In an effort to increase transparency to the community and to enforce data-driven discussions, BA Labs is commenting strictly from the risk POV, considering this proposal mostly as a strategic decision up to the SummerFi community and governance.
## Current Ethena Exposure
Current SummerFi exposure to Ethena-related assets (sUSDe, USD, and PT versions of those) stands at $2m. This is ~1.6% of all SummerFi TVL, and is done via 4 different Fleets (Arbitrum: Lower risk USDC, Ethereum: Lower risk USDC, USDT, and ETH), and 14 different ARKs onboarding to those 4 fleets.
The maximum potential SummerFi exposure to Ethena (based on the current caps) is 7.6%.
## Evaluation
Given the lindiness of the Ethena protocol, and it’s assets (mostly sUSDe, and PT-sUSDe) being utilized as collateral on almost all major lending venues across networks (again, mostly Mainnet, due to Ethena’s lack of coverage on other networks), we state that the risk of increasing the maximum potential exposure to Ethena is acceptable at this stage, and that it’d be a subject of further risk assessment by BA Labs if is to grow significantly up from this point.
As mentioned in the proposal, this could be done via increasing the caps of existing (currently onboarded) ARKs that have Ethena exposure, although it should be noted that such an increase would result in raising exposure to other collateral assets listed on those specific ARKs (which can sometimes be a blocker from risk perspective).
Another option is introducing sUSDe ARK to e.g. USDC or USDT Fleets on Mainnet, in which case SummerFi can gain direct Ethena exposure either via buying sUSDe on secondary markets, or native USDe minting + USDe staking via Ethena contracts. It’s important to emphasize that SummerFi is yet to introduce ARKs with strategies that include token swapping (which would be the case here, if non-minting+staking path is to be chosen).
As stated above, we believe that this is more of a strategic decision for SummerFi community, and in case the proposal goes for a vote, we’d encourage SummerFi team to further explore the native minting option, thus avoiding secondary markets and (s)USDe price fluctuations that those imply, which can affect the end APY of the ARK.
## Ethena minting and redemption process
The minting and redemption of USDe are handled through EthenaMinting contracts, which facilitate atomic transactions exclusively for whitelisted addresses. These users—individuals or businesses that have completed KYC—interact with Ethena’s API to obtain a price quote and cryptographic signature, validating each transaction. While the atomic nature of the process ensures seamless execution, it also allows Ethena to reject requests that may jeopardize the asset’s backing or if significant price movements occur prior to execution. Currently, the contracts support a limited set of assets with USDT and USDC being primary assets used for minting historically.
### Fees
Mint and redeem fees, charged by Ethena to cover for the perp position opening and mgmt costs (Ethena doesn’t categorize this as protocol revenue) are not fixed, i.e. a subject of change depending on market conditions, mint size, while Ethena team reserves the rights to adjust those at their discretion.
### Lockup periods
Another important note from SummerFi’s instant liquidity point of view is that unstaking sUSDe to USDe directly implies a 7-day unstaking period, meaning USDe is withdrawable only after 7-days have passed since the unstaking transaction.
## Adding USDe Fleet
Accepting deposits in USDe directly avoids swapping/minting process, while introducing a limited yield source spectrum (assuming USDe is not to be swapped back to USDC for yield diversification) as USDe currently has significantly lower distribution compared to USDC/USDT, thus resulting in smaller number of yield opportunities beside staking to sUSDe, mostly related to Aave/Morpho and Pendle.
