Guy Young on Why Ethena Launched a Neobank on Top of Its Stablecoin

Guy Young (0:00)

Yeah, I mean, there is definitely a risk you can lose money on USDe. I would kind of just point towards the last sort of two to three years is kind of one of the most testing periods you could have ever imagined for a product like USDe to have got through and never lost even a basis point of users' money. So just for some figures for your listeners, there's been around like $30 billion of mint and redemption flows within USDe, peaked at around $15 billion. And then we went through the Binance 1010, de-leveraging event that we saw at the back end of last year, and then the Aave kelp incident that was in Q2 of this year. In many ways, this is like some of the most testing periods you could have ever gone through with a product like this where people would have expected something to go wrong. And nothing did go wrong with like $30 billion of flows coming in and out.

Laura Shin (0:45)

Hi, everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. First, we'll take a quick word from the sponsors to make this show possible.

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Today's guest is Guy Young, founder and CEO of Ethena Labs. Welcome, Guy.

Guy Young (1:19)

Nice to have you here.

Laura Shin (1:21)

It's nice to see you and congratulations on the recent launch of Athena Pay, your new NEO Bank.

It's a really interesting launch because Athena, for a long time, has been seen as very crypto product, and it even had both centralized and decentralized aspects. It just was its own unique animal, and it very quickly became one of the most successful non-reserved back stablecoins. So I'm curious to hear why you decided to also launch a NEO Bank.

Guy Young (1:52)

Yeah, for sure. I think it's part of a broader theme, I think. Just from the lessons that I think we've gathered through the last cycle, which is I don't have as much confidence that all the money that we thought would turn up into DeFi and operate on Chain is eventually going to come here and operate in the same way that we have in the last five years. I think I've increasingly become the form of the view that DeFi probably just plays a role in the back end for a lot of user-facing frontends that actually control the user in the distribution. I think you've seen that trend in the last year or so with some of the bulk products, for example, like you've seen integrations with Morpho into Coinbase and Robinhood. I think that those are just very good examples of the role that DeFi plays as providing better infrastructure or better products in the background to a centralized front end where tens of millions of users actually sit. I think that this is a bit of a learning for us, which is just looking at the data from this last cycle versus 2021

DeFi TVL actually didn't even break the peak of where we were in 2021, and it was actually 30-40 percent below the peaks that we saw even four or five years ago. To us, that was just a very important data point which told us that we needed to go out and meet users where they are in a form factor that they're used to, which we think is a mobile app that anyone can access to be able to interact with these products. I think it's a combination of a few different things. One is just recognizing that you can't just operate on train and expect that the whole world is going to turn up and get used to interacting with the Metamask wallet and finding your DeFi dApp, and you need to go meet users where they are to try and control the destiny of your own distribution in a more meaningful way. I think that that segues into the second piece, which is I think Athena has done a decent job of integrating into important distribution platforms in the last two to three years, so integrations across some of the names that I mentioned earlier with Robinhood and Coinbase, Binance, Bybit, et cetera, et cetera.

While that's extremely helpful to try to bootstrap your growth in the beginning, I think in an end stage, if you're going to control the end user relationship, that's a much more valuable place to be in terms of being able to extract the margin and actually grow revenues for the business. While that still maintains one of the most important growth vectors that we have, in terms of integrating in the back end of other people's products and platforms, we thought that the opportunity here was so big for us to go and try to do that ourselves, direct with this type of product, and thought we couldn't ignore the opportunity to go and try it at least.