Elixir launches 'fully decentralized' synthetic dollar aiming to challenge Ethena's USDe

Elixir, a modular blockchain project focused on providing liquidity for decentralized orderbook exchanges, has launched a synthetic dollar asset, deUSD, aiming to challenge Ethena’s USDe.

Ethena Labs’ USDe stablecoin, also known as a “synthetic dollar,” maintains its peg through arbitrage mechanics and a yield-returning cash-and-carry trade. It is fully collateralized by crypto assets and delta-hedged to ensure stability. While operating within the DeFi ecosystem, its collateral and operations involve interactions with centralized exchanges and custodians.

Elixir’s deUSD is also fully collateralized, created using stETH as collateral to short ether in a delta-neutral position. deUSD stakers can receive an additional yield on top of the basis yield in the form of exchange incentives for supplying liquidity, the project said.

Elixir claims to provide a “truly decentralized” non-custodial and on-chain alternative to USDe, with verifiable proofs of execution, open source code and liquidity, without relying on centralized parties. Elixir claims deUSD offers several other advantages over USDe, including the ability to remain stable in times of extreme negative funding.

“The network Elixir has built and stress-tested over the past two years is well suited to power a truly decentralized synthetic stable asset,” Elixir Labs founder and CEO Philip Forte said in a statement shared with The Block. “deUSD has been built with transparency and resiliency as its core features, removing dependency from basis-related market trends and unstable sources of yield." 

$1 billion in liquidity lined up

Elixir claims to have $1 billion in liquidity lined up to back the new yield-bearing token, alongside support from DeFi platforms such as Pendle, which is tokenizing and creating a market for Elixir’s Apothecary initiative — a points-based system to help users track their contributions to the network.

Since the Apothecary program opened in March, Elixir says it has accumulated over $300 million in total value locked, excluding the $1 billion in capital committed for deUSD, leading into its anticipated September mainnet launch.

Users currently supply ether to the Apothecary to mint a cross-chain liquidity provider token, backed 1:1 with ETH, earning Elixir points known as “Potions.” The elxETH token can then be used as collateral on decentralized orderbook exchanges like Vertex, Bluefin, RabbitX, dYdX, ApeX, Orderly Network and SynFutures, among others. Elixir has partnered with some of those exchanges to convert its approximately 70,000 staked ether into backing for its new synthetic stablecoin.

Pendle is tokenizing the Apothecary’s “Potion” program by dividing the Elixir points into two distinct markets: one for users who wish to buy and sell Potions directly and another for those interested solely in the ether staking yield generated by the Potions.

With the launch of deUSD, Apothecary depositors can choose to either mint deUSD using their deposited ether once DEX support goes live or withdraw their ether, the team said, adding that any remaining ether in the Apothecary contract can be withdrawn or converted at any time.

Elixir reaches $800 million valuation ahead of mainnet launch

At the same time it opened the Apothecary in March, Elixir also announced the completion of an $8 million Series B funding round co-led by Sui blockchain developer Mysten Labs and Arthur Hayes’ family office, Maelstrom.

The fresh capital brought the project close to unicorn status at an $800 million valuation — an eight-fold increase on Elixir's valuation following its $7.5 million Series A round last October, led by Hack VC. 

In addition to its $2.1 million seed round in January 2022, Elixir has raised more than $17 million in total funding.