[Temp Check] Ethereal Request to Integrate with Ethena

Summary

This proposal introduces Ethereal: an integrated spot & perpetual futures DEX built on the upcoming Ethena Network using USDe. Ethereal are requesting that the exchange be directly integrated into Ethena-related reserve management from launch to provide a fully onchain venue for management of spot and derivative positions backing USDe, pending full Ethena Risk Committee due diligence on Ethereal. If the proposal passes, Ethena will commit to a slow and controlled approach to allocating liquidity on Ethereal.

In addition to expanded utility and demand for USDe, the Ethena community will also stand to benefit from a 15% allocation of any potential Ethereal governance token in the future should this proposal pass. Ethereal proposes this potential allocation go to circulating ENA holders. This proposal will outline synergies between Ethereal and Ethena, and more importantly seek the Ethena community’s support for an integration with Ethereal in the coming months.

Background

Ethereal Overview

Ethereal V1 (testnet expected in Q4) is an L3 EVM appchain settling to the Ethena Network. This architecture aims to optimize for the benefits of isolated blockspace as well as the synergies with the Ethena ecosystem. In addition to a fully onchain exchange engine, Ethereal can support deployment of additional applications utilizing USDe to unlock specific features which can augment the functionality of the core DEX (e.g. borrow/lend markets).

Ethereal is designed to match centralized exchange performance while maintaining complete self-custody and flexibility to support features such as cross-margin, liquidity automation, and portfolio margin. Ethereal’s architecture is capable of processing 1 million operations per second with sub-20ms latency, in-line with the most performant exchanges.

Ethereal contributors include teams with decades of collective experience across web2, web3, and traditional finance, including several years as lead contributors to one of the most successful DEX protocols in the space.

Benefits to the Ethena ecosystem

1. Demand: Ethereal offers a new avenue to expand USDe growth and adoption. With Ethena’s inventory acting as a deep supply/demand buffer, Ethereal could offer some of the most liquid and cost effective onchain spot & perpetual futures markets available today. Increased demand for Ethereal products built on top of USDe can unlock new sources of demand for USDe.

2. Decentralization: Migrating USDe backing management to onchain venues can improve transparency and unlock new mechanisms available to the Ethena protocol.

3. Alignment: The Ethena community will also stand to benefit from a 15% allocation of any potential Ethereal governance token in the future, which will help to ensure alignment between Ethena and Ethereal community stakeholders.

4. Precedent: A digital dollar alongside a native reward-bearing composable asset like sUSDe enables a wide design space for new financial primitives to be built. Ethereal’s launch will provide the blueprint for other applications built using USDe on the Ethena Network, helping to drive Ethena’s transformation from an asset issuer to a platform for financial innovation.

What Ethereal is Requesting

Ethereal’s highest priority is to be aligned with the Ethena community as a partner invested in the growth and adoption of USDe in DeFi. Ethereal are requesting support from the Ethena community for an integration with Ethereal as a venue for executing hedging transactions, subject to satisfactory technical due diligence conducted by the Ethena Foundation and Risk Committee. In addition, Ethereal would request technical support for the deployment of Ethereal onto the Ethena Network to implement an integration with Ethena’s hedging engine.

Next Steps

1. If this vote is approved, Ethereal’s integration with Ethena as a venue for hedging transactions will be put forward to the Ethena Risk Committee for due diligence and subsequently voted on by the Risk Committee. Ethena will take a slow and controlled approach to allocating liquidity on Ethereal, if approved.

2. If approved by the Risk Committee, Ethena will provide technical support to the Ethereal team to integrate with Ethena’s hedging engine.

3. If this vote is approved by the community and the Risk Committee, ENA holders will be eligible to receive 15% of any potential Ethereal governance token in the future.