{"id":11285,"date":"2024-03-04T17:00:00","date_gmt":"2024-03-04T15:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/delta%e2%80%91neutral-synthetic-dollars-why-the-usde-stablecoin-matters\/"},"modified":"2024-03-04T17:00:00","modified_gmt":"2024-03-04T15:00:00","slug":"delta%e2%80%91neutral-synthetic-dollars-why-the-usde-stablecoin-matters","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/delta%e2%80%91neutral-synthetic-dollars-why-the-usde-stablecoin-matters\/","title":{"rendered":"Delta\u2011neutral synthetic dollars: why the USDe stablecoin matters"},"content":{"rendered":"
Disclaimer<\/span><\/p>\n

This article is for information only and does not constitute investment advice. <\/strong><\/p>\n<\/div>\n

In March 2023 published<\/a> his essay Dust on Crust, in which BitMEX co-founder Arthur Hayes criticised fiat-backed stablecoins. In their place he proposed the Naka Dollar (Satoshi Nakamoto Dollar), a decentralised \u201cstable coin\u201d governed by algorithms. <\/p>\n

Hayes envisaged a token pegged to the US dollar but collateralised by bitcoin\u2014more precisely, by short positions in the \u201cdigital gold\u201d and inverse perpetual swaps denominated in dollars. Algorithms would keep the peg, as Naka DAO and derivatives exchanges swap assets between themselves. Centralised crypto-exchanges could act as custodians, he argued, because they have the necessary scale, unlike DEX<\/span>. Such an arrangement, in his view, would avoid pressure from regulators and the banking system. <\/p>\n

\n

\u201cThe aim is to launch a token worth $1 that does not need the fiat banking system,\u201d concludes Hayes. <\/p>\n<\/blockquote>\n

Later, a new project called Ethena emerged, embracing the principles set out in that essay. It secured backing not only from major CEX<\/span>, the Dragon Capital fund and market maker Wintermute, but also from Maelstrom Capital, Hayes\u2019s family office. In February 2024, after a closed test, Ethena Labs opened its platform to the public and attracted about $500m in TVL<\/span> in its first week. <\/p>\n

What, then, has drawn investors to the project? To answer that, first consider the technology Ethena Labs proposes.<\/p>\n

Delta neutrality <\/strong><\/h2>\n

USDe\u2019s architecture is built on a strategy popular in traditional finance (TradFi): delta\u2011neutral trading and portfolio management. Such approaches are common in options markets to control risk from moves in the underlying asset. <\/p>\n

In TradFi, delta measures the change in an option\u2019s price relative to changes in the price of the underlying. If an option is in the money, its delta is close to 1; if it is out of the money, its delta is close to 0. For options on a non\u2011dividend\u2011paying underlying, deltas differ as follows:<\/p>\n