Ethena Season 1 Airdrop: Case Study
A case study of Ethena and its genius Season 1 airdrop campaign
How To Get Your Web3 Startup From 0 To $900M In 21 Days: Story Of Ethena Airdrop
A Story Of The Brand New Stablecoin That Revitalized DeFi
Launched in early 2024, Ethena.fi conquered significant parts of TVL for many DeFi protocols in a relatively short time, generating new yield opportunities via their main product: USDe.
USDe was the fastest USD asset to reach $3B supply ever in crypto, reaching $2B in less than one month!
Ethena’s current TVL is $3.39B. Let’s just appreciate how beautiful that TVL chart is.
The growth has been consistent, capturing more and more share in various markets, like the Pendle one, one of the biggest and hottest protocols in DeFi.
Ethena also generated over $100M in fees for 2024 to date (Jul 16) and $65.8M in protocol revenue.
But how did Ethena manage to capture so much attention and value in such a short time?
The protocol didn’t just launch a stablecoin, but made sure a proper incentivization and adoption program was architectured into the roots of USDe’s growth plan.
Let’s therefore dive into the Ethena phenomenon…
How Ethena Achieved Its Growth
Unpacking Ethena
Before analyzing the airdrop program that led to Ethena’s current usage, let’s take a moment to get a general overview of what Ethena is.
Now, at its core, Ethena is a yield-bearing stablecoin protocol (USDe) which is trying to solve the so-called stablecoin trilemma, or having a USD-pegged coin that is concurrently stable, scalable and censorship-resistant.
USDe is in fact collateralized by crypto-native blue chips, unlike UST it is not prone to death spirals, and finally it generates yield: all in what the team called “The Internet Bond”.
So let’s now break down the key components that make Ethena unique:
1) Peg Mechanism and Yield Generation:
As mentioned above the protocol’s native stablecoin is designed to maintain a 1:1 peg (value) with the US Dollar.
How is that achieved?
Ethena leverages a Delta-Neutral position that utilizes spot staked ETH tokens as collateral for yield generation, and a counterpart ETH capital which is shorted on the perpetual market.
Delta-Neutral strategies have proved to be historically outperforming in the market
This configuration ensures that for every $1 change in the underlying value of Ethena’s held assets, its net value remains neutral (0), while generating income from:
- staked ETH yield
- funding rates deriving from the perpetual position
But what is the Funding Rate?
It is a payment mechanism that ensures that the native market (spot market) price is efficiently anchored to the overlying virtual market (perpetual market) price.
Funding rate can be positive or negative. Positive if the virtual price is above the spot price, longs pay shorts. Viceversa if the funding rate is negative, and so the virtual price is below the spot price, shorts will pay longs.
Formula: Funding Rate Payment=Virtual Price−Market Price
2) Reserve Fund:
A safety fund that compensates distributions if funding rate yields turn negative.
3) Cross-chain Compatibility:
Ethena isn’t confined to a single blockchain, enhancing its utility and reach.
Let’s move then to the airdrop campaign that enhanced this product.
Ethena Season 1 Airdrop Campaign Analysis
As we have now understood, Ethena’s journey to the top wasn’t just about having a good product; it was also about getting it into the hands of users.
Here comes the Shard Campaign or Season 1.
Campaign Details
The Shard campaign lasted 40 days, precisely from Feb 19, 2024 to Apr 1, 2024.
For Season 1 Ethena allocated 5% of total supply, or 750M $ENA tokens, and of these, 722M have been claimed, translating into a claiming ratio of 96.3%.
According to Dune, claimers in total were 45k, and the $ENA price at claim was $0.64 with a FDV at launch / airdrop date of $9B.
Campaign Goals
The Shard Campaign was a carefully orchestrated series of incentives designed to achieve specific goals:
First of all, obviously increasing the USDe Market Cap to generate more fees and so revenue. The second point is connected with the first one, and it’s reaching several DeFi markets and creating an ecosystem of USDe yield opportunities.
Last major goal was to reduce USDe circulating supply by promoting USDe staking with a 7-day unstaking period.
What Did Ethena Want Users To Do?
