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

Guy Young (Ethena) on a New Model for a Crypto-Backed Stablecoin (EP.459)

On The Brink with Castle Island