Key Takeaways
- Hyperliquid has invited proposals for a natively-issued stablecoin that could replace USDC.
- Validators will vote on which team they want to build the new stablecoin—USDH.
- Some of the biggest names in stablecoins have submitted proposals.
Hyperliquid has been one of the most successful crypto platforms to break out in recent times. So when plans to unlock the sought-after USDH ticker were announced, some of the biggest names in stablecoins joined a bidding war.
With a vote commencing on Sept. 11, Paxos, Ethena Labs, Frax Finance, Agora, Native Markets, Open Eden and Sky (formerly MakerDAO) are among those that have submitted proposals.
What Is USDH? Hyperliquid’s Proposed Stablecoin
Hyperliquid is a decentralized perpetual futures exchange built on a custom, Layer 1 blockchain.
The perpetual contracts themselves are synthetic derivatives that rely on stablecoin collateral, of which the vast majority (~95%) is currently denominated in USDC.
However, in Telegram and Discord updates on Sept.9, Hyperliquid announced that it would release the USDH ticker, which was initially blacklisted as an asset name, for a new stablecoin that could replace USDC as the protocol’s primary margin currency.
“The USDH ticker is well suited for a Hyperliquid-first, Hyperliquid-aligned, compliant, and natively minted USD stablecoin,” the announcement stated.
Validators will vote on the team that is “best-equipped” to build the new token, with users able to stake with the validator that aligns with their top choice between Sept. 10 and Sept. 14.
Proposed Reserve Assets
Ahead of a Sept. 11 deadline, at least seven potential issuers have submitted bids to launch USDH. (This article ignores non-serious proposals and those from small DeFi platforms that are unlikely to gain sufficient community support)
The proposals reflect divergent approaches to stablecoin reserves revenue sharing and each offer a different set of features that could shape how the Hyperliquid ecosystem evolves in the future.
For example, Ethena Labs and Frax proposed creating a reserve pool of shares in BlackRock’s tokenized T-bill fund, BUIDL. (In Ethena’s case, via USDtb). Similarly, Open Eden proposed using its own tokenized US Treasury bills fund, TBILL.
Meanwhile, Paxos, Native Markets and Agora proposed holding U.S. treasuries and other cash-like assets directly.
Most bids proposed holding 100% reserve collateral. Only Sky suggested overcollateralizing USDH under a similar model to its existing stablecoin, which combines crypto and real-world asset collateral.
Revenue-Sharing Models
The seven teams also suggested different models for revenue distribution.
While Sky, Frax, Agora, Native Markets and Open Eden have committed to distributing 100% of USDH yield to users or the Hyperliquid ecosystem, Paxos and Ethena would retain up to 5% of reserve income.
Frax would distribute reserve yield to users through staking and/or rebasing. Rebasing is also favored by Sky, which is committed to paying USDH holders a fixed 4.85% annualized yield.
Sky would use any additional reserve income to buy back HYPE tokens and support the ecosystem through a dedicated treasury fund.
This reflects the approach taken by Paxos, Agora, and Native Markets, which all proposed using token buybacks and an ecosystem fund to distribute revenues.
Finally, Ethena would split reserve income between HYPE token buybacks, validator rewards, and an ecosystem support fund.
Alternative Proposals
Beyond official bids for the USDH ticker, other stablecoin platforms are also eying an entry into the Hyperliquid ecosystem.
In a post on Monday, Sept. 8, Curve founder Michael Egorov suggested launching a clone of crvUSD backed by HYPE and other stablecoins held in Hyperliquid vaults.
Egorov’s proposed stablecoin, which he suggested calling dUSDH, would be a more decentralized, permissionless alternative to the regulated, redeemable options proposed for USDH.
“This will make revenues for the ecosystem, while fueling its further growth,” he stated.
Some Hyperliquid community members have rejected the idea of releasing the USDH ticker at all.
As one comment on Discord explained, USDH was originally reserved to create a more even playing field for issuers.
“I strongly suggest they keep the USDH ticker blacklisted indefinitely or build an in-house stable themselves, which was the premise for it being blacklisted in the first place,” they said.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
