Guy Young, the founder and CEO of Ethena, joins the show to talk crypto-backed stablecoins. 

• How Ethena began with an Arthur Hayes blog post
• The origins of synthetic stablecoins on Bitmex
• The difference between Hayes’ Nakadollar and the Ethena design
• Why synthetic stablecoins have failed in the past and how Ethena addresses this
• How staked ETH as the underlying collateral opens up a new design space
• How Ethena mitigates their exposure to exchanges with off-exchange custody
• Guy’s backstory and entrance into crypto
• Why the circumstances are favorable for the success of a synthetic stable today
• Why the short leg of the Ethena position has to rely on CeFi for now
• Where the yield from ETH positive funding ultimately comes from
• Limits to scale on Ethena on the short leg of the trade and ETH staking
• Guy’s explanation for where the yield from being long ETH comes from
• Correlation dynamics between the ETH yield and the funding rate
• Why it’s important that crypto yields are somewhat negatively correlated with tradfi yields
• What protects the system when funding flips negative?
• How the system can react to constraints in ETH funding and ETH staking
• The possibility of adding Bitcoin as a collateral type
• Why Ethena distinguished the stablecoin and the yield-bearing component
• Rebasing versus accruing yield tokens
• How they think about different stETH derivatives
• Ethena versus stETH-backed overcollat stablecoins
• Why the supply of stablecoins is shrinking
• Will major stablecoin issuers become interest bearing?
• Ethena’s regulatory strategy
• The BUSD security analysis from the SEC and how interest bearing affects that
• Why end users deserve yield in exchange for taking on the counterparty risk of holding a stable
• Why Guy is excited by Paypal USD
• Guy’s prediction for stablecoin interest-bearing market cap

Further reading:

• Arthur Hayes, Dust on Crust