Key Points
Ethena USDe and Dai are both “crypto-native” stablecoins that don’t hold U.S. dollars.
Ethena tries to balance long and short crypto trades to stay pegged to the U.S. dollar.
Dai pegs itself to the U.S. dollar and uses smart contracts to hold crypto assets as collateral.
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Most cryptocurrencies aren't safe investments for conservative investors. But over the past decade, stablecoins -- which are cryptocurrencies tethered to the U.S. dollar and other real-world assets -- have become popular alternative plays for risk-averse investors.
The world's top stablecoins are all pegged to the U.S. dollar. Some of those coins are backed by actual U.S. dollars and Treasuries, while others are backed by other investments. Their ultimate goal is to track the U.S. dollar -- so their value should stay at $1.00.
It might seem counterintuitive to invest in stablecoins because they won't keep pace with inflation or outperform the S&P 500 (SNPINDEX: ^GSPC). However, stablecoins can be held without a bank account, used for faster and cheaper cross-border money transfers, and help people preserve their savings in countries with hyperinflation and currency devaluation issues. They can also be lent out in centralized finance (CeFi) exchanges and decentralized finance (DeFi) pools to earn higher yields than traditional savings accounts, CDs, and Treasuries.
I recently compared two of the top stablecoins: Tether (CRYPTO: USDT) and USD Coin (CRYPTO: USDC). Today, I'll examine two lesser-known USD stablecoins -- Ethena USDe (CRYPTO: USDE) and Dai (CRYPTO: DAI) -- and see if either token is worth buying.
The similarities and differences between Ethena USDe and Dai
Ethena USDe and Dai both peg their value to the U.S. dollar, but neither token is backed by actual U.S. dollars or Treasuries. That sets them apart from stablecoins like USD Coin and PayPal USD (CRYPTO: PYUSD), which are both supported by U.S. dollar reserves.
Ethena USDe was initially minted on the Ethereum (CRYPTO: ETH) blockchain by Ethena Labs. It's supported by a mix of crypto assets (including Ether, Lido Staked Ether, and other tokens) instead of U.S. dollars or Treasuries. Its protocol constantly balances long spot positions in certain crypto assets with short derivative positions (like futures) in other crypto assets to generate gains and losses to remain pegged to the U.S. dollar.
Simply put, Ethena juggles a bunch of crypto positions to keep the value of its token at $1.00. It claims that this crypto-native approach frees it from the regulations associated with fiat currencies (unlike USD Coin or PayPal USD). However, it's only opened up its reserves to weekly independent attestations since this April -- and it's unclear if it can maintain its delicate balancing act if another crypto winter begins.
[SRC] https://finance.yahoo.com/news/better-stablecoin-buy-ethena-usde-164100923.html
