Citing community feedback, Ethena Labs has withdrawn its bid to issue the native stablecoin for the Hyperliquid network. The announcement by Ethena's CEO on Thursday leaves Native Markets, a community-backed project, as the frontrunner to win the rights to the "USDH" ticker in a future governance vote. Ethena stated its decision was based on a preference from validators for a "homegrown solution."

• A DeFi heavyweight has unexpectedly bowed out of a high-stakes competition, dramatically altering the likely outcome.
• Discover the powerful community-driven sentiment that led to the strategic withdrawal of a top contender.
• Learn about the emergent, community-backed project that is now the overwhelming favorite to win, according to prediction markets.

The contest to determine the issuer of the official Hyperliquid stablecoin began as a four-way race between financial titans, including the regulated powerhouse Paxos and DeFi innovators Frax and Ethena. The goal was to select a partner to create a secure, native USD-pegged asset to reduce the platform's heavy reliance on bridged stablecoins. Ethena, with its highly successful USDe protocol that has captured billions in value, was widely considered a formidable contender. Their experience in creating a capital-efficient, yield-bearing synthetic dollar made their proposal a serious and technologically advanced option for the Hyperliquid platform.

However, the core of Ethena’s withdrawal stems from a powerful and recurring theme in decentralized finance: the preference for "native" projects. In its statement, the Ethena team acknowledged community pushback over their status as an external team proposing a solution, rather than one born from within the Hyperliquid ecosystem. This sentiment reflects a belief within the DeFi community that native teams are inherently more aligned with a protocol's long-term success. Ethena’s decision to respect this feedback and step aside has been viewed as a classy move that honors the principles of community-led development.

With Ethena’s exit, the path appears to have been cleared for Native Markets. Prediction markets on Polymarket immediately reflected the shift, with the odds of Native Markets winning the bid surging to over 92%. While some observers have pointed to the relative newness of Native Markets compared to established players, Ethena Labs founder Guy Young framed their likely success as a testament to Hyperliquid’s open and meritocratic culture. This underdog story has galvanized the community, showcasing a scenario where a grassroots project can effectively outmaneuver billion-dollar protocols.

The withdrawal also puts the remaining contenders, particularly Paxos, in a challenging position. The Paxos proposal represented the most traditional and regulated path forward, a clear attempt to build a bridge for institutional finance with a unique yield-sharing model. However, the community’s strong alignment behind Native Markets suggests a preference for a DeFi-native approach over a more corporate, top-down solution. While the governance vote is ultimately decided by the weight of validator staking, the momentum appears to have decisively shifted.

This internal focus on community alignment and native development is unfolding as U.S. regulators themselves are grappling with how to approach the industry. The choice between a regulated institutional player like Paxos and a DeFi-native team like Native Markets is a microcosm of the entire sector's evolution, a trend underscored by the recent joint statement from the SEC and CFTC promising a new, clearer approach to DeFi regulation.

As the September 14 governance vote approaches, the narrative has been simplified but the stakes remain incredibly high. The community now faces a clearer choice, and the pressure is on validators to align with their delegators. The likely victory for Native Markets will be seen as a major win for decentralized governance, serving as a powerful case study for how emerging DeFi ecosystems prioritize alignment over established names.

Expert Opinions and Quotes

“While some are complaining about their lack of credibility (Native Markets) I think their success here perfectly embodies everything which is so special about Hyperliquid and their community. It is a level playing field where emergent players can win the hearts of the community and are given a fair shot at succeeding.” — Guy Young, Founder of Ethena Labs - Source

FAQs

Why did Ethena withdraw from the Hyperliquid stablecoin race?
Ethena withdrew after receiving feedback from the Hyperliquid DeFi community and validators who expressed a strong preference for a "native" project—one built from within the ecosystem—to issue the stablecoin.

Who is now expected to win the bid for the USDH ticker?
Following Ethena's withdrawal, the community-backed project Native Markets has become the overwhelming favorite, with prediction markets giving them over a 90% chance of winning the vote.

What does this withdrawal mean for the upcoming vote?
Ethena's exit significantly simplifies the choice for validators in the governance vote. It solidifies the position of Native Markets as the frontrunner and demonstrates the powerful influence of community sentiment in decentralized governance.

What is the significance of the Hyperliquid stablecoin?
The native Hyperliquid stablecoin (USDH) is a critical piece of infrastructure designed to reduce the risks associated with bridged assets, improve liquidity, and create a more secure and efficient financial foundation for the entire Hyperliquid platform.