# Ethenna Enhances Collateral Management Amid Bybit Hack

Ethenna has announced significant measures to improve its USDₑ collateral management and crisis response systems following the recent Bybit hack, the largest hacking incident in cryptocurrency history.

# Swift Response to Bybit Hack

Immediately following the Bybit hacking incident, Ethenna prioritized the safety of customer assets. The company minimized exposure to exchange default risk by utilizing Copper’s ClearLoop, an institutional-grade off-chain custody solution, instead of directly holding its USDₑ collateral assets on exchanges. On the day of the hack, Ethenna swiftly secured $30 million in unrealized profits from futures positions with Bybit within 90 minutes. This demonstrated a rapid and systematic risk management protocol, enabling smooth processing in the next settlement cycle.

Ethenna maintains the value of its stablecoin, USDₑ, and generates organic revenue through a delta-neutral strategy that leverages funding rate differences between long (buy) and short (sell) positions in the cryptocurrency market.

Additionally, Ethenna significantly increased the liquidity buffer deposited in its USDₑ mint and redemption smart contract from $30 million to $250 million. This enhancement enabled the company to efficiently handle redemption requests exceeding $100 million within just one hour. Such measures rapidly restored USDₑ’s on-chain price to previous levels after a brief drop and effectively mitigated potential counterparty risk through swift asset reallocation and hedging position adjustment across exchanges.

# Off-Chain Settlement and Risk Management

Ethenna employs an Off-chain Exchange Settlement (OES) solution that utilizes centralized exchange liquidity while ensuring collateral assets are not directly transferred to exchanges. This approach helps overcome the delays in exchange deposit and withdrawal processes and achieves flexible asset reallocation and risk management by processing delegation/undelegation steps within seconds. As a result, Ethenna maintained the stability of its collateral-backed assets and retained customer trust even after the hacking incident.

# Systematic Innovations for Enhanced Transparency

Throughout its response to the Bybit hack, Ethenna underscored the importance of transparency and prompt communication. The company clearly disclosed exposure amounts, unrealized profits, and redemption situations related to the hack early on, demonstrating exemplary crisis management practices in the industry.

Furthermore, Ethenna plans to integrate Chaos Labs’ Edge Proof of Reserve (PoR) Oracle to enhance the real-time transparency of USDₑ collateral. This integration will enable independent third parties to verify the collateral’s coverage, net collateral value, and governance-approved assets through an API-based secure reading function every day. This move will solidify Ethenna’s standing as the most transparent off-chain dollar-pegged asset issuer in the industry.

# Continuous Investment and Trust Building for the Future

Labeling its response to the Bybit hacking incident as a “historical stress test,” Ethenna stated its commitment to ongoing improvements in protocol architecture and transparency to mitigate various risk factors. The company aims to ensure customer asset safety and market trust while laying the foundation for offering more stable and transparent financial services in the future.

This announcement has reminded the cryptocurrency industry of the critical importance of asset protection and transparent information disclosure during crises. Ethenna’s innovative response strategy is expected to set a new standard for the sector going forward.