In the current stablecoin space, why do I only recommend ENA?

Previously, I wrote a critical article on the stablecoin USDD launched by Sun Ge titled "Critical Review of USDD: Born from the Hype of LUNA, a 'Unstable Coin' with Continuous Controversies," which sparked some reactions in the community and led to me being blocked by Sun Ge. So, aside from USDD, is there still an opportunity in the stablecoin sector?
The stablecoin field in the cryptocurrency market seems to be flourishing, but there are undercurrents. From established giants like USDT and USDC to algorithmic stablecoins like DAI and FRAX, and the recently popular RWA (Real World Assets) projects, despite the numerous choices, three fundamental contradictions remain unresolved: centralization risk, lack of yield, and low capital efficiency. A project called ENA (Ethena) is quietly breaking the deadlock with its disruptive mechanism design, becoming my personal recommendation in the current stablecoin sector. This article will delve into its underlying logic, ecological potential, and risk boundaries, providing a comprehensive reference for retail investors.
The Dilemma of Traditional Stablecoins: An Unfinished Revolution
Fiat-collateralized stablecoins (like USDT and USDC) have long dominated the market, but their core issue lies in the trust that entirely depends on the reserve management of centralized institutions. The brief de-pegging incident of USDC during the 2023 Silicon Valley Bank crisis has exposed the fatal weakness of such stablecoins—users' asset safety is fundamentally still constrained by the fragility of the traditional financial system. Even though some projects attempt to introduce over-collateralization models (like DAI requiring a collateralization rate of over 150%), they inevitably face the awkwardness of low capital utilization and users bearing the volatility risk of collateral assets. Worse still, these stablecoins can hardly provide any yield to holders, leading to a continuous erosion of their actual purchasing power in a high-inflation macro environment. As for algorithmic stablecoins, the collapse of UST has long proven that a Ponzi model lacking real yield support is doomed to fall into a death spiral.
Economic Model and Product Mechanism
In the face of the collective dilemma of traditional stablecoins, ENA has chosen a completely different path—transforming Ethereum staking yields into the underlying value engine of the stablecoin. Specifically, when users stake assets like ETH through the ENA protocol, these assets are automatically deployed to the Ethereum Beacon Chain or LSD protocols (like Lido, Rocket Pool), generating an annual staking yield of 3%-5%. Unlike ordinary staking, ENA does not keep these yields within the protocol; instead, it distributes them to holders of the stablecoin USDe through smart contracts, thus creating a stablecoin with inherent yield-generating properties. The revolutionary aspect of this design is that it allows stablecoins to break free from the designation of "zero-yield instruments," transforming them into proactive assets for users to combat inflation. This is clearly discussed in our systematic analysis article on the incentive misalignment issue in the crypto market and the evaluation criteria for sustainable token economic models, which can help users briefly judge what kind of economic model has long-term investment potential.
To ensure stability, ENA has introduced a dynamic hedging mechanism: every time a user mints USDe, the protocol automatically establishes a reverse position in the derivatives market (like perpetual contracts) to hedge against the price volatility risk of the staked assets (like ETH). This mechanism allows ENA to operate with a 100% collateralization rate, improving capital utilization by over 50% compared to over-collateralized models like DAI. Historical data has validated its effectiveness—during the dramatic fluctuation of ETH prices from $1,200 to $4,000 in 2023, USDe remained firmly pegged to $1, with no de-pegging or liquidation events occurring.
More importantly, ENA has built a self-reinforcing economic flywheel. USDe holders continuously earn ETH staking yields, attracting more capital inflow; the fees earned from hedging trades are partially used to buy back and burn ENA tokens, driving deflation; while ENA stakers can share protocol revenue and influence the ecological development direction through governance voting. As of the second quarter of 2024, the TVL (Total Value Locked) of the ENA protocol has surpassed $1.2 billion, with USDe circulation reaching $800 million, and the cooperative ecosystem covering over 50 leading DeFi platforms such as Aave, Curve, and Pendle, becoming the liquidity hub of the yield-generating stablecoin sector.
Investment Potential
Currently, the ecological momentum of ENA resonates with three key trends. First is the long-term rise in Ethereum staking rates. The current Ethereum staking rate is only 26%, far below the 60% level of competing chains like Cosmos and Solana. As the Ethereum ecosystem matures and staking tools become more widespread, the staking rate is approaching 50%, making ETH staking yields the most important source of "risk-free interest rates" in the crypto market. As a stablecoin directly linked to this yield, ENA will be the biggest beneficiary.
Second is the accelerated layout of traditional institutions in RWA (Real World Assets). Giants like BlackRock and Fidelity are vigorously promoting tokenized government bonds, bonds, and other products, but these institutions need entry tools that combine compliance, yield stability, and on-chain transparency. USDe, with its decentralized architecture and real-time verifiable yield distribution records, is very likely to become the preferred bridge for institutional funds entering the DeFi world.
Finally, the expectation of deep integration with the Binance ecosystem. The ENA team has reached a strategic cooperation with Binance Labs, and the technical architecture is fully compatible with the Binance Smart Chain (BSC). Once USDe is launched on Binance as a base trading pair, its liquidity will experience exponential growth. Considering Binance's dominance in the spot trading market, this integration is likely to become the "final push" for the explosion of the ENA ecosystem.
Risk Warning and Retail Participation Strategy
Any innovation comes with risks, and ENA's potential challenges mainly stem from two aspects: first, technical vulnerabilities in the Ethereum consensus layer or LSD protocols (like Lido) could lead to interruptions in staking yields; second, insufficient liquidity in the derivatives market could increase hedging costs, potentially affecting the protocol's profitability. For retail investors, it is recommended to adopt a "long-short combination" strategy: in the short term, pay attention to key events such as the ETH staking rate breaking 30% and the launch of USDe trading pairs on Binance, gradually building positions in ENA; in the long term, continuously earn protocol revenue dividends by staking ENA tokens while participating in governance voting to deeply bind to the ecological development dividends.
Before ENA emerged, stablecoins either had severe centralization issues or, like the algorithmic stablecoin LUNA, were prone to collapse. You wouldn't imagine that stablecoins could utilize the simple operation of "shorting" to achieve this, and the effect is quite good. While the vast majority of stablecoins are still caught in the old paradigm, ENA is opening up a new RWA market through the triangular breakthrough of "yield + capital efficiency + decentralization." For retail investors, whether from the economic model or product paradigm, ENA is a great investment target. ENA is currently at the bottom; many people are increasingly hesitant to buy at this time, but the risk is always present. Buy when no one cares, sell when the crowd is bustling.