The DeFi lending protocol AAVE is one of the largest out there, and offers many different liquidity pools to earn a yield from. However, at the moment the highest yield is that of UDSe.
What is USDe?
Ethena Labs has developed USDe, a synthetic dollar stablecoin designed to be scalable, decentralised, and independent of traditional banking. Unlike fiat-backed stablecoins, USDe maintains its dollar peg through a delta-neutral hedging strategy, combining crypto collateral with derivatives.
How USDe Works
- Synthetic Dollar: Instead of physical dollars, USDe uses assets like ETH or stETH paired with short positions on perpetual futures to stay aligned with the US dollar.
- Delta-Neutral Hedging: Long positions in crypto are balanced by equivalent short positions in derivatives, offsetting price swings and maintaining stability.
- Mint & Redeem: Users mint USDe by depositing collateral and shorting ETH; they redeem it by returning USDe, which unwinds the hedge and releases the collateral.
AAVE and USDe Safety
USDe has $1.32 billion in liquidity in AAVE, demonstrating the depth of trust that the market has in the asset. If you are seeking yield from crypto whilst looking to hedge risk, staking USDe on AAVE is an excellent method to do so.
However, it should be noted that this higher-than-average stablecoin yield is through maximising return via Merkl rewards. See alts.
The Speculatour’s Disclosure: Not financial advice. No guidance is provided for any particular investor, asset prices can fall as well as rise. The Speculatour is not a licensed securities dealer, broker, investment bank or advisor.
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