Ethena Labs and Securitize to Launch New Blockchain: What is Converge?

Ethena Labs and Securitize unveiled Converge, a new blockchain that promises to bridge the gap between traditional finance (TradFi) and DeFi. This collaboration seeks to bring institutional-grade offerings to the DeFi space, alongside standard applications for retail investors, offering a new dimension of tokenization and financial infrastructure. 

What is Converge and How Will It Work?

Converge is a blockchain built on the Ethereum Virtual Machine (EVM), providing an environment designed to facilitate both permissioned and permissionless financial applications. This dual approach allows Converge to serve as a bridge between traditional financial institutions and the rapidly evolving world of decentralized finance. The blockchain aims to offer retail investors access to standard DeFi applications, while also meeting the needs of institutional investors with a robust, compliant infrastructure.

Scheduled for a second-quarter mainnet launch, Converge is expected to offer a unique combination of features aimed at accommodating a diverse range of financial products. Ethena Labs, a stablecoin developer, and Securitize, a leader in tokenized asset issuance, are at the forefront of this initiative. They plan to release detailed technical documentation and a developer testnet soon.

Institutional Capital and Tokenized Assets

One of the primary focuses of Converge is the facilitation of institutional-grade applications, particularly those that deal with tokenized assets. Tokenization, the process of turning real-world assets into digital tokens, is gaining momentum in the financial sector, with Securitize playing a key role in this development. The company has already issued over $2 billion in on-chain assets, including offerings from major institutions like BlackRock, Apollo, and KKR.

Converge will serve as the primary issuance layer for Securitize’s tokenized assets, opening the door to a broader range of financial instruments beyond treasury products. With this strategic move, Converge aims to serve as a central hub for institutional investors who are looking to tap into the growing market of tokenized financial products.

The platform's integration with Ethena’s stablecoins—USDe, USDtb, and iUSDe—will enable the creation of innovative financial products. By combining these stablecoins with tokenized assets, Converge aims to simplify transactions and provide institutional investors with more robust options in the DeFi space.

Key Features of the Converge Blockchain

Converge operates with three main application tiers designed to meet the needs of various market participants:

1. Permissionless DeFi Ecosystem: This tier supports USDe-enabled applications and projects incubated by Ethena Labs. It aims to give retail investors access to DeFi protocols and applications that are compliant and easily accessible.

2. Permissioned Applications: A key feature of Converge is the ability to allow traditional financial institutions to interact with blockchain applications in a compliant manner. This feature will be enabled by iUSDe and USDtb, which adhere to Know-Your-Customer (KYC) regulations. This tier allows the platform to serve as a bridge between DeFi and the regulated world of traditional finance.

3. New Financial Products: The third tier focuses on creating innovative products by leveraging Securitize’s tokenized securities. This includes offerings like fixed-income leverage, credit swaps, and equity trading via both spot and perpetual swaps. This feature opens up a world of possibilities for institutional investors seeking exposure to blockchain-based financial products.

DeFi and Institutional Collaboration: The Future of Finance

While speculative DeFi applications have driven much of the industry’s early growth, Ethena Labs and Securitize believe that the future of blockchain lies in institutional adoption. Both firms have recognized that DeFi’s potential goes far beyond speculation. The massive opportunity is in creating financial products that appeal to traditional financial institutions and large-scale investors.

Converge will integrate with major DeFi protocols like Aave, Pendle, Maple Finance, and Morpho Labs, aiming to provide institutional players with the necessary tools to interact with the decentralized economy. Converge will also integrate infrastructure providers such as LayerZero for cross-chain interoperability, Pyth Network for price oracles, and Wormhole for asset bridging.

Moreover the platform will have support from custodians like Anchorage, Copper, and Fireblocks for secure and efficient for institutional use.

The Role of Custodians and Validators

Custodians play a critical role in the Converge ecosystem. As the blockchain is designed to cater to institutional investors, robust custodial services are essential for managing large volumes of tokenized assets. Securitize has partnered with leading custodians, including RedStone, to ensure the security and compliance of the platform. These custodians will help safeguard Converge’s assets, ensuring that institutional investors have the confidence to engage with the blockchain.

In addition to custodians, institutional validators will secure the network by staking ENA tokens, Ethena Labs’ native governance token. This setup will allow the Converge blockchain to maintain a high level of security and decentralization while meeting the needs of institutional users.

Worth noting, Ethena Labs and Securitize have recognized that the future of finance lies in combining the best elements of both the traditional financial system and the decentralized economy. With Converge, they aim to create a space where the two worlds can interact seamlessly, offering opportunities for investors of all types.