TLDR
- Five protocols compete for Hyperliquid’s USDH stablecoin contract: Sky, Paxos, Frax, Agora, Native Markets
- Sky offers 4.85% APY and $25M ecosystem fund with $8B balance sheet backing
- Hyperliquid holds $5.5B USDC making this DeFi’s most valuable stablecoin contract
- Each bidder proposes different yield structures and compliance approaches
- Community validators decide after upcoming network upgrade
Hyperliquid has ignited a fierce competition among crypto protocols vying to launch its native USDH stablecoin. The decentralized exchange, which processed $400 billion in trading volume last month, holds $5.5 billion in USDC deposits, making this contract one of the most lucrative opportunities in decentralized finance.
Sky, formerly MakerDAO, entered the race Monday with a comprehensive proposal backed by its $8 billion balance sheet. The protocol already manages $12.5 billion across its USDS and DAI stablecoins, bringing proven experience to the competition.
Sky co-founder Rune Christensen outlined competitive terms including 4.85% annual percentage yield on USDH holdings. The proposal promises $2.2 billion in instant redemption liquidity through Sky’s Peg Stability Module, ensuring large traders can convert positions without delays.
The protocol pledges $25 million for “Hyperliquid Genesis Star,” an ecosystem development fund modeled after Sky’s successful Spark program. Sky also plans migrating its buyback engine, which generates over $250 million annually, directly onto Hyperliquid’s infrastructure.
Competing Proposals Target Different Strategies
Paxos focuses on regulatory compliance, offering 95% of reserve earnings for HYPE token buybacks plus zero-fee USDC migration. The established stablecoin issuer brings deep traditional finance relationships and regulatory expertise.
Frax positions itself as community-first, proposing a wrapper model where 100% of Treasury yields flow directly to users. This approach contrasts with revenue-sharing models offered by competitors.
Agora leverages backing from State Street, VanEck, and MoonPay, promising 100% net revenue toward HYPE buybacks while emphasizing neutrality. VanEck CEO Jan van Eck publicly endorsed Agora’s bid, noting his firm’s commitment to Hyperliquid’s ecosystem growth.
Native Markets faces community skepticism due to potential conflicts of interest. The Stripe Bridge-backed venture has drawn criticism over Stripe’s ownership of wallet provider Privy and its competing Tempo blockchain project.
High Stakes Decision Looms
Hyperliquid represents 7.5% of USDC’s total circulating supply, demonstrating the platform’s institutional adoption. The winning proposal will determine USDH’s structure, from regulatory compliance under the GENIUS Act to yield distribution mechanisms.
Each bidder offers distinct advantages. Sky brings DeFi-native experience and substantial liquidity backing. Paxos provides regulatory clarity and traditional finance integration. Frax emphasizes community ownership and direct yield benefits.
The competition may expand further, with Ethena hinting at submitting its own proposal before voting begins. Community validators will decide after Hyperliquid’s next network upgrade, with the Foundation abstaining from the decision.
This bidding war reflects Hyperliquid’s growing influence in crypto markets. The exchange’s combination of high trading volumes, substantial deposits, and active community makes the USDH contract highly coveted among stablecoin issuers.
Winners will gain access to billions in potential deposits while helping shape the future of decentralized exchange infrastructure. The decision will determine whether Hyperliquid partners with established DeFi protocols or traditional financial services firms.
Validators face a complex choice balancing yield generation, regulatory compliance, ecosystem development, and long-term strategic alignment when voting commences.