In the campaign users could earn “Shards” (points) through various actions:
- Providing liquidity to Curve pools (20 Shards per day): Users who provided liquidity to Curve’s USDe pools and locked their LP tokens via Ethena’s frontend could earn 20 shards per day for each $ worth of LP token locked (later reduced to 15 shards per day).
- Locking USDe in Ethena (10 Shards per day)
- Simply holding USDe (5 Shards per day): Users could earn 5 shards per day for simply holding USDe (later reduced to 2 shards per day).
- Staking USDe for sUSDe (1 Shard per day): Users could stake USDe to receive sUSDe, earning 1 shard per day for each sUSDe held.
This tiered reward system aligned user behavior with protocol goals, creating a win-win situation for both Ethena and its community.
Now, by looking at this Dune dashboard, we can see the distribution of actions, or how many users did what:
- Locking USDe for 10x shards: 16.8K users
- Staking and holding sUSDe for 1x shards: 14.3K users
- Buying and holding USDe for 5x shards: 10K users
- Locking LP tokens for 20x shards: 5.3K users
- Holding YT/LP on Pendle for 10x shards: 4.8K users
Campaign Rules and Milestones Hit
Campaign Rules
On Feb 19, 2024 the campaign started and was divided into epochs, with the first epoch lasting two weeks or until $100M worth of LP tokens and $100m of locked USDe were staked.
This last point makes the airdrop program “conditional”. Basically, if a key milestone is reached before the original end date, the program is designed to terminate.
When the campaign allocation is predetermined, it creates a sense of time pressure for users to get involved.Ethena in fact had a $1B TVL milestone in Season 1, reached in less than a month
On Mar 5, 2024: Shard rewards got updated:
- Curve LP rewards reduced from 20x to 15x per day
- Holding USDe rewards reduced from 5x to 2x per day
Cooldown periods were then implemented:
- Lock Curve LP: 21 days
- Lock USDe: 7 days
- Stake USDe for sUSDe: 7 days
- Hold USDe: no cooldown
Moreover, a referral program was introduced and allowed users to earn additional shards equal to 10% of their referrals’ accumulated shards.
Finally, the campaign (Season 1) concluded on April 1, 2024, with ENA tokens claimable on April 2nd.
Vesting rules were also implemented for the top 2000 wallets, which consisted of a 6-month linear vesting period of half $ENA tokens, and continued participation in the Ethena ecosystem was required to maintain eligibility for unvested ENA.
Results and Milestones Hit
Did these rules get any results? And if so, what milestones have been hit?
Since the beginning of the Ethena Season 1 campaign, the USDe total supply (staked and unstaked) has increased by 11 times, as also shown at the beginning of this report.
One interesting thing to note here is that, even after the Season 1 airdrop concluded, USDe total supply grew consistently from $1.5B on April 1 2024 to $3.4B now.
But what is even more interesting is that sUSDE total holdings also increased (despite the number of holders significantly decreased), and as you can see the difference between the amount of USDe and sUSDe diminished.
This means that more USDe has been staked, and as a consequence the USDe circulating supply reduced. This was in fact one of the campaign goals as we have seen earlier.
On Mar 2, 2024 then USDe supply hit $600m and Pendle integration went live, and we know how things went…
40% of Pendle’s Total Value Locked is deriving from USDe. Quite impressive!
On Mar 11, 2024, USDe supply reached $900M and new integrations were announced, offering additional ways to earn shards. Specifically:
- Layer 2 integrations (Injective, Manta, Mantle)
- Money market integrations (Morpho, Gearbox, Ajna)
Vesting also worked, in fact these selected wallets showed about 35% more activity than the rest of the wallets which were unvested.
Post-Airdrop Performance
About post-airdrop usage, Ethena introduced Season 2. This made sure that stickiness not only didn’t vanish, rather, liquidity got stickier (both USDe and sUSDE supply increased after Season 1).
The Season 2 launch in order to maintain utilization is something other protocols apply to bounce back from usage drops after the first airdrop ends.
So what results did Ethena carry off thanks to this strategy?
- USDe transfers remained constant, not too down compared to ones during the Season 1.
