Ethena Labs Secures $250 Million Allocation for USDeFRAX Pool
Ethena Labs, the creator of the synthetic dollar, has received approval for a USDeFRAX liquidity pool in collaboration with Frax Finance. This partnership aims to diversify the yield of the FRAX stablecoin. The Singularity Roadmap proposal put forth by Ethena Labs has paved the way for the creation of a USDeFRAX POL with a maximum limit of $250 million on the defi stablecoin exchange Curve.
Looking ahead, the issuer of USDe and Frax Finance are determined to provide substantial on-chain dollar liquidity, despite concerns raised about the similarity between Ethena Labs’ product and Terraform’s algorithmic stablecoin UST. Andre Cronje, a developer from Fantom, has expressed concerns about the risks associated with USDe, which relies on collateralized positions to maintain its value relative to the US dollar. This mechanism is similar to UST’s design, which ultimately led to the collapse of Terra’s $60 billion ecosystem.
Following the inclusion of Bitcoin (BTC) as a means to support its peg, Ethena Labs faced similar concerns from CryptoQuant founder Ki Young Ju regarding the potential for a crypto contagion. Both UST and Terraform had also used BTC as a reserve asset before the defi project experienced a crash in May 2022.
Despite being a controversial defi stablecoin, USDe has gained significant user demand and has exceeded $2 billion in supply since its launch in February. According to DefiLlama, Ethena Labs exclusively offered its U.S. dollar-pegged token on Ethereum’s mainnet.
Shortly after its debut, the protocol experienced a security exploit worth $290,000, but the issue was quickly resolved. Experts were unable to identify the underlying vulnerability at the time, and Ethena Labs has since expanded the integration of USDe.
As part of its efforts to reward early supporters and participants, the stablecoin provider has airdropped its governance token, ENA, with 750 million free tokens.
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