Yield Mechanism Explanation

How sUSDe shares the protocol's inherent generated yield

Context

Users are able to receive a portion of the protocol's generated yield by staking their USDe and receiving sUSDe atomically in return.

Once users stake their USDe for sUSDe, they begin to accrue value without any further action or cost.

Overview

The amount of sUSDe a user receives is determined by how much USDe was transferred as well as when it was transferred. Ethena's sUSDe utilizes a "Token Vault" mechanism, the same as Rocketpool's rETH or Binance's WBETH.

The protocol does not rehypothecate, lend out, or otherwise utilize deposited USDe for any purpose. There is no need for any such action, as the USDe backing mechanic inherently creates value.

This mechanism simply enables Ethena to provide protocol yield to ecosystem participants without users having to do any action to "earn" it. The USDe value of sUSDe grows on its own. When a user unstakes his or her USDe, the user receives an amount of USDe equal to the initial amount staked plus their share of protocol yield deposited in the staking contract while that user's USDe was staked, as reflected in the value increase of sUSDe.

Important Notes

• The amount of sUSDe you receive when you stake USDe is likely to be less in number, but valued at the equivalent amount of USDe. This is a result of the "Token Vault" mechanism and the ratio defined below in the worked example.

• The value of USDe will remain worth the market trading price of USDe while sUSDe will grow in USDe value as the protocol deposits protocol yield in the staking contract daily.

• If the protocol were to suffer a loss due to funding or another reason, Ethena's insurance fund would bear the cost, rather than the staking contract.

Users can only receive positive or flat value accrual while staking USDe; periods of negative protocol yield are not passed on to sUSDe. Ethena's reserve fund bears associated costs if funding is so negative that it causes negative protocol yield.

Calculation & Worked Example

sUSDe:USDe ratio = (total sUSDe supply) / (total USDe staked + total protocol yield deposited)