Premise

This data driven report dives into @Ethena recent growth while successfully retaining more than 70% of its capital.

Due to the fast growth of Ethena over the past week, some of the data reported is not up-to-date. Here's how things changed since the time of writing:

• TVL: Increased from $5.88B to $7.55B (+28.4%)

• Market Position: Improved from #17 to #15 in all DeFi

• Category Dominance: Strengthened from 68.1% to 70.6% market share

The Paradox of DeFi Loyalty

In a space known for fleeting hype, fast rotations, and mercenary capital, one protocol has broken the mold. While most DeFi platforms bleed users at the first sign of volatility, Ethena has quietly built a fortress: retaining 76% of TVL, commanding 68.1% of an entire category, and exhibiting the lowest volatility of any major DeFi protocol.

This piece unpacks the science of capital retention - a deep dive into how Ethena transformed from an experimental stablecoin protocol into DeFi's first truly infrastructure-grade financial primitive whose resilience, dominance, and sustainability mirror TradFi systems more than yield farms.

Introducing Ethena: Infrastructure-Grade Digital Money

Ethena is a synthetic dollar protocol built on Ethereum, offering "internet money" in the form of $USDe through a delta-neutral basis trading strategy using long spot BTC/ETH positions and short BTC/ETH perpetuals to create a dollar-pegged asset without centralized collateral.

Revenue Mechanics:

• 15% annualized basis arbitrage from shorting perpetual futures (majority of income)

• 3% staking yield on ETH-based long collateral

• 4% fixed returns from stablecoin deployments into liquidity pools

As of July 2025, Ethena's assets are allocated across derivatives basis trades, staked ETH assets, and liquid stable assets, with exact distributions varying based on market conditions and governance decisions.

Executive Summary

As the infrastructure layer for yield-bearing synthetic dollars, Ethena anchors 68.1% of the total market share across a 29-protocol ecosystem spanning 12 chains, with $8.71B in sticky, high-trust TVL.

The protocol demonstrates exceptional operational maturity with an 8.23 volatility score (based on 90-day daily TVL percentage changes) compared to the 15-25 range typical for DeFi protocols, while maintaining consistent growth trajectories that outperform category benchmarks.

A1’s Core Thesis: Ethena represents successful category creation, proven stress resilience, and operational maturity that demonstrates how infrastructure protocols achieve sustainable market leadership through specialized financial innovation and superior risk management.

1. Building a Category: Ethena and the Architecture of Synthetic Digital Dollars

Ethena didn't just enter a market - it defined one. Most DeFi categories mature slowly and distribute market shares across 3–5 incumbents.

Ethena's dominance suggests it sparked the category rather than competed in one, becoming the standard others now benchmark against.

1.1 Composition of the Yield-Bearing Synthetic Dollar Ecosystem (29 Protocols)

1.2 The Blueprint for DeFi Category Creation

A New Ecosystem Emerges From Ethena

Ethena's launch triggered a cascade of protocol innovation around synthetic, yield-bearing dollars, giving rise to a $8.67B ecosystem of stable value systems spanning 29 protocols across 12 chains. The 12-month data reveals this wasn't gradual market evolution but category creation through infrastructure-grade performance.

Infrastructure-Grade Performance Through Full Market Cycles

Ethena's +68.85% annual growth combined with 68.1% sustained market dominance represents infrastructure-grade performance rarely seen in DeFi. The protocol's journey through five distinct phases validates its positioning as category-defining infrastructure.

Recovery Excellence: The +132.7% recovery from October 2024 lows demonstrates institutional confidence patterns typical of infrastructure protocols. While most DeFi protocols struggle to maintain momentum through bear markets, Ethena's V-shaped recovery mirrors traditional infrastructure assets.

Volatility Management: A 8.23 volatility score places Ethena in infrastructure-grade stability ranges, significantly lower than typical DeFi protocols. This stability, maintained while growing 68.85% annually, suggests the protocol has achieved the rare combination of growth and reliability that defines infrastructure leaders.

