Castle Labs Weekly Report: Ethena Pay Unlocks $80 Million in Demand, New Opportunities Emerge in the Hyperliquid Ecosystem

Author: Noveleader, Castle Labs

Compiled by: TechFlow

TechFlow Overview: While markets focus on high annualized subsidies, what truly drives protocol valuation re-evaluations are solid “entry points and revenue-sharing mechanisms.” This week’s Castle Labs Weekly Report takes Ethena Pay and the Hyperliquid ecosystem as core case studies, breaking down how on-chain financial products build self-sustaining growth flywheels.

Whether it's the stablecoin bank leveraging $7.64 million in deposits to drive nearly $80 million in USDe demand, the L2 Elysium empowered by 50% sequencer revenue buybacks, or TradeXYZ front-running Nvidia rumor pricing during US stock market weekend closures, the all-around-the-clock on-chain market is demonstrating remarkable efficiency.

This week, the crypto industry saw a flurry of major product launches, headlined by Paragon Power Perps, which delivers option-like payoff curves through perpetual contracts, and Elysium, positioned as a Layer 2 network for capturing value within the Hyperliquid ecosystem.

Beyond a deep dive into these two new products, this weekly report also highlights the following key developments:

· The Ethena Pay & Earn+ Growth Flywheel: An interview with Product Marketing Lead (GTM) Lito, analyzing how Earn+ directly drives USDe issuance scale;

· Hyperliquid HIP-4 Prediction Markets Enter Acceleration Phase: How top deployer Outcome leads traffic surges;

· RWA Derivatives Moves: Derive enters the RWA options space, Rysk Finance launches an Nvidia (NVDA) volatility yield strategy;

· Fixed-Rate Lending Protocol IRIS Goes Live: How it aggregates existing lending markets to meet borrowers’ fixed-rate needs, along with New York Stock Exchange tokenized securities choosing Avalanche as the settlement layer, among others.

The Ethena Pay & Earn+ Flywheel: Interview with GTM Lito

Ethena Pay, the new internet banking product under Ethena, officially launched in September this year. It subsequently introduced the Earn+ investment module at the end of October, allowing depositors to earn up to a 12% APY through leveraged USDe exposure.

To date, Earn+ has accumulated $7.64 million in deposits, directly generating approximately $80 million in demand for USDe. This significant positive transmission effect proves that Ethena Pay serves as a highly efficient growth lever.

Once the total supply of USDe crosses the $7.5 billion threshold, the protocol's $ENA buyback mechanism will officially activate. Therefore, any scenario that expands real-world demand for USDe is materially bullish for $ENA.

Figure: Trend of Ethena Pay deposit scale and leveraged USDe demand exposure driven by Earn+

To gain a deeper understanding of this growth flywheel and Ethena Pay's differentiated moat, we interviewed Ethena Pay's GTM, Lito.

The market for new stablecoin banks and crypto payment cards is already highly crowded. When discussing how to break through, Lito noted: “Actually, letting other teams enter the market first to educate users can be beneficial. We can fully draw on predecessors' successful experiences and lessons learned from missteps, then execute more flawlessly.”

Additionally, another major moat for Ethena Pay lies in its clear business model and long-accumulated brand trust.

Lito explained: “We generate yield on assets deposited in Ethena Pay. This profit logic is identical to how traditional banks earn net interest margins (NIM).”

He added: “We have weathered every major turmoil in the crypto market. From the '10/10' flash crash to the Bybit security incident, Ethena has never caused users to lose even a single dollar. This reputation will give the public strong confidence in using Ethena Pay.”

Regarding the flywheel effect generated by the synergy between Earn+ and DeFi products, Lito emphasized: “Once you control the frontend distribution channels and genuinely own your users, you can seamlessly push new features or upgraded experiences without being constrained by any intermediary platforms.”

