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2023-07-17 14:18:40 ET

Ethena, a blockchain startup for Ethereum -backed stablecoins, has reportedly secured $6 million in a seed funding round.

Axios reported on Monday that the startups funding round was led by Dragonfly Capital, a leading Web3 venture firm. Other prominent investors to back Ethena in the round were crypto platforms Deribit, Bybit, Gemini, OKX, and Huobi. The stablecoin developer also received backing from BitMEX founder and former CEO Arthur Hayes.

The stablecoin industry , like much of the broader cryptocurrency market, is still largely nascent. Also importantly, the wider sector is fast learning from some of the biggest challenges and failures, one of which is the collapse of TerraUSD.

In its approach to the stablecoin space, Ethena has adopted a unique approach designed to ensure its USDe stablecoin maintains its peg. The startup employs a novel technique where it uses collateral from Ethereum derivatives. By employing perpetual swaps and a price hedging mechanism, the platform allows for the shorting of Ether and thus able to keep the USDe value stable. Maintaining that dollar parity is the key to greater adoption of the ETH-backed stablecoin.

Ethena also offers a savings bond that generates yield via staked ETH. In this case, users can deposit collateral in the form of USD, ETH, or some liquid staking tokens and use that to mint USDe and generate yield with liquid staking derivatives (LSD).

They are features that could strengthen Ethenas position in the LSDFi sector of the wider decentralised finance (DeFi) industry. LSDFi unlocks new yield opportunities for LSD tokens.

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Ethereum stablecoin developer Ethena secures $6 million funding - InvestorsObserver