Hyperliquid’s Launch of USDH Sparks Intense Competition Among Corporate and DeFi Players
Hyperliquid’s recent move to launch its own stablecoin, USDH, has set off a race among corporate and DeFi-focused teams vying for the opportunity to handle billions in trading volume and a significant portion of reserve revenue. With the Sept. 14 vote looming, questions are arising about whether the selection process truly favors the most capable bidders or if there is a bias towards certain entrants.
The decision to introduce a new stablecoin like USDH is seen as a strategic move to reduce dependence on Circle’s USDC stablecoin, which currently dominates Hyperliquid’s reserves and generates substantial revenue for Circle. By launching USDH, Hyperliquid aims to retain more of this yield in-house, offering greater control over liquidity and reserve management while empowering users to play a more direct role in the platform.
The request for proposal for the USDH ticker has attracted a diverse range of contenders, each presenting unique strategies:
– Ethena Labs proposes a USDH fully backed by USDtb, a stablecoin linked to BlackRock’s BUIDL fund, with plans to return 95% of net revenue from USDH reserves to the Hyperliquid ecosystem.
– Paxos, a stablecoin issuer known for BUSD and PYUSD, aims to integrate PayPal and Venmo rails into the USDH ecosystem, emphasizing regulatory compliance and directing 95% of reserve yield to HYPE buybacks.
– Frax Finance plans to mint USDH at parity with frxUSD and Treasuries, channeling Treasury yield to Hyperliquid users through DeFi mechanisms.
– Sky Ecosystem (formerly MakerDAO) proposes a decentralized issuance model with a 4.85% yield, backed by an $8 billion balance sheet, and plans to fund a Hyperliquid Star initiative for platform growth.
– Agora commits 100% of net income from USDH to platform support or HYPE token buybacks, focusing on community-driven growth within Hyperliquid.
– Native Markets suggests a 50/50 yield split between platform growth and the Assistance Fund, aiming to balance ecosystem development with user support initiatives.
Sam, a research analyst at Messari, highlights the importance of finding a long-term, synergistic partner for USDH. Criteria such as GENIUS compliance, high HYPE buybacks, diversified collateral, and deep liquidity are key considerations in the selection process. Ethena’s proposal stands out for its innovative approach, offering reward-incentivized collateral and a prime brokerage using different underlying assets.
As the final vote approaches, the balancing act between regulatory compliance and DeFi innovation will be crucial for Hyperliquid. While the competition intensifies among bidders, concerns have been raised about the fairness of the selection process. Some participants feel that the process may be tilted in favor of certain entrants, raising questions about the transparency and integrity of the decision-making process.
Overall, the launch of USDH by Hyperliquid has sparked a high-stakes competition, with various players vying to shape the future of stablecoins and reserve management in the crypto space. The outcome of the vote on Sept. 14 will determine the direction of Hyperliquid’s stablecoin strategy and its impact on the broader crypto ecosystem.