The Power Law in Action

The ecosystem distribution reveals an extreme power law: 1 protocol above $5B (Ethena), 1 protocol in the $500M–$1B range, 3 protocols in the $300–500M range, and 24 protocols below $300M. More striking is the micro-scale concentration: 13 protocols hold less than $10M TVL, with 6 protocols below $1M despite months of operation.

Scale Gaps: The largest competitor (USDX at $670M) is 8.8× smaller than Ethena, while the smallest tracked protocol (OpenDelta at $12) is 479,731,509× smaller. This unprecedented scale distribution suggests the category has rapidly matured into infrastructure-dominant structure rather than competitive fragmentation.

Multi-Chain Paradox: Liquidity Depth > Chain Breadth

Among the 28 tracked synthetic dollar protocols, 15 operate cross-chain across 12 blockchain ecosystems, signaling strong multi-network demand. However, Ethena maintains an Ethereum-only deployment and captures the majority of category TVL.

Multi-Chain Efficiency Paradox: @DesynLab Basis Trading operates across 15 chains yet holds only $89M TVL (65.5× smaller than Ethena). USDX spans 3 chains with $670M TVL (8.8× smaller). This challenges the prevailing assumption that multi-chain expansion drives scale.

2. Protocol Resilience in Practice: Ethena's Performance Under Stress

Infrastructure is tested when the tide goes out. In two major drawdowns (March and April–May 2025), most DeFi protocols suffered deep capital outflows. Not Ethena. While lending markets like @aave, staking giants like @LidoFinance, and restaking leaders like @eigenlayer saw TVL plunge, Ethena showed something rare: not just retention, but recovery with growth.

• Average volatility score (top 20 protocols): 14.87

• Ethena's percentile rank: 1st (most stable)

Detailed Stress Response Metrics

• Retention Rate During Stress: 86.1% (March), 88.4% (April-May)

• Average Retention: 87.25%

• Volatility Score: 8.23 (180-day) vs measured protocol average of 14.87

• Recovery Velocity: 3-6 weeks vs 7.2 weeks average for measured protocols

• Post-Stress Performance: +19.25% average above pre-stress levels

2.1 Comparative Protocol TVL Range Analysis (90-Day API Data)

2.2 TVL Movement Timeline Analysis (90-Day API Data)

2.3 Detailed Ethena TVL Movement (180-Day Historical API Data)

2.4 Detailed Stress Period Analysis (Daily TVL Changes)

March 2025 Correction Period

April-May 2025 Drawdown Period

2.5 How Ethena Outperformed the DeFi Field in Crisis

When the market stumbles, most protocols react. A few reveal their design. Ethena's performance during recent market stress events was notably resilient, with data indicating stronger relative retention and recovery dynamics compared to peer protocols.

Cross-Protocol Performance: Capital Stayed Where It Trusted Most

Ethena's 76.2% TVL retention rate exceeds all measured major DeFi protocols including AAVE V3 (61.8%), Lido (54.1%), EigenLayer (54.8%), and Sky Lending (68.7%). This creates a 14–22 percentage point retention advantage across the comparative protocol sample during measured stress periods.

Volatility: The Steadiest Hand in the Market

The 8.23 volatility score positions Ethena as the most stable protocol among all 20 measured DeFi protocols. The measured range spans from 8.23 (Ethena) to 19.67 (SparkLend), with Ethena demonstrating 24.6% superior stability compared to the next most stable protocol (Sky Lending at 10.25).

Speed of Recovery: Ethena Bounced Back First

Comparative recovery timeline analysis shows Ethena's 3–6 week average across measured events versus 7–12 week recovery periods for comparison protocols (AAVE V3: 8–9 weeks, Lido: 10–12 weeks, EigenLayer: 7–8 weeks). This represents a measurable 37.5% faster recovery velocity within the tested protocol sample.

