USDe surging? Deconstructing the Satoshi Nakamoto dollar practice behind the 14 billion scale

Who do you think is the third stablecoin?

USDT and USDC occupy the top two spots without much suspense, but today’s third is not DAI, FDUSD, or TUSD, but a new face that was launched less than two years ago – USDe.

According to CoinGecko data, as of September 23, the circulating supply of USDe has exceeded 14 billion USD, ranking third in the stablecoin market, only behind USDT and USDC. More importantly, if we exclude the volumes of USDT and USDC, USDe has almost captured 40% of the market share of all other stablecoins, creating strong pressure on the survival space of established stablecoins.

What exactly allows this up-and-coming player to rise rapidly in a short period? What are the profit logic and risk hazards behind it? At the same time, what new variables are emerging in the stablecoin track as USDe rises swiftly?

Source: CoinGecko

0 to 14 billion USD, the nonlinear rise of USDe

The stablecoin sector has always been a super big cake with substantial profits.

In a horizontal comparison, the "money printing machine" attribute of the leading player Tether is even comparable to top CEXs. According to Tether's Q2 2025 attestation report, Tether's total holdings in U.S. Treasury bonds exceed 127 billion USD (an increase of about 8 billion USD from the first quarter), with a net profit of approximately 4.9 billion USD in the second quarter, and the total net profit for the first half of this year reaching as high as 5.7 billion USD.

It is worth noting that Tether has only about 100 employees, and its profit margin and operational efficiency are astonishingly high, nearly at least an order of magnitude lower compared to cryptocurrency exchanges and traditional Web2 financial giants!

However, at this profitable table, not all players are sitting comfortably, and it can even be said that, apart from USDT, the performance of traditional stablecoins in recent years has not been perfect:

• USDC experienced a temporary de-pegging during the banking crisis in 2023 due to reserve risks, leading to a significant withdrawal in its value and a major hit to its vitality, the effects of which have not fully dissipated to this day.
• DAI has gradually moved towards "super USDC" after MakerDAO's transformation, and its scale has also entered a bottleneck period;
• Newcomers like TUSD and FDUSD have seen short-term growth, but it is difficult to shake up the landscape.

Source: Ethena Official Website

It is against the backdrop of the slowing growth and solidification of traditional stablecoin giants that USDe emerges, charting a completely different "non-linear" growth curve.

Since its official launch in November 2023, USDe has rapidly grown from a circulation market value of 0 to the level of 14 billion USD in less than two years, experiencing only two pullbacks during this period while quickly recovering growth. Especially since July of this year, it has surged nearly twice from about 5 billion USD in just around two months and has been deeply integrated by several leading CEX.

It can be said that, looking at it over a longer period, the growth curve of USDe is almost unparalleled.

This almost counterintuitive growth curve is also inseparable from its well-known high-yield flywheel—when the competition for stablecoins enters the "stock game" stage, USDe's extremely high annual yield, the practical scenarios for trading margins, and the "Delta neutral" story have indeed helped it quickly open up the incremental market, becoming the most controversial and most关注的 new star.

Deconstructing USDe: Where Do High Returns Come From?

The biggest impact of USDe on the stablecoin market is undoubtedly its high yield attribute — users can stake USDe as sUSDe to earn all the yields generated by the protocol.

According to the official website of Ethena Labs, as of the time of writing, the annualized yield of sUSDe is still as high as 7.83%, and it had previously maintained above 20% for a period of time. So what kind of stablecoin mechanism is USDe, and why is there such a high annualized yield?

To understand USDe, it is essential to clarify its fundamental difference from the previously collapsed UST—UST is an uncollateralized algorithmic stablecoin, whereas USDe is a fully collateralized synthetic dollar that maintains value stability through a "Delta neutral" strategy. This is actually a practical version of the "Satoshi Dollar" concept proposed by BitMEX founder Arthur Hayes in his March 2023 article "Dust on Crust."