- After a slight decrease, the balance and number of USDe YT or LP holders on Pendle kept staying at the same levels of during the Shard campaign.
- The amount of USDe purchased kept being stable. Same for USDe locked, except that now it seems to be in a little decrease trend.
The ROI That Turned Heads
Let’s now talk a bit about investment numbers.
The Shard Campaign wasn’t just successful in terms of participation; it was also incredibly lucrative for early adopters.
As explained by Thor Hartvigsen:
- 1K $USDe on day one would have become 640 $ENA
- 1K $YT-USDe at launch would have become 8K $ENA
We can also calculate roughly how much the average address made.
Let’s take the total number of shards distributed → 360B,
and divide it by the total number of claimers → 45,835
We find that the average address collected about 7.8M shards (points).
If we go to Whales Market, we see that Ethena S1 points traded at 0.0014$ per point,
so by multiplying the average number of shards collected by the point price,
we get that the average address made $10K with this airdrop.
Community Feedback
Last but not least, the Community Feedback.
Overall the community sentiment is positive, for both users and projects.
Few people are really bearish on Ethena.
On CT some people share their strategy for Season 2, some actually farm it and others don’t, but look from staying out of the game.
Conclusion
Ethena’s big rise isn’t just a story of a successful token launch; it’s a case-study of how a points program can enhance a product.
As the protocol moves into its next phase with the Sats Campaign (Season 2), all eyes will be on Ethena to see if it can maintain its impressive growth trajectory and potentially support the stablecoin landscape.
Key points of the Sats Campaign are:
- Duration: 5 months (until September 2, 2024) or until USDe supply reaches $5 billion. Again a conditional program.
- Boosted Rewards: Early participants from the Shard Campaign receive increased incentives.
- Expanded Capacity: The inclusion of BTC as a backing asset could potentially allow USDe to grow in supply.
On Chain Times analyzed some possible ROI outcomes and strategies for Season 2: strategies that can be applied easily through our Airdrop Tracker, that features more than 400 airdrops: https://defi.oneclick.fi/airdrops/explore
With that said whether you’re an airdrop farmer, a normal DeFi user, or just curious about crypto, Ethena is a project worth watching, and we at One Click will continue to analyze its development over time.
Feel free to share feedback with us about our airdrop tool. Follow us on X or directly send a report in their app.
Thank you for reading!
- Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Always do your own research before investing in any cryptocurrency or DeFi project.*
References:
- https://defi.oneclick.fi/airdrops/ethena-season-2
- https://defi.oneclick.fi/airdrops/ethena-labs
- https://research.chainslab.io/ethena-labs-usdes-playbook#mechanic
- https://defillama.com/protocol/ethena?tvl=true&fees=false&groupBy=cumulative&revenue=false
- https://dune.com/sankin/ethena-s1
- https://support.bittime.com/hc/en-us/articles/9443894320143-A-Peek-at-Ethena-ENA-Price-TVL-Growth-After-Airdrop-Release
- https://dune.com/elya3/ethena
- https://x.com/DefiIgnas/status/1775910200962088994
- https://mirror.xyz/0xF99d0E4E3435cc9C9868D1C6274DfaB3e2721341/lJHZjwoyS7k2UqfrMeOItH_JqRlmk3yJ8_SkrISGpmA
- https://mirror.xyz/kenton.eth/WLQ98TytJgxtdkcTevSlISbUKoFWex5Gw_TcW8u_SaY
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- https://pro.whales.market/points/Ethereum/Ethena
- https://www.onchaintimes.com/p/a-comprehensive-guide-to-ethena-s2
- https://x.com/ThorHartvigsen/status/1775189482318234043
- https://defillama.com/protocol/pendle#tvl-charts
- https://docs.uxd.fi/uxdprotocol/overview/delta-neutral-position/whats-a-perpetual-future#funding-rates
- https://ethena-labs.gitbook.io/ethena-labs
- https://x.com/leptokurtic_/status/1796823152003097062
- https://members.delphidigital.io/reports/the-rise-of-ethena-unpacking-the-emerging-synthetic-dollar
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