Inside Ethena's Own Stress Response: Consistency and Growth

Beyond outperforming peers, Ethena showed remarkable internal consistency across two major stress events:

Consistent Resilience: Ethena maintained >85% retention rates across both distinct stress periods (March: 86.1%, April–May: 88.4%) despite different stress characteristics, indicating systematic protocol resilience rather than event-specific market conditions.

Predictable Recovery: Both recovery periods followed similar 3–6 week timelines regardless of initial drawdown severity, suggesting predictable recovery mechanics independent of external stress factors.

Growth Through Stress: Both recovery periods resulted in TVL levels exceeding pre-stress baselines by significant margins (+12.0% March event, +26.7% April–May event), demonstrating net capital accumulation during stress cycles.

3. Derivatives Market Integration: Examining the Future Potential of Ethena

Ethena's role in DeFi goes beyond being a stablecoin. It is well-positioned to become foundational collateral for decentralized derivatives platforms, which now exceed $13.6B/day in volume. Traders need low-volatility, yield-bearing collateral for margin and LP provisioning, and Ethena's model is uniquely suited to this role.

3.1 Derivatives Market Volume Analysis (Top 20 Protocols)

Derivatives Market Totals:

• Total Daily Volume: $13.62B across tracked protocols

• Total Weekly Volume: $73.31B

• Market Growth Rates: +11.14% (24h), +28.03% (7d)

• Chain Distribution: 25+ distinct blockchain ecosystems

• Protocol Count: 100+ active derivatives protocols

3.2 Chain Distribution Analysis in Derivatives Market

3.3 30-Day Growth Trends: Derivatives Platforms vs Digital Dollar Infrastructure

3.4 The Understated Alignment Between Derivatives and DeFi Collateral Infrastructure

The crypto derivatives market is large, fast-moving, and aggressively expanding. But beneath its volatility lies a quieter, more stable foundation, one increasingly defined by protocols like Ethena. Together, these two layers - velocity and stability - are beginning to reveal a deep structural interdependence.

Scale Tells the Story: Velocity Needs Collateral

The decentralized derivatives market's $13.62B daily volume compares to Ethena's $5.88B TVL as a 2.3x ratio. Mathematical relationship shows that even 5% derivatives volume capture ($681M) would represent 11.6% growth for Ethena's current position. In short, a small slice of fast money needs a large amount of stable collateral.

Parallel Market Concentration Patterns

Hyperliquid accounts for 65.5% of decentralized derivatives volume, while Ethena anchors 68.1% of TVL within the yield-bearing digital dollar ecosystem. Both markets demonstrate similar concentration ratios (65–68% range), indicating comparable market structure patterns between volume-based and TVL-based DeFi categories.

Different Speeds, Different Roles

Derivatives market shows 28.03% weekly growth versus Ethena's 24.13% monthly growth. When normalized for frequency, the derivatives sector is growing 4× faster, highlighting higher market velocity compared to the more stable TVL growth patterns of synthetic dollar protocols.

Derivatives protocols exhibit high volume velocity with significant daily changes (±50% common across protocols), while Ethena demonstrates TVL stability (8.23 volatility score). This 7× differential suggests complementary market functions - high-frequency trading versus stable collateral provision.

Same Design, Different Ends: Single-Chain Dominance

While Hyperliquid dominates through single-chain focus (65.5% on Hyperliquid L1), other chains show distributed activity: Ethereum ($1.02B across 5 protocols), Arbitrum ($2.26B across 8 protocols). Multi-chain derivatives activity reaches $4.76B (34.8% of market) across 20+ protocols.

Across both derivatives and synthetic dollar ecosystems, single-chain dominance by leading protocols suggests that concentrated liquidity often outperforms multi-chain distribution when building foundational market infrastructure.

4. Competitive Positioning: Ethena vs. Infrastructure Giants

As DeFi expands, competition intensifies across most verticals. Notably, Ethena is the only synthetic dollar protocol in the top 50 DeFi rankings, reflecting not just current market leadership, but signs of emerging structural defensibility.

