Solana (SOL) Tapped For USDe Expansion In Ethena's Bold New Proposal

Solana’s SOL Token to Back USDe Stablecoin In a recent development within the Ethena community, a proposal has been put forth to integrate Solana’s native token, SOL, into the Ethena ecosystem. This move aims to add SOL as a backing asset for the USDe stablecoin.

Currently, Ethena employs a hedging mechanism for Bitcoin and Ethereum perpetual futures to generate revenue for the USDe stablecoin. This proposal seeks to expand Ethena's hedging strategy by incorporating one of the fastest-growing ecosystems in the crypto space - Solana.

However, the inclusion of SOL as a backing asset will be implemented gradually, considering its relatively shorter trading history and lower liquidity compared to BTC and ETH.

According to the proposal, SOL boasts an impressive $2 billion of open interest across major venues. This presents an attractive opportunity for Ethena to increase its revenue through favorable funding conditions.

Liquid Staked SOL Tokens to Be Included The proposal also includes adding liquid staked SOL tokens, such as BNSOL and bbSOL, to the SOL allocation. This will follow a similar setup to how ETH liquid staking tokens are integrated into Ethena’s ETH allocation.

The proposal caps the SOL LSTs at one-third of the total SOL allocation. If approved, this expansion could unlock an additional $2-3 billion in open interest. This, in turn, could help scale Ethena's USDe from its current supply of $2.5 billion to meet the growing demand.

Ethena's Risk Committee will vote on integrating SOL and its staked variants into the Ethena protocol over the next seven days. A unanimous vote is required for the integration to proceed.

If approved, Ethena, similar to its BTC and ETH integrations, could command 5-10% of SOL’s open interest. This integration will increase Ethena's market presence, enhance its profitability, and bolster the standing of USDe within the crypto ecosystem.

Ethena's strategy highlights the rising prominence of Solana, which is vying with Ethereum on parameters like speed, scalability, and lower costs.Solana’s Dominance in Web3

Solana, powered by its unique Proof of History algorithm, facilitates low latency and cost-efficient transactions, presenting a viable alternative to Ethereum. This scalability has enabled Solana to capture a large market share in Web3, owing to its growing popularity among developers and users.

Recent figures indicate that Solana currently controls 35% of the Web3 market, trailing closely behind Ethereum's 45%, with a 10% gap. In the previous quarter, Solana led all L1 chains with a net inflow of $1 billion in bridged assets.

This growth showcases Solana's rising clout, positioning it as a major competitor to Ethereum's long-standing dominance in the Web3 space.

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