Ethena Labs scores $250m allocation for USDeFRAX pool

Synthetic dollar developer Ethena Labs received the green light for a USDeFRAX liquidity pool with Frax Finance to diversify FRAX stablecoin yield. 

The Singularity Roadmap proposal from Ethena Labs was approved and has enabled the protocols to create a USDeFRAX POL with a $250 million ceiling on the defi stablecoin exchange Curve.

Moving forward, USDe’s issuer and Frax Finance plan to deliver dense on-chain dollar liquidity despite concerns that Ethena Labs’ product bears striking similarities to Terraform’s algorithmic stablecoin UST.

Fantom developer Andre Cronje pointed to USDe risk stemming from the asset’s peg system, which depends on collateralized positions to maintain parity with the U.S. dollar. The mechanism is akin to UST’s design, a decentralized architecture that eventually crippled Terra’s $60 billion ecosystem.

After the synthetic dollar creator onboarded Bitcoin (BTC) to help maintain its peg, CryptoQuant founder Ki Young Ju echoed Cronje’s concerns regarding a potential crypto contagion. UST and Terraform also tapped BTC as a reserve asset before the defi project crashed in May 2022. 

Ethena Labs’ USDe crosses $2b market cap

Although USDe may be considered a contentious defi stablecoin, the asset has drawn user demand and crossed $2 billion in supply since launching in February. Per DefiLlama, Ethena Labs offered its U.S. dollar-pegged token exclusively on Ethereum’s mainnet. 

The protocol suffered a $290,000 security exploit nearly a month after its debut, but the issue was swiftly resolved. Experts could not determine the underlying vulnerability then, and Ethena Labs has advanced to expand USDe integration across. 

The stablecoin provider airdropped its governance token ENA with 750 million free tokens for early supporters and participants.