Ethena Labs, a Lisbon-based startup that creates innovative crypto products, has secured $14 million in a strategic funding round led by Dragonfly, Brevan Howard Digital and Maelstrom, the family office of BitMEX founder Arthur Hayes.
The round, which was oversubscribed by more than three times, also saw participation from PayPal Ventures, Franklin Templeton, Fidelity via Avon Ventures, and several leading crypto exchanges such as Binance, Deribit, Gemini and Kraken.
Ethena Labs’ founder and CEO Guy Young told The Block that the round was structured as a simple agreement for future equity with token warrants, and that the startup did not need more cash at the moment. The round valued Ethena Labs at $300 million, he added.
Ethena Labs is the developer of USDe, a novel Ethereum-based stablecoin that is backed by derivatives. USDe aims to achieve price stability by hedging its exposure to ether’s volatility across both centralized and decentralized platforms. In other words, USDe is supported by a long position in staked ether and a short position in ether futures.
This mechanism ensures that USDe maintains a constant dollar value, regardless of ether’s price movements. Ethena Labs said that this is similar to the traditional cash and carry strategies used with treasuries and futures. Users can create USDe by depositing U.S. dollars, ETH or liquid staking tokens as collateral.
Ethena Labs publicly launched USDe in December 2020, after a stealth launch that quickly attracted over $224 million in total value locked. USDe is on track to surpass $1 billion in TVL and become a strong competitor to Tether, the dominant stablecoin in the crypto market, according to Hayes, who is also the founding advisor of Ethena Labs and an early investor via Maelstrom.
Ethena Labs’ vision for USDe was inspired by Hayes’ blog post “Dust on Crust” in 2020, where he outlined his idea for a crypto-native, derivative-backed stablecoin that operates independently of the traditional financial banking system.
Ethena Labs’ second product is an Internet bond, a dollar-denominated savings instrument that leverages USDe’s staking and hedging features to generate value for holders. The Internet bond captures both the staking yield of ether and the basis in futures markets, Ethena Labs said. The bond has averaged an annualized yield of between 12-20% over the last two months, Ethena Labs added.
Ethena Labs was founded in 2020 and has a team of 12 people. With the new funding, the startup plans to expand its team by hiring quant engineers and business development executives in Asia, Young said.
