Omer Goldberg
Omer Goldberg

Chaos Labs Partners with Ethena Labs for Mechanism Design, Economic Security and Risk Optimization

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    Chaos Labs & Ethena Labs: A Strategic Partnership

    Chaos Labs is thrilled to announce its collaboration with Ethena Labs. Together, we aim to enhance mechanism design and establish risk frameworks for the novel Ethena protocol. This partnership promises to bolster the economic security and resilience of Ethena's stablecoin, USDe.

    Pushing the Boundaries of Mechanism Design

    Ethena Labs is at the forefront of mechanism design innovation. Recognizing the importance of ensuring the protocol's economic robustness, especially against volatile markets and unforeseen black swan events, Ethena has sought the expertise of Chaos Labs. The collaboration will focus on liquid staking tokens and perpetual contract liquidity challenges.

    Leveraging Chaos Labs' Expertise

    By teaming up, the two will utilize Chaos Labs' top-tier DeFi agent-based simulation platform. This will guide the design process, facilitate risk parameter optimization, and foster data-driven decision-making for protocol configuration.

    Ethena's Innovative Stablecoin Approach

    Ethena's methodology allows users to deposit USD, Ethereum, or liquid staking tokens as collateral to mint USDe. To ensure stability, the collateral undergoes delta-hedging across centralized and decentralized exchanges. This collateral is then meticulously allocated to safeguard onchain institutional-grade custodial wallets, ensuring delta-neutral collateralization through a corresponding 1x short position. The initial research phase will focus on liquidity and withdrawal risks associated with the most important LSTs, including Lido’s $stETH, Alluvial’s $LsETH, Binance’s $WBETH, and OKX's $BETH.

    A Vision for a Capital-Efficient Stablecoin

    Guy Young, Founder and CEO of Ethena, shared his insights on the collaboration: "Ethena's vision of a capital-efficient stablecoin pushes the boundaries by connecting DeFi with centralized liquidity. Our team's most important focus points are managing economic security and financial risk while creating a robust mechanism design. Our collaboration with Chaos Labs aims to deliver a product that provides utility in stable market conditions and remains resilient through volatility and turbulence in the broader market.”

    Learn More About Ethena

    For a deeper dive into Ethena and its innovative stablecoin, please visit Ethena's official website.