Ethena and Securitize Team Up in $1B Tokenization Contest

Stablecoin issuer Ethena has joined forces with tokenization platform Securitize to submit an application for Sky’s $1 billion tokenization contest, a competition designed to bring real-world assets (RWAs) into the world of tokenization. Their proposal centers around the inclusion of USDtb, Ethena’s stablecoin, and aims to leverage BlackRock’s BUIDL, a tokenized U.S. Treasuries fund, as a primary reserve asset.

Partnership and Proposal Details

The collaboration between Ethena and Securitize is a strategic effort to capture a share of the $1 billion prize in Sky’s Spark competition, which was launched to incentivize the tokenization of real-world assets, particularly public securities. The Spark competition is hosted by Sky, the decentralized finance (DeFi) protocol formerly known as MakerDAO, which has a track record of integrating real-world assets into the crypto ecosystem.

In their pitch, Ethena and Securitize seek to integrate USDtb (Ethena’s stablecoin) within Sky’s tokenized ecosystem, alongside BUIDL (BlackRock’s tokenized U.S. treasuries fund), which is the largest tokenized U.S. Treasuries fund by market cap. By using BUIDL as the reserve asset, the proposal aims to increase liquidity and provide a more robust framework for tokenized securities, thereby helping to bridge the gap between traditional financial assets and the DeFi world.

Tokenization Grand Prix and Spark Competition

The Spark competition, announced in June 2024, is a major opportunity for real-world assets issuers to earn liquidity for their tokenized securities. Sky opened up applications for the contest in August 2024, and the top winners stand to receive up to $1 billion in liquidity. Ethena and Securitize are positioning their proposal not only to include USDtb but also to offer an innovative swap facility with USDe, Ethena’s other stablecoin.

This swap facility would enable Sky’s ecosystem to seamlessly manage the reallocation of assets between USDtb and USDe, depending on the interest rate cycle within Sky’s platform. The flexibility of this system ensures that if crypto funding increases, Sky could easily adjust its USDtb holdings and shift them to USDe more efficiently than with other RWA issuers.

Strategic Importance for Ethena and Sky

Ethena plays a significant role within the Sky ecosystem, contributing around $120 million to Sky’s annual revenue, which accounts for nearly 30% of Sky’s total earnings. This makes Ethena a crucial partner in the protocol’s financial operations, especially considering that collateral backing for Ethena’s assets is only at 13%. The collaboration is expected to bolster both Ethena’s standing within the DeFi community and enhance Sky’s ability to handle tokenized real-world assets.

The joint application by Ethena and Securitize for Sky’s $1 billion tokenization contest could mark a significant step in the integration of traditional financial assets, such as U.S. Treasuries, into the decentralized finance ecosystem. By combining USDtb, USDe, and BUIDL in an innovative liquidity management system, the proposal has the potential to strengthen Sky’s position as a leader in tokenized securities. The success of their application could not only provide substantial liquidity for the platform but also catalyze further adoption of tokenized real-world assets across the DeFi space.