Ethena proposes adding Solana (SOL) as a backing asset for USDe, aiming to boost revenue and meet growing market demand.
Ethena has proposed adding Solana (SOL) as a backing asset for its stablecoin, USDe. This proposal suggests using the same hedging mechanism currently applied to Bitcoin (BTC) and Ethereum (ETH) perpetual futures. It also includes Binance Liquid Staked SOL (BNSOL) and Bybit Liquid Staked SOL (bbSOL) as potential collateral options for USDe.
The proposal suggests that SOL should be integrated into USDe’s support in a limited and incremental approach. The Risk Committee will be central to this process. They will consider issues like the relatively recent time when SOL started trading the perpetual futures or its lower trading volume. Furthermore, the Risk Committee shall consider the scarce SOL historical funding information.
However, the proposal points out that SOL’s market is growing. Currently, there is roughly $2 billion worth of open interest in all the platforms that Ethena operates. This makes SOL an appealing choice for supporting USDe as they have been inclined to provide higher funding rates in 2024 than BTC and ETH.
In August, Ethena minted 10 USDe on Solana using Layerzero’s OFT standard, which is Omnichain Fungible Token. During that time, Ethena decided to include SOL as a collateral form for USDe, with approval from the Risk Committee.
Ethena Aims to Increase Protocol Revenue with SOL Backing for USDe
The inclusion of SOL as a backing asset is considered as means of increasing the protocol revenue of Ethena. In this way, the funding rates of SOL might be beneficial to enhance the performance of USDe. Furthermore, this would create $2-$3 billion of open interest which can be scaled by Ethena from the current USDe supply of $2.5 billion. This would also help Ethena meet the increasing market demand for its services. It would also help Ethena meet the growing market demand experienced in the market.
The proposal of the SOL also shows that Ethena would start with an estimate of $100-200 million of an initial SOL. This would be 5-10% of SOL’s open interest. The allocation will be consistent with Ethena’s current strategy toward BTC and ETH where the project has similar market share. In the end, the proposition also suggests that BNSOL and bbSOL should be incorporated into the overall SOL allocation. These assets would be taken in the same ratio as LSTs, forming a third of total ETH investment.
Finally, the Risk Committee will need to approve the proposal. They have seven days to deliberate and reach a decision. The committee must approve the proposal unanimously for SOL to be added as a backing asset for USDe.
