Ethena is building a synthetic dollar protocol on Ethereum, offering a crypto-native alternative to traditional stablecoins. Its main product, USDe, is designed to maintain a value close to $1 through a unique hedging mechanism. Unlike traditional stablecoins that rely on fiat reserves held in banks, USDe is backed by crypto assets and stabilized using a "delta-neutral" strategy. This involves holding collateral in the form of staked Ethereum (ETH) or its derivatives and opening equivalent short positions in the derivatives market to hedge against price volatility. If the price of Ethereum decreases, gains from the short positions offset the collateral's loss, helping to maintain USDe's stability.
USDe has gained traction in the DeFi space, reaching a circulation of over $10 billion, making it the third-largest dollar-pegged asset in crypto. The total value locked (TVL) in the protocol has surpassed $14 billion. Furthermore, Binance has recently integrated USDe as a spot trading pair and collateral asset, which could further boost adoption.
YZi Labs' Investment: A Strategic Move
YZi Labs' increased investment is intended to help Ethena scale its operations, expand the reach of USDe, and develop new products. The funds will be used for several key initiatives:
- Boosting USDe Integration: Enhancing USDe's presence across centralized exchanges (CEXs) and decentralized protocols (DeFi).
- Accelerating BNB Chain Adoption: Promoting USDe adoption and protocol expansion on the BNB Chain.
- Supporting New Product Launches: Facilitating the launch of USDtb, a fiat-backed stablecoin designed for regulatory compliance, and Converge, an institutional settlement layer. USDtb is backed by short-duration treasury assets, including BlackRock's BUIDL. Converge is an Ethereum Virtual Machine-compatible chain focused on tokenizing real-world assets.
YZi Labs was an early supporter of Ethena, participating in its Season 6 Incubation Program in February 2024. This continued support reflects confidence in Ethena's vision and its potential to become a core infrastructure provider for tokenized global finance.
Ethena's Future and the Stablecoin Landscape
Ethena is positioning itself as more than just a stablecoin issuer, but as a key player in the future of tokenized finance. By combining its synthetic dollar innovation with initiatives that comply with regulations, Ethena is appealing to retail users, DeFi protocols, and institutional players.
The stablecoin market is becoming increasingly competitive, with established players like USDT and USDC dominating the space. However, there is growing demand for crypto-native alternatives that can offer sustainable yields alongside scale and liquidity. Ethena's USDe aims to meet this demand by providing a stable, censorship-resistant, and scalable solution for digital assets.
Ethena's CEO, Guy Young, believes that embedding stable, yield-bearing assets directly into the core of the crypto economy is the "holy grail of digital dollar distribution". With the support of YZi Labs and the increasing adoption of USDe, this vision is moving closer to reality.
