Elixir Unveils Yield-Bearing Stablecoin To Compete With Ethena

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

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

On July 31, Elixir Labs unveiled deUSD, a “synthetic U.S. dollar asset” claiming to comprise a more decentralized alternative to Ethena’s USDe. Elixir is targeting September for the deUSD’s mainnet launch.

DeUSD will deploy on the Elixir network, which facilitates liquidity for decentralized orderbook exchanges. The Elixir network attracted a $300 million total value locked (TVL) since launching its Apothecary points program three months ago. Users earn points in exchange for minting elxETH, an Ether-backed token supported by several decentralized orderbook exchanges including dYdX, Vertex, and SynFutures.

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

“The network Elixir has built and stress-tested over the past 2 years is well suited to power a truly decentralized synthetic stable asset,” said Philip Forte, Founder and CEO of Elixir Labs. “DeUSD has been built with transparency and resiliency as its core features, removing dependency from basis-related market trends and unstable sources of yield.”

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

Users can also stake deUSD to earn additional liquidity provider incentives on top of yield from the token’s underlying basis position.

Elixir versus Ethena

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

USDe pioneered combining staked ETH exposure hedged against a delta-neutral short position to derive yield from both short funding rates and Ether staking. USDe’s current annual rate of return sits at 11%, although Ethena initially claimed USDe could offer yields exceeding 20%.

However, some analysts warn that 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, asserting the token’s value remains stable in times of “extreme negative funding” by reducing its basis trade exposure and investing in U.S. treasuries via MakerDAO’s sDAI. Conversely, as the profitability of basis trading 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 and on-chain fashion free from centralized parties.

Pendle, the leading yield tokenization, has pledged to support deUSD by launching yield and principal tokens for the stablecoin. Pendle is also tokenizingElixir’s Apothecary points program, dubbed “potions.”

Apothecary users can now commit to either minting deUSD or withdrawing their ETH deposits when support from decentralized exchanges goes live.