This also explains why Ethena Pay can directly feed back into the broader ecosystem: every new user's account assets default to holding USDe, meaning that “every instance of user growth for Ethena Pay is fundamentally equivalent to an increase in USDe adoption.”

Meanwhile, $ENA will soon play a more direct role within Ethena Pay. Lito revealed: “In a few weeks, we will announce an account tier upgrade program. At that time, upgrading privileges will require users to hold and lock up ENA.”

Figure: Key takeaways from our interview with Ethena Pay's GTM, Lito

Elysium: An L2 Creating Value Flowback for the Ecosystem & Early LP Opportunities

Elysium, which went live on mainnet yesterday, has one of its core missions to help redirect general on-chain activities that previously spilled over to Robinhood, Solana, and Base back into the Hyperliquid ecosystem, covering DeFi applications, meme coins, on-chain spot trading, and tokenized US stock trades.

From a technical architecture standpoint, Elysium is built on the Arbitrum Orbit stack, uses $HYPE as the base-layer Gas token, and settles final state on the Hyperliquid L2, HyperEVM.

More importantly, it features a native value feedback mechanism: the network automatically distributes sequencer revenue through smart contracts, with 50% allocated to buybacks, 25% going to the treasury, and the remaining 25% used to incentivize developer building.

Since its mainnet launch yesterday, the amount of cross-chain capital transferred into Elysium has exceeded $50 million, yet liquidity currently sitting in decentralized exchange (DEX) pools remains minimal.

Figure: Breakdown of initial cross-chain capital flows upon Elysium's launch, with the vast majority of the net $50.9 million still held within wallet addresses

Precisely because pool liquidity is still in an early, scarce phase, there is a favorable yield window for acting as a market maker (LP) in relevant pools right now. The APRs displayed on current dashboards are highly attractive. However, as on-chain capital gradually becomes abundant, these high yields are expected to drop rapidly in the short term.

Figure: Ranking of annualized fee yields across mainstream DEX liquidity pools during Elysium's mainnet early stage

Focusing on medium-to-long-term potential, Elysium's most imaginative differentiating advantage lies in its ability to directly read underlying order book data from Hyperliquid. The related core upgrade is scheduled to roll out in four weeks.

By then, thanks to the low-latency location advantage of being adjacent to the HyperCore engine and its high-performance throughput, numerous innovative DeFi protocols are expected to cluster on Elysium.

Power Perps: How Paragon Eliminates Option Strike Prices and Expiry Dates

As the contract deployer for the Hyperliquid HIP-3 protocol, Paragon recently officially launched Power Perps, the first product to pack option-like convexity into a perpetual contract that features neither strike prices nor expiry dates.

Figure: When the underlying price doubles, linear, square, and cubic Power Perp contracts exhibit 2x, 4x, and 8x return curves, respectively

The operating mechanism of this innovative product is not complex: standard perpetual contracts track the immediate price of the underlying asset, whereas power perpetual contracts track the power of the underlying asset's price, such as square or cubic contracts.

For example, when the underlying asset price doubles, the corresponding square perpetual contract will yield a 4x return.

More importantly, it features an asymmetric curve with “less downside, more upside” characteristics (excluding funding rates and leverage): when the underlying rises 10%, the square contract profits 21%; when it falls 10%, the contract only loses 19%; and even if the underlying price halved by 50%, the square contract would only decline by 75%.

This naturally curved P&L structure is quite similar to a long call option, but it completely eliminates the cumbersome selection of strike prices and expiry delivery mechanisms, allowing all liquidity to be highly aggregated on a single order book.

HIP-4 Prediction Markets Enter Escape Velocity: Taking Outcome as an Example

Trading volumes in HIP-4 prediction markets on Hyperliquid have surged recently, primarily driven by top deployers like Outcome, which rapidly emerged after permissionless deployment opened in late August. Traffic concentration in this niche is extremely high, with its ecosystem landscape mirroring that of TradeXYZ in HIP-3.

