The collaboration between Ethena and Coinbase has introduced the Steakhouse High Yield Vault, a yield opportunity for Coinbase users through the integration with $USDe on the Morpho protocol. This integration indicates the increasing intersection between centralized exchanges and the infrastructure of decentralized finance (DeFi) platforms. Coinbase aims to create an accessible and regulated on-chain savings product for its users.
Bridging CeFi and DeFi Infrastructure
The Steakhouse High Yield Vault utilizes the peer-to-peer Ethereum-based lending protocol, Morpho, and $USDe, Ethena’s synthetic dollar, to provide yield opportunities to Coinbase users. Through this vault, Coinbase users can deposit assets without having to interact with DeFi platforms directly.
This integration bridges the centralized exchange with the decentralized permissionless lending market, increasing the efficiency of the capital of retail users while still adhering to Coinbase’s compliance regulations.
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Mechanism Behind the High Savings Rate
The high savings rate generated by the $USDe stablecoin from Ethena and Coinbase stems from the fact that $USDe is backed by delta-neutral positions in derivatives of staked Ethereum. The assets locked within the vault launched by Ethena and Coinbase are routed through Morpho lending pools. The demand for borrowing from these pools by both institutional and DeFi users creates the yields on $USDe, enabling Ethena and Coinbase to offer competitive on-chain returns.
Unlike yields on stablecoins that are generated from Treasury bills, $USDe’s yields are derived from crypto-native strategies. While this diversifies the sources of yields on $USDe, it also creates dependencies between $USDe and the derivatives market for staked Ethereum.
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Opportunities and Operational Risks
Users of the $USDe vault gain access to yields that are native to the decentralized finance ecosystem without having to self-custody their yields. On a broader scale, the existence of this vault signals the continued interest in decentralized finance from institutional users. However, there are several risks to consider before using the $USDe vault. The vault is created with smart contracts that can carry risks of failure. Additionally, the derivatives that back $USDe are hedged against market movements with counterparty risks. Furthermore, the yields on $USDe are subject to fluctuations in the crypto markets, which can lead to volatility.
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