Athena sparked controversy by launching an algorithmic stable coin that yields 27%
Athena Labs recently unveiled the USDe stablecoin on the public Ethereum mainnet, introducing an alternative to stablecoins like USDC and UST.
The synthetic USD asset uses sophisticated hedging techniques while offering attractive rewards of 27.6% APY. However, the prospect of such a high yield has sparked controversy in crypto circles.
TLDR
Athena Labs introduced the USDe stablecoin on the public network and offered a 27.6% API reward. Encouraging the use and growth of the USDe stablecoin, the campaign will reward activities such as liquidity provision and staking rewards that decay over time.
USDe aims to delta-hedge the dollar curve by shorting ETH derivatives to offset volatility. This approach seems to differentiate it from unsuccessful algorithms such as UST. Already, USDe has attracted strong interest, having raised more than $289 million in total value locked.
But despite the innovations, Athena faces doubts about the sustainability of its top prizes. Critics point to risks of product reversal, where negative products can quickly undermine the protocol. Others argue that businesses come with costs that can reduce returns in the long run.
Announcing @ethena_labs public network ????
Details on our “Shard Campaign” on the following twitter pic.twitter.com/kXU5WjJ4rB
— Athena Labs (@ethena_labs) February 19, 2024
To encourage adoption and growth, Etena also announced the “Shard Campaign” promoting activities around USD. The program provides token rewards for actions such as asset acquisition and liquidation. These shard rewards are broken down into short-term “eps” lasting days or weeks, which encourage faster participation.
However, the campaign will limit participation from US users to ensure regulatory compliance. Some have criticized these restrictions as exclusionary, antithetical to decentralized governance. However, Athena maintains the ecosystem requires the participation of long-term and ethical contributors.
As algorithmic stablecoins continue to be controversial following the UST collapse, USDe represents a bold new attempt. However, its long-term sustainability is uncertain, with both rewards and risks stretched to extremes…
