Reserve Fund
Additional margin of safety
The reserve fund acts as an additional margin of safety behind USDe to provide a source of capital to pay for periods of negative funding, as well as a bidder of last resort for USDe in open markets.
Composition of Reserve Fund
Stable uncorrelated collateral to cover funding payments in same currency denomination:
Stablecoin assets including USDC and USDT for USD-M contracts
Smaller ETH collateral allocation for ETH-M contracts
Other assets as determined by governance
Security of Reserve Funds
Controlled by 4/8 multi-sig with keys held by contributors sitting within Ethena Labs.
USDe Open Market Arbitrage Vehicle
Since the solvency of USDe is both transparent and provable during all periods of time, if the open market price of USDe divergences sufficiently from the provable asset value backing USDe in an extreme case then the reserve fund may act as a bidder of USDe in the open market.
Capitalization of Reserve Fund
The reserve fund is funded with a portion of the revenue generated by the Protocol, allowing it to grow alongside the backing of USDe. The amount of Protocol revenue applied towards the reserve fund is subject to governance.
The reserve fund will also be capitalized with funds raised from private placement investors.
Sizing
Ethena Labs has conducted detailed modelling on the proposed sizing of the reserve fund under various stressed scenarios to inform the ongoing capitalization of the reserve
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