4.1 DeFi Infrastructure Top 50 Competitive Analysis

4.2 Lending Category Competitive Analysis (Top 15)

Lending Category Totals: $43.6B across Top 15 protocols

4.3 Complete Liquid Staking Category Competitive Analysis (Top 10)

Liquid Staking Category Totals: $38.2B across Top 10 protocols

4.4 Competitive Scale Differential Analysis

4.5 When One Protocol Owns the Whole Category: Ethena's Structural Advantage

In most DeFi sectors, protocols compete for incremental share within an already defined category. But in a few cases, a single protocol emerges early, establishes the standard, and retains dominant positioning as the space matures. Ethena is one such case.

Synthetic Dollars at the Top: A Singular Presence

Among major DeFi categories represented in the Top 50, market share concentrations range from 58.0% (Uniswap V3 in DEX) to 100.0% in categories represented by a single protocol. Ethena accounts for 100% of Top 50 representation within the synthetic dollar category, highlighting the absence of comparable competitors at this scale.

System-Level Ranking Context

Ethena ranks #17 overall among DeFi protocols (excluding centralized exchanges), placing it in the top 3% of all tracked protocols. It currently ranks #17 by total value engaged, positioned between Bitget (#16, $6.02B) and BitMEX (#18, $5.54B).

Competitive Structure: Concentration vs Fragmentation

Ethena is the only synthetic dollar protocol within DeFi's Top 50. This contrasts with categories such as:

• Lending: 7 protocols

• Liquid Staking: 5 protocols

• Restaking: 2 protocols

• DEXs: 2 protocols

This asymmetry reflects deeper structural dynamics: synthetic dollar protocols tend to concentrate around a single dominant infrastructure, while other verticals show greater fragmentation.

Growth Profile: Stability Over Acceleration

Among Top 50 category leaders, recent weekly growth rates are:

• EigenLayer: +8.07%

• Ether.fi: +7.11%

• Lido: +6.08%

• AAVE V3: +4.37%

• Babylon: +3.74%

• Ethena: +1.47%

Ethena's lower short-term growth reflects a more mature and stable adoption curve, aligning with infrastructure-like behavior rather than early-stage protocol dynamics.

5. Utility Over Extraction: Ethena's Infrastructure-First Economic Model

Ethena has generated over $400M in cumulative protocol revenue since launch, placing it among the top earners in DeFi. But unlike many protocols, Ethena does not retain this revenue to grow its own treasury. Instead, nearly 100% of protocol revenue is passed through to USDe holders in the form of yield.

5.1 Gross Protocol Revenue (User-Distributed) and Fee Analysis

5.2 Revenue Efficiency Analysis (TVL-Adjusted Metrics)

5.3 Economic Model Classification Analysis

5.4 Competitive Revenue Model Comparison

5.5 Sustainability Framework Analysis (Quantitative Metrics)

5.6 Rethinking Protocol Value: Ethena's Infrastructure-Led Economic Model

While many DeFi protocols build around transaction-based revenue extraction, Ethena operates on a fundamentally different premise: infrastructure utility over protocol profitability. Its economic model prioritizes user value creation and market functionality rather than near-term monetization.

Infrastructure vs Revenue: Intentional Under-Monetization

Ethena operates as infrastructure rather than a revenue-extracting protocol. The protocol earns $1,564 daily revenue on $5.88B TVL, translating to just 0.000027% revenue efficiency. This is fundamentally different from fee-focused protocols like Uniswap V3 (0.0096% efficiency) or AAVE V3 (0.00080% efficiency). This model implies a clear prioritization: maximize user utility, not protocol revenue.

Yield Pass-Through as a Design Feature

Ethena's low revenue retention rate (1.55%) suggests that yield generated by the system flows primarily to USDe holders, rather than being captured by the protocol treasury. This structure aligns closely with stablecoin infrastructure models, where economic value is passed to users rather than accumulated by the protocol.