Source: BitMEX

In short, excluding the expectation of airdrop income, the high yield of USDe mainly comes from two sources:

• LSD Staking Yield: The assets deposited by users, such as ETH or stETH, will generate stable staking yields;
• Funding Rate Income from Delta Hedging Positions: This is the bulk of the earnings, specifically the funding rate earned from short positions in perpetual futures opened on CEX;

The former is relatively stable, fluctuating around 3% to 4%, while the latter completely depends on market sentiment. Therefore, the annualized yield of USDe is somewhat directly dependent on the overall network funding rate (market sentiment), and the key to understanding how this mechanism operates lies in the "Delta Neutral Strategy"—if an investment portfolio consists of correlated financial products and its value is not affected by minor price changes in the underlying assets, such a portfolio possesses the nature of being "Delta Neutral."

This means that USDe will form a "Delta Neutral Strategy" through equal amounts of long positions in spot ETH/BTC and short positions in futures ETH/BTC: the Delta value of the spot position is 1, the Delta value of the futures short position is -1, and the Delta value after hedging is 0, which achieves "Delta Neutral."

In simple terms, the USDe stablecoin module opens a short position of equal amount when it receives user funds and buys ETH/BTC, thus maintaining the value stability of each USDe by hedging. This also ensures that there is no risk of liquidation loss in the collateral position.

Source: Ethena Official Website

Taking an example with the BTC price assumed to be 120,000 USD, if a user deposits 1 BTC, the USDe stablecoin module will simultaneously sell 1 futures BTC. After the two hedge each other, the total investment portfolio's Delta value will be 0:

• If BTC falls to 100,000 USD: the spot position incurs a loss of 20,000 USD, but the futures short position gains 20,000 USD, resulting in a total portfolio value of 120,000 USD.
• If BTC rises to $140,000: the spot position profits $20,000, but the futures short position loses $20,000, so the total value of the portfolio remains $120,000.

In this way, the total value of the collateral remains stable, while this short position can continuously earn funding rates. Historical data shows that in most instances (especially during bull markets), the funding rates in the crypto market are positive, meaning that longs pay fees to shorts.

Therefore, the combination of these two parts of the income constitutes a highly attractive high APY for USDe.

Shadows Under the Aura: Potential Risks and Controversies of USDe

Although the mechanism design of USDe is sophisticated, the high returns are not without risks, and the market's main concerns focus on the following points.

First is the funding rate risk. Since the yield model of USDe is highly dependent on a positive funding rate, once the market turns bearish, the funding rate may remain negative for a long time, at which point short positions not only earn no yield but also incur costs. This will severely erode the yield of USDe and may even trigger the risk of decoupling.

Furthermore, there are risks associated with centralization and custody, as the collateral and hedging positions of USDe are stored in centralized custodial institutions and CEXs. Although it is relatively decentralized, it still faces counterparty risks. If there are issues with the exchange (such as bankruptcy or theft), it will directly threaten the asset security of USDe.

Finally, there are liquidity and execution risks. After all, during extreme market fluctuations, Ethena needs to quickly adjust its large spot and futures positions. At that time, market liquidity may be depleted, leading to significant trading slippage, which can render the "Delta Neutral" strategy ineffective.

Moreover, there is an invisible risk, which is the depegging of LSD collateral - if the liquid staking tokens such as stETH used by Ethena become unpegged from ETH, its hedging effect will also be significantly reduced, resulting in asset loss.

Overall, the rapid rise of USDe reflects the market's huge expectation for a high-yield, high-capital-efficiency decentralized stablecoin "holy grail" against the backdrop of the retreat of algorithmic stablecoins and the regulatory pressure on centralized stablecoins. Moreover, to be fair, it has indeed pioneered a new paradigm of "synthetic dollar."

However, for users, while embracing its high returns, it is also necessary to clearly recognize its unique risk model. This competition concerning the future core assets on the blockchain is worth our continuous attention.