LlamaRisk supports onboarding eUSDe to Aave v3 Core Instance. Ethereal is a decentralized exchange tailored for spot and perpetual trading built on the Ethena Network that employs USDe as collateral. Currently, the platform remains in a pre-deposit phase where eUSDe is a receipt token for idle USDe deposited in an ERC4626-compliant vault with instant 1:1 redemption capability. Numerous protocol features—particularly trading functionalities—are either inactive or only theoretically described, with limited documentation and unverified implementations. The main use case for Aave is allowing users to farm Ethereal Points, especially given higher capital efficiency under stablecoin emode.
Since its mid-February 2025 launch, eUSDe has seen substantial growth, with total deposit volume exceeding $1.60B and approximately $930M in TVL as of April 2025. Although secondary market liquidity is limited to a few Uniswap pools with minimal TVL, this presents less concern due to the instant redemption feature for USDe. Token distribution shows high centralization, with the top ten holders controlling over 88% of the supply—Pendle alone holds nearly 82%.
Guardian’s security assessment found only one low-severity issue in the contract, which leverages standard OpenZeppelin libraries. A bug bounty program is not yet active but is confirmed to be on the roadmap. Given that Ethena maintains a $3M bounty, we expect Ethereal to take security equally seriously. Additional audits are currently underway beyond the initial assessment. Counterparty risk exists through the vault’s SafeProxy ownership structure with a 2-of-3 signer threshold that controls deposit and withdrawal functions. It is important to note that the risk profile will definitively change once additional protocol functionalities are enabled, necessitating continuous monitoring, reassessment, and prompt actions as Ethereal implements future development stages.
Collateral Risk Assessment
1. Asset Fundamental Characteristics
1.1 Asset
Ethereal is a decentralized exchange for spot and perpetual trading, built on the Ethena Network and employing USDe as collateral. It is not live yet. Ethereal USDe (eUSDe) is a receipt token provided in return for pre-deposited USDe into Ethereal, where deposits can be made on Ethereum L1. It can be redeemed on a 1:1 basis for USDe at any point. Holding eUSDe grants users the ability to earn Ethereal points, which grow in proportion to the amount deposited and the length of the deposit, while enabling a 30x multiplier on Ethena Rewards and granting early access to the testnet.
1.2 Architecture
Architectural details of Ethereal (v1), as revealed in the available documentation, remain sparse. By design, Ethereal combines on-chain and off-chain components to deliver performance levels comparable to centralized exchanges while preserving a non-custodial framework characteristic of DeFi. The disclosed benchmarks suggest sub-20ms latency with the ability to handle over a million orders per second.
Both perpetual markets (planned for v1.0) and spot markets (slated for v1.1–1.2) will rely on an off-chain order book system. A dedicated sequencer will aggregate transactions off-chain and regularly batch-commit them on-chain. The settlement will occur on the Ethena network, which oversees its block space to ensure reliable transaction finality and throughput, even during heavy trading.
It is worth noting that this remains a theoretical design, with no publicly available performance metrics or additional technical documentation to substantiate its capabilities.
The eUSDe architecture is straightforward - it operates as a tokenized vault built on the ERC4626 standard, managing deposits and withdrawals for a single, predefined ERC20 asset, i.e. USDe. When users deposit USDe, they receive vault shares representing their proportional ownership of the pooled assets, with the exchange rate determined by the ERC4626 conversion rules. These deposited tokens remain in the vault, providing the backing for the share tokens and undergoing no additional processing. Users can initiate withdrawals at any point, redeeming their share tokens for USDe on demand for free.
1.3 Tokenomics
Tokenomics of the network have not yet been disclosed. The only live feature is Season Zero, a pre-deposit campaign designed to strengthen liquidity and reward early supporters.
By holding eUSDe, users accumulate Ethereal Points, granting them priority access to the testnet and other upcoming initiatives, as well as a 30x multiplier on Ethena Rewards. Both Ethereal Points and the Ethena multiplier can be further maximized through eUSDe integrations. The one with Pendle has the highest tier of benefits.
Source: Ethereal Points, April 7th, 2025
Because each eUSDe is fully backed by an equivalent amount of USDe and supports immediate redemption, its risk profile effectively mirrors that of USDe. Accordingly, the main considerations highlighted in the USDe risk analysis apply here.
1.3.1 Token Holder Concentration
The token holder concentration for eUSDe is highly centralized, with the top 10 holders collectively owning approximately 88.47% of the token supply. Pendle SY-eUSDE contract alone holds nearly 82% of the total supply. The second-largest holder is Morpho, with 2.00%, and the third place is for Euler eUSDe vault.
Source: Etherscan, April 14th, 2025
2. Market Risk
2.1 Liquidity
2.1.1 Liquidity Venue Concentration
The liquidity pool landscape for eUSDe is limited in depth:
2.1.2 DEX LP Concentration
2.2 Volatility
Limited data is available due to limited liquidity, instant deposit, and redeemability.