Sustainability Anchored in Market Role

Unlike protocols that rely on fee generation for sustainability, Ethena's durability appears rooted in its ecosystem role and infrastructure value. Key performance indicators support this:

• 68.1% market dominance

• 8.23 volatility score

• 87.3% stress retention

These metrics indicate that market positioning, not fee flows, underpins the protocol's competitive edge.

The Efficiency Illusion: Yield Distribution as a Retention Engine

At first glance, Ethena appears to be 3-30× less "revenue efficient" than major DeFi protocols when measured by revenue per $1B in TVL. But this is a false signal of weakness. Ethena's low protocol capture rate is not due to poor revenue generation; the protocol has generated over $400M in cumulative revenue. Instead, its yield-pass-through design distributes nearly all earnings directly to USDe holders.

This architecture prioritizes user alignment over protocol profit, sacrificing short-term monetization for long-term capital stickiness and systemic integration. The result is powerful defensibility: high user trust, low churn, and strong TVL resilience.

Revenue Headwinds and the Cost of Dominance

Despite its positioning, there are inherent risks. A –68.17% daily revenue change highlights volatility in revenue generation, which could challenge sustainability if operational costs begin to exceed protocol income. Since revenue is primarily driven by funding rates in the perpetuals market, a shift toward a bearish regime could compress funding spreads and further reduce protocol-level earnings.

However, Ethena's role as an infrastructure layer with entrenched usage suggests it may remain viable without high revenue dependence, provided ecosystem value continues to scale.

6. Conclusion: Infrastructure, Intent, and the Long Game

Ethena's current position across metrics (category formation, stress resilience, ecosystem integration, structural positioning, and economic model) reflects a deliberate and consistent design philosophy: to act as infrastructure, not just a product.

Rather than maximizing protocol-level revenue, Ethena has prioritized capital stability, user value retention, and ecosystem alignment. This has allowed it to build both trust and scale, not through aggressive extraction or rapid multi-chain expansion, but by establishing itself as a core building block in a specific market niche.

6.1 The Infrastructure Blueprint

Ethena has successfully demonstrated the blueprint for DeFi category creation:

• Achieve infrastructure-grade scale and reliability early - 68.1% market dominance with 8.23 volatility score

• Maintain dominance through full market cycles - 76.2% TVL retention through major stress events

• Become the operational standard that defines an entire market segment rather than competing within one

6.2 Key Performance Validation

Category Creation Success: Ethena triggered ecosystem emergence from 1 → 29 protocols, maintaining 68.1% dominance despite 28 new entrants achieving 1,000%+ growth rates.

Institutional Patterns: V-shaped recovery (+132.7% from October lows), infrastructure-grade stability, and sustained market leadership mirror traditional infrastructure assets rather than typical DeFi volatility patterns.

Network Effects: Single-chain Ethereum deployment outperforms multi-chain competitors, suggesting liquidity concentration outweighs geographic distribution for infrastructure protocols.

6.3 The Model's Broader Implications

Ethena's trajectory offers a useful reference point for how infrastructure protocols in DeFi may succeed:

• Not by dominating every metric, but by selecting the ones that matter for their function

• Not by competing broadly, but by becoming indispensable within a narrow, strategically important vertical

• Not through extraction, but through utility maximization and user value alignment

As DeFi matures and segments into specialized infrastructure layers, Ethena's trajectory may be less an anomaly, and more a preview of how sustainable, institutional-facing protocols will need to operate.

The protocol's success suggests that some verticals, especially those serving as financial infrastructure, may naturally favor winner-take-most outcomes, with long-term implications for DeFi's evolving market structure.

This content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. The views expressed are those of A1 Research at the time of publication and are subject to change without notice. Nothing in this material should be interpreted as a recommendation to buy, sell, or hold any asset. A1 Research does not guarantee the accuracy or completeness of any information contained herein. Please conduct your own due diligence and consult a licensed financial advisor before making investment decisions. Not financial advice.