Ethena Joins Hyperliquid’s USDH Stablecoin Contest
By: Eliza Bennet
In a move that underscores the growing competition in the decentralized finance (DeFi) space, Ethena Labs has thrown its hat into the ring to become the issuer of Hyperliquid’s USDH stablecoin. This development follows Hyperliquid’s recent announcement that it is launching a native stablecoin to enhance its ecosystem, a maneuver expected to tap into the $5.5 billion in USD Coin (USDC) deposits on its decentralized exchange. Ethena is now the sixth contender in this high-stakes game, competing against notable entities like Paxos, Frax, Agora, Native Markets, and Sky.
Ethena's proposal is distinct, centering around backing the USDH stablecoin entirely by USDtb, which is tied to BlackRock’s BUIDL fund. This strategic alignment with major financial players like BlackRock, Anchorage Digital, and Securitize aims to leverage both institutional expertise and security enhancements. Ethena has outlined plans to form a guardian network of validators, offering a decentralized approach to the stablecoin’s security management, thereby eliminating the risks associated with single-issuer control. Additionally, Ethena has pledged to return 95% of net revenue from USDH reserves to the Hyperliquid community through investments in the HYPE token, a move intended to foster ecosystem development.
Beyond the immediate financial implications, Ethena has committed significant incentives to support the market transition to USDH on Hyperliquid’s platform. The firm plans to inject between $75 million to $150 million into Hyperliquid's ecosystem, covering migration costs from USDC to USDH and promoting its hUSDe synthetic dollar product. Ethena’s approach is not just about providing liquidity but about creating a robust ecosystem that integrates tokenized real-world assets, with partnerships set to rollout through platforms like HyperEVM.
The integration of USDH is expected to significantly impact Hyperliquid’s financial metrics. Validator-driven governance is key to the selection process, with community approval required before a gas auction for final deployment. Ethena’s proactive engagement in community revenue sharing and infrastructure security demonstrates its commitment to reshaping DeFi. Should Ethena’s proposal succeed, projections estimate an additional $220 million in annualized revenue for HYPE holders and a potential 7% reduction in Circle’s USDC supply, marking a transformative period for both Hyperliquid and the broader crypto ecosystem.
Ethena’s venture into the USDH issuance race highlights the escalating innovation and competitive spirit within DeFi. As the selection process continues, all eyes will be on how these developments influence both Hyperliquid’s trajectory and the DeFi landscape at large, showcasing a gripping contest that promises to redefine market dynamics.
