Ethena Labs reassures users that their stablecoin USDe remains solvent after the Bybit exchange hack. While around a billion dollars were lost, Ethena claims their funds are sufficient to cover the losses.
Bybit Hack and Ethena Labs' Response
On February 21, hackers stole over $1.4 billion from crypto exchange Bybit, including Lido Staked Ether and other crypto assets. According to the DeFi protocol Ethena Labs, their stablecoin USDe has around $30 million exposed in financial instruments on Bybit. However, the company assures that their reserve fund more than covers any potential losses. "USDe remains fully collateralized at this time," Ethena stated.
USDe Strategy and Security
Ethena's reserve fund acts as an additional safety margin behind USDe. As of Q4 2024, it stands at approximately $46 million. Ethena employs a strategy of hedging against crypto market volatility using offchain derivatives. Furthermore, the company clarifies that the cryptocurrencies backing USDe are held with the third-party custodian Copper, not on Bybit itself.
Centralization Risks
Ethena allows users to mint USDe against cryptocurrencies like Bitcoin and Ether, combined with liquid staking tokens and other stablecoins. Despite the advantages, Ethena's central-decentralized methods (CeDeFi) pose risks of failures with exchanges, custodians, and settlement providers. Following the Bybit incident, their CEO reassured customers of active withdrawal capabilities.
Despite the risks associated with the Bybit hack, Ethena Labs successfully maintained USDe's stability through funding and hedging strategies. However, challenges remain in managing risks within central-decentralized systems.