Figure: Weekly trading volume trends for Hyperliquid HIP-4 prediction markets by deployer (dashed line indicates the opening of third-party deployments on Aug 29)

In terms of structural distribution, the vast majority of current HIP-4 trading volume is concentrated on sports event betting markets, followed by cryptocurrency price prediction markets. This implies that trading heat exhibits clear seasonality, allowing traders to appropriately scale up positions during major events or match nodes.

Figure: Distribution of trading volume and number of listed HIP-4 prediction markets as of Nov 10, 2026 (last 7 days) categorized by theme

Considering Outcome's own potential airdrop expectations and current incentive programs, along with possible Q3 point dividends from Hyperliquid in the future, personally engaging in interactions at this stage presents a highly cost-effective exploratory opportunity.

A relatively robust practical market-making strategy is “dual-side low-price limit orders”: simultaneously placing limit buy orders on both the YES and NO sides with a combined cost under $1, for example, buying at $0.48 and $0.49 respectively.

While waiting for orders to fill, market makers can continuously earn liquidity rewards provided by Outcome; once all buy orders on both sides are filled, investors only need to spend $0.97 to lock in an arbitrage position that guarantees a $1 payout upon expiry.

Of course, the core risk of this strategy lies in “one-sided execution,” where extreme unilateral price movement results in only one side being filled, instantly turning the position into a pure directional bet. Therefore, this strategy is better suited for longer-term markets with mild price fluctuations, and it is not advisable to use it rashly in high-frequency, wildly fluctuating scenarios like live sports betting.

Cutting-Edge Project Radar: RWA Options, Weekend US Stock Pricing, and NYSE Settlement Updates

· Derive Expands into RWA Options: Currently, Derive holds a 95% share of the on-chain options market. As massive-scale real-world asset (RWA) options prepare to go live, investors will gain entirely new hedging tools alongside perpetual contracts.

· Rysk Finance Launches US Stock Volatility Yield: The pre-paid volatility yield-focused protocol Rysk Finance is similarly accelerating its RWA layout, having already rolled out an options yield strategy targeting Nvidia (NVDA).

· On-Chain Front-Running Pricing of Nvidia's Weekend Rumors: Over the past weekend, as the market circulated breaking news and scrutiny reports involving Nvidia CEO Jensen Huang and an individual named Alice Huang, TradeXYZ under Hyperliquid became a critical venue for price discovery.

During Nasdaq's trading halt, TradeXYZ provided investors with uninterrupted outlets for risk hedging and news trading. This perfectly illustrates the core value that 24/7 all-around-the-clock on-chain exposure creates for all market participants.

Figure: xyz:NVDA price on Hyperliquid TradeXYZ front-running rumors to dip to $175.43 during US stock weekend closures, alongside hourly volume changes

· Fixed-Rate Lending Protocol IRIS Officially Goes Live: In August this year, we published an in-depth research report exploring fixed-rate credit design. Now, IRIS, one of the protocols featured in the paper, has officially entered its mainnet implementation phase.

IRIS is built directly atop mature DeFi lending markets like Morpho, Spark, and Aave. Borrowers simply submit a fixed-rate intent, and its backend solver network automatically allocates underlying assets across markets and manages dynamic hedging, simultaneously optimizing borrowing costs and rate stability.

· NYSE Tokenized Securities Choose Avalanche for Settlement: The tokenized equity securities platform under the New York Stock Exchange (NYSE) has confirmed it will adopt Avalanche as its settlement layer.

Avalanche, which maintained relatively low market profile until now, has been steadily advancing institutional business development. Meanwhile, Ethena Pay is also deployed on Avalanche, with Earn+ officially running on the chain via Aave V4, continuously attracting substantial DeFi capital inflows.

Figure: Following the announcement of NYSE tokenized securities settlement partnership, AVAX/USDT hourly chart saw rapid volume surge and climbed, briefly touching the $9.014 level