DeFi

Elixir unveils high-yield stablecoin to compete with Ethena

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Elixir’s deUSD is backed by a delta-neutral ETH position, accumulating Ether staking rewards and short-term funding rates to pay yield to holders.

Ethena will soon face competition from rival stablecoin issuers relying on its novel yield-generating mechanism.

On July 31, Elixir Labs unveiled deUSD, a “synthetic US dollar asset” that claims to be a more decentralized alternative to Ethena’s USDe. Elixir is targeting September for the launch of deUSD’s mainnet.

DeUSD will be deployed on the Elixir Network, which facilitates liquidity for decentralized order book exchanges. The Elixir Network has attracted $300 million in total value locked (TVL) since launching its Apothecary Points program three months ago. Users earn points in exchange for creating elxETH, an Ether-backed token supported by several decentralized order book exchanges, including dYdX, Vertex, and SynFutures.

The 70,000 ETH staked on exlETH will be used to collateralize deUSD alongside ETH shorts to create a delta-neutral position. As such, the token derives its yield from staking rewards and short funding rates.

“The network that Elixir has built and tested over the past two years is perfectly suited to power a truly decentralized synthetic stable asset,” said Philip Forte, Founder and CEO of Elixir Labs. “DeUSD was built with transparency and resilience as core features, removing reliance on basis-driven market trends and unstable yield sources.”

Elixir said it also has $1 billion in liquidity “lined up” to back deUSD, and could also back other assets as collateral in the future.

Users can also stake deUSD to receive additional incentives as a liquidity provider, on top of the underlying base position yield of the token.

Elixir vs. Ethena

Elixir’s deUSD draws inspiration from and seeks to compete with Ethena’s USDe stablecoin.

USDe was the first to combine a hedged staked ETH exposure against a delta-neutral short position to yield both short-term funding rates and staking Ether. USDe’s current annual yield stands at 11%, although Ethena initially claimed USDe could deliver yields exceeding 20%.

However, some analysts warn that the USDe’s yield mechanism may not be sustainable in an environment of prolonged bearish momentum.

Elixir claims that deUSD is less exposed to negative funding rates than USDe, saying the token’s value remains stable during times of “extreme negative funding” by reducing its exposure to basis trading and investing in US Treasuries via MakerDAO’s sDAI. Conversely, as basis trading profitability returns to higher levels, deUSD’s exposure to funding rates will increase.

Elixir also claims greater decentralization than USDe, combining “decentralized execution with verifiable proof-of-execution, open-source code, and liquidity” in a non-custodial, on-chain manner without centralized parties.

Pendulumthe leading yield tokenization, has committed to supporting deUSD by launching yield and principal tokens for the stablecoin. Pendle is also tokenizing Elixir’s Apothecary points program, dubbed “potions.”

Apothecary users can now pledge to create deUSD or withdraw their ETH deposits when decentralized exchange support goes live.

Related: BlackRock’s BUIDL Considers Major Investment from Ethena Labs

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