Ethena Labs Integrates Chaos Labs' Data Authenticity Tech to Bolster USDe Risk Management Framework

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

Ethena Labs has integrated data authenticity technology from Chaos Labs to bolster the risk management framework for its synthetic dollar token USDe.

Edge oracles from Chaos Labs will independently verify the total dollar value of USDe's reserves and the reserve coverage of USDe's supply. They will also attest that the reserves are governance-approved and delta-neutral, an integration that was exclusively shared with CoinDesk by Chaos Labs.

A synthetic stablecoin, USDe maintains a soft peg with the U.S. dollar via an automated delta-hedging strategy that shorts bitcoin and ether perpetual futures to offset changes in the prices of these cryptocurrencies.

Over the weekend, the synthetic stablecoin experienced volatility, dropping to 0.982 against tether and 0.988 against USDC, according to Kaiko, amid concerns that the protocol had multi-million dollar exposure to Bybit's ether (ETH) derivatives market. A malicious entity drained over $1 billion in ether from the exchange after it was hacked late Friday.

However, the so-called de-peg was brief as Ethena quickly assured investors that all assets backing USDe were fully off-exchange and that its reserve fund was more than sufficient to cover any losses from the Bybit exploit.

Another layer of credibility is added to USDe's reserves thanks to the integration with Chaos Labs, which ensures their continued security and transparency.

The Edge Proof of Reserves (PoR) oracles will continuously monitor the token's reserve levels and verify the collateral backing them. This is accomplished by seamlessly integrating off-chain data from custodians and centralized exchanges into the on-chain environment, enabling scalable and robust support for institutional-grade applications.

The integration also offers automated alerts to inform users of any data anomalies or if reserve levels fall below the necessary thresholds. Verified data is displayed publicly on Ethena's transparency page and attestor interfaces, keeping stakeholders up to date.

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

While providing real-time and transparent data verification, Chaos Labs' Edge oracle leverages zero-knowledge proofs to ensure security and privacy, even for reserves held off-chain or on different blockchains.

These oracles have secured over $70 billion in volume, providing risk management to decentralized finance (DeFi) powerhouses such as AAVE, Jupiter, GMX, and Tether.