Source: Geckoterminal, April 15th, 2025
2.3 Exchanges
Aside from the limited Uniswap v3 and v4 pools, eUSDe currently has no established presence on other DEXs or CEXs.
2.4 Growth
eUSDe has experienced rapid adoption since its pre-deposit program launched in mid-February 2025. As of early April, the total value locked reached approximately $930M, supported by cumulative deposits of $1.60B and withdrawals of $672M.
During the same period, the number of unique depositors grew in a near-linear fashion to 22,857, reflecting consistent onboarding momentum.
Source: Dune - @etherealdex, April 14th, 2025
3. Technological Risk
3.1 Smart Contract Risk
Ethereal engaged Guardian to conduct a security assessment of their pre-deposit vault. The report documents 1 low severity finding that was acknowledged by the Ethereal team. The team also confirmed that other audits are underway for the other contracts necessary for the next phase of the protocol deployment.
3.2 Bug Bounty Program
None at the moment. The bug bounty program is on the roadmap.
3.3 Price Feed Risk
The vault does not currently implement any price feed or Oracle functionality.
3.4 Dependency Risk
EtherealPreDepositVault inherits from OpenZeppelin contracts:
- Ownable function to provide a basic access control mechanism;
- ERC20 token standard and its interface, allowing the vault to issue share tokens that represent a claim on the underlying assets;
- ERC4626 pattern for tokenized vaults;
The vault contract relies on OpenZeppelin standards and does not appear to introduce significant risks.
4. Counterparty Risk
4.1 Governance and Regulatory Risk
References to an Ethereal governance token have appeared in some publications, but no official announcement or concrete details have been released as of this review. No legal issues have been identified that would hinder asset onboarding.
The Terms of Service function as the binding agreement between users and Ethereal Ltd, together with its affiliated entities, and oversee any interaction with, or use of, the website located at www.ethereal.trade (referred to hereafter as the “Platform”) and all associated services, products, and applications.
Ethereal enforces geographic limitations by prohibiting any individual in, or under the authority of a party in, the United States from utilizing its services. In addition, users located in, residing in, or under the control of jurisdictions subjected to comprehensive sanctions by the United States, United Nations, or the United Kingdom are restricted from accessing the services. This includes Cuba, North Korea, Iran, Syria, and specified areas within Russia and Ukraine, notably Crimea, Donetsk, Luhansk, and Zaporizhzhia.
Individuals subject to export restrictions, anti-terrorism statutes, anti-money laundering laws, economic or financial sanctions, or trade embargoes are also disallowed from using the services. These include sanctions enforced by agencies such as the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of State, the U.S. Department of Commerce, and the United Nations Security Council.
Ethereal reserves the right to implement geo-blocking measures to restrict access from prohibited regions. Users are barred from using virtual private networks or similar methods to mask or modify their IP addresses to circumvent these prohibitions.
The Terms likewise clarify that Ethereal does not possess, run, or govern the underlying protocol, and any activity executed on the protocol does not equate to a transaction with Ethereal. Ethereal does not administer trade execution or manage liquidity pools on the protocol. Instead, the platform constitutes one avenue among many for interacting with the protocol, and Ethereal does not intervene in smart contracts or transaction validation.
Ethereal may occasionally offer incentives, prizes, or rewards to users who engage in particular activities, though there is no assurance that participants will actually receive such rewards. Ethereal holds the discretion to adjust, discontinue, or revoke these offers at any point without notice. Ethereal disclaims any warranties or guarantees regarding reward amounts or percentages, continuous availability of rewards, error-free functionality, or specific digital assets linked to rewards. Certain or all rewards may be partially or entirely nullified if a “Slashing Penalty” is enforced by the underlying blockchain network, and Ethereal assumes no responsibility for any resulting losses.
Users might be required to submit personal or identifying information directly to Ethereal or through a third party frequently to verify their identity and deter unlawful activity. By providing these details, users grant Ethereal the authority to perform whatever inquiries are necessary to confirm user identity and safeguard against misuse of the services.
4.2 Access Control Risk
4.2.1 Contract Modification Options
The contract allows modifications through two toggle functions that change its operational state. The vault owner has the exclusive authority to toggle the deposit and withdrawal functionalities via setDepositsEnabled and setWithdrawalsEnabled. The owner can transfer or renounce ownership using functions inherited from OpenZeppelin’s Ownable.
4.2.2 Timelock Duration and Function
No timelock implemented.
4.2.3 Multisig Threshold / Signer identity
Vault Owner is a SafeProxy with 2/3 signing threshold and the following signatories:
- 0x4320A9290720462F0cd5dfB0F0B9bD4D4A74A8D3
- 0xF3D11F9829Fdb9F61a7d987CCAa858054E80Eb33
- 0xb6349012024331A6989cdc4cfDf480C40cfAE058
Note: This assessment follows the LLR-Aave Framework, a comprehensive methodology for asset onboarding and parameterization in Aave V3. This framework is continuously updated and available here.
We recommend using eUSDe’s vault exchange rate with a CAPO adapter coupled with the USDe feed used on Aave’s Core Instance (USDT/USD).
This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.
