Ethena Labs Integrates Chaos Labs’ Data Authenticity Technology

Ethena Labs has integrated Chaos Labs’ data authenticity technology, Edge Proof oracles, to strengthen the risk management framework for its synthetic dollar token USDe.

Independent Verification

Edge oracles will independently verify the total dollar value of USDe’s reserves and the reserve coverage of USDe’s supply, confirming that reserves are governance-approved and delta-neutral. Chaos Labs shared this announcement exclusively with CoinDesk.

About USDe

USDe, a synthetic stablecoin, maintains a soft peg with the U.S. dollar through an automated delta-hedging strategy that shorts Bitcoin and Ether perpetual futures to offset price changes of these cryptocurrencies.

Recent Volatility

The synthetic stablecoin experienced volatility over the weekend, falling to 0.982 against Tether and 0.988 against USDC amid fears that the protocol had multi-million dollar exposure to Bybit’s Ether (ETH) derivatives market. The exchange was hacked late Friday, with over $1 billion in Ether drained by a malicious entity.

Short-Lived De-Peg

However, this de-peg was short-lived as Ethena assured investors that all assets backing USDe were held off-exchange and that its reserve fund was more than enough to compensate for any losses from the Bybit exploit.

Enhanced Credibility

The integration with Chaos Labs adds another layer of credibility to USDe’s reserves, ensuring their security and transparency.

Continuous Monitoring

Edge Proof of Reserves (PoR) oracles will constantly monitor reserve levels of tokens and the collateral backing them. This is achieved by integrating off-chain data from custodians and centralized exchanges into the on-chain environment, ensuring scalable support for institutional-grade applications.

Automated Alerts

The integration also provides automated alerts to notify users of any data anomalies or if reserve levels fall below required thresholds. Verified data is publicly displayed on Ethena’s transparency page and attestor interfaces, keeping stakeholders informed.

Commitment to Transparency

“This integration ensures continuous, independent verification of reserves, fostering greater transparency and security for all users. By leveraging real-time, tamper-resistant data, Ethena reinforces its commitment to a robust and reliable synthetic dollar,” the announcement stated.

Zero-Knowledge Proofs

Chaos Labs’ Edge oracle leverages zero-knowledge proofs to ensure security and privacy while providing real-time, transparent data verification, including for reserves held off-chain or across different blockchains.

Proven Track Record

These oracles have secured over $70 billion in volume, delivering risk management to decentralized finance (DeFi) giants like AAVE, Jupiter, GMX, and Tether.