Q1. I’m new to DeFi—can you explain how delta-hedging works in ETHENA in a simple way?

- Takes crypto assets like BTC and ETH as margin collateral for short perpetual futures positions

- The change in value of the collateral is offset by the short futures position, resulting in delta neutral exposure (no exposure to price changes)

- Result of that is a synthetic dollar that earns the funding rate paid to the short position

Q2. Ethena team said that ethena protocol generates profits using hedging, but is there a solution if losses occur due to negative funding costs incurred in futures trading?

- Allocate to liquid stablecoins earning risk free rate to ensure minimal exposure to lower funding rates

- Reserve Fund of $60m

- never had a week of negative revenue since Ethena launch

- Over last 4 years, funding rates positive on 90% of days

Q3. Ethena protocol generates revenue through centralised exchanges (CEX) such as Binance, so many people worry that it could be risky if an exchange experiences problems like FTX did. Aside from spreading assets across multiple exchanges, what special safeguards does Ethena have in place to protect investors' assets?

- Off Exchange Custodians, no positions held on centralized exchanges themselves, all assets reside with custodians

- Bybit hack was a good example of how Ethena can handle a centralized exchange event

Q4. Does Ethena Team anticipate that USDe will have a competitive advantage over stablecoins such as DAI and USDC in the long term?

- Ethena has competitive advantage being the only one with access to perpetual future funding rates, a cashflow opportunity of over a billion dollars with minimal competition

- allows Ethena to take advantage of better market conditions when funding rates increase

- centralized stablecoins continue to internalize all yields

Q5. I am curious about the incentive structure, such as airdrops, that will be offered to Ethena ecosystem participants, especially for holders.

- Ethereal currently in testnet, committed 15% of their token supply to ENA holders

- ENA holders earning points and airdrops for multiple projects aside from Ethereal: Terminal, Strata, Derive, Echelon with many more to come

- emulating BNB model of airdrops to holders

Q6. Does Ethena ultimately rely on a centralised system? Or is there another business structure that will eventually become independent from Centralized Exchange?

- USDe denominated perpetual futures on DEXs e.g Ethereal

- As DEXs increase in market share Ethena will allocate more efforts to integrating

Q7. Ethena claims that ‘stablecoins are the most important crypto product.’ Why does the Ethena team believe this?

Stablecoins are not only the foundation of the entire industry, but are also arguably the only crypto asset to have (i) found true product-market fit globally with more than 100m users, (ii) the largest addressable market, and (iii) the greatest potential for revenue generation.

• This concludes the AMA, and we will continue to host AMAs with promising projects in the future.