Synthetic dollar

The best-known design, Ethena's USDe, takes deposits of ETH, BTC or liquid staking tokens and opens an equal short position in perpetual futures. Because the long and the short cancel out, the combined position keeps a roughly constant dollar value whatever the market does. The token is minted against that hedged portfolio, and staked versions pass on the staking yield and funding payments it earns.

Synthetic dollars grew quickly because they scale with derivatives markets rather than with bank accounts, and in bull markets positive funding rates can produce yields well above Treasury rates. They are now used as collateral across DeFi lending and in looping strategies.

The model depends on conditions that can change. Long stretches of negative funding turn income into cost, exchanges holding the hedges add counterparty risk, and a sudden move can test the backing if collateral and hedge diverge. Redemptions may be limited to approved parties, so the secondary-market price can drift from one dollar during stress.