Building index-tracking assets on top of options instead of debt
https://t.co/gFNEvCbHct
What if the use options as the base of defi, instead of CDPs and liquidations? So instead of extreme price movements creating a sharp and global "you get liquidated" effect, instead your exposure to the index diverges quadratically from your preferred exposure in a smoother way?
A key benefit is getting rid of the need for instant oracles, and instead making everything work on top of "slow oracles" (ie. the type that prediction markets use)
This design has a significant downside - the need to do regular rebalancing - and an open question of whether and how this rebalancing can be made slippage-resistant enough. But it's worth considering and trying IMO. I would feel much safer holding algostables inside something like this, than in something that depends on an oracle that has to give real-time answers (and therefore could be tricked into giving wrong real-time answers with no time for human recourse).
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Excited to partner with Coinbase for the first time to support their dollar savings products. The upcoming integration next week will be the first time Ethena products are available for their 100m+ user base.
Given the evolving nature of the Clarity Act, we expect further potential tailwinds for onchain native products like USDe from idle balances on exchanges, and Ethena is well positioned to support this transition.
This design is a bit different from traditional options since you don't pay an upfront premium. The real cost comes from rebalancing, slippage could definitely be higher in low liquidity environments.
I think liquidity will improve as adoption grows, similar to what we saw with early Uniswap LPs.