DeFi protocol Ethena Labs has announced the winners of its tokenized RWA reserve fund. The prize will be shared by Blackrock’s BUIDL, Mountain’s USDM, Superstate’s USTB, and Sky’s USDS stablecoin.
According to a statement on X, Ethena Labs’ risk assessment committee evaluated and eliminated 21 out of 25 applicants to remain with the four successful assets. The protocol’s reserve fund will allocate 40% of the amount, roughly $18M to BUIDL, $13M to USDS, $8M to USDM, and the remaining $7M to USTB.
The DeFi protocol announced last July that it had plans to invest in a reserve fund within the real-world asset space, during which 25 firms applied. The Ethena Risk Committee, which consists of five advisory firms, including Blockworks Advisory, Block Analitica, Steakhouse, Gauntlet, and Llama Risk, made the final selection and allocation.
Growing Trend with DeFi Protocols
Ethena Labs is a decentralized finance (DeFi) protocol that recently issued a $2.5 billion yield-generation stablecoin. The company’s USDe synthetic dollar token generates yield by holding spot BTC and Spot ETH while selling or shorting equal amounts of Ether and Bitcoin derivatives, enabling investors to harvest the difference in funding rates. The allocation of the tokenized assets will now enable Ethena to benefit from the surplus accrued from protocol revenues.
Ethena is the issuer of USDe, a synthetic dollar token that generates yields through spot Bitcoin and spot Ether while selling or sorting equivalent amounts of ETH and BTC derivatives and harvesting yields in the form of funding rates. The allocation allows the DeFi protocol to earn a yield on the extra funds accrued from the platform’s revenues, which acts as insurance if funding rates turn negative.
Benefits of Ethena Labs Tokenized RWA Investment
Tokenized RWA investment refers to tangible assets placed outside the digital space. RWAs can include anything from machinery to commodities and real estate properties. This new concept within the blockchain space exists as digital tokens representing traditional physical assets in equities, bonds, commodities, or currencies. The tokenization process has recently gained traction within the blockchain industry and is seen as a great opportunity worth hundreds of trillions of dollars.
Tokenization is how consumers use blockchain technology to convert their real-world assets into digital tokens. The method enables users to facilitate fractional ownership of high-value assets, making them more accessible to a broader base since they have become smaller and more affordable.
Tokenized assets are now becoming popular because they bring benefits like enhanced liquidity. Compared to traditional markets, encumbered by set trading hours, the nature of blockchain technology means that tokenized RWA investment experiences continuous engagement within the market, giving investors greater flexibility. Furthermore, the transparency associated with blockchain technology enhances investor confidence, thereby significantly eliminating the possibility of fraud or ownership conflicts. Tokenization has also been associated with reduced costs since there is less paperwork, no third parties or legal fees, and other barriers related to the traditional markets.
Conclusion
Ethena entered the tokenized RWA investment arena when there was growing interest in moving treasury assets to real-world assets (RWA) by decentralized finance platforms and protocol foundations. The most popular tokenized holdings currently include US short-term government bonds that allow investors to earn yields that aren’t directly tied to crypto markets while operating within blockchain’s boundaries.
The current trend of investing in tokenized assets has enabled the tokenized treasury to triple its size within one year to $2.2 billion. The tokenized assets sector has recently experienced tremendous growth and is valued at nearly $13 billion, which US treasuries mostly back. By expanding to include the tokenized RWA investment, Ethena Labs is widening its revenue base, aiming to supplement periods of negative funding rates.
