The launch of Hyperliquid’s stablecoin has ignited intense competition within the decentralized finance (DeFi) sector, drawing interest from several prominent institutions and protocols vying to secure the USDH ticker and govern the ecosystem’s new stablecoin. As Hyperliquid develops its in-house stablecoin, various DeFi giants are actively courting validators in this heated race.
Haseeb Qureshi, a managing partner at Dragonfly, voiced concerns over the fairness of the bidding process, suggesting a potential ‘backroom deal’ favoring Native Markets. Qureshi claimed that multiple bidders indicated that validators were only considering Native Markets, implying prior knowledge of the proposal. “It’s not even a serious discussion, as though there was a backroom deal already done,” he stated on X, further supported by the anonymous trader known as X.CL, who represents Hypurrscan, which holds 15% of the voting power.
In response, Alex Svanevik, founder of Nansen, which operates the largest Hyperliquid validator within The Hypurr Collective, disputed Qureshi’s allegations, asserting that extensive efforts have been made to evaluate other proposals. “Our teams have put a ton of effort into reviewing proposals and speaking with bidders to find the best alternative,” Svanevik said, highlighting the continual engagement with potential bidders.
Over the past week, the race to launch USDH intensified, with formal proposals from major players like Sky (formerly Maker), Ethena, Paxos, and Agora. Notably, Dragonfly has investments in both Agora and Ethena, which are competing with Native Markets for the rights to launch Hyperliquid’s stablecoin.
The Native Markets proposal stands out as it seeks to natively mint the stablecoin on the HyperEVM, ensuring compliance with the GENIUS Act while leveraging the fiat capabilities of its issuer, Bridge, a subsidiary of Stripe. This strategic positioning could ease fiat onramps to Hyperliquid, which currently requires on-chain bridging solutions. The Native Markets team consists of notable figures such as Max Fiege of Liquity and Barnbridge fame, and Anish Agnihotri, the former President and COO of Uniswap Labs. Their proposal allocates 50% of the reserve yield to a Hyperliquid Assistance Fund for purchasing HYPE tokens, while the other half is reinvested for USDH growth.
In a surprising turn, Paxos presented a revised proposal featuring a partnership with PayPal to list HYPE on both PayPal and Venmo, thereby facilitating free on and off ramps. This initiative includes $20 million in ecosystem incentives and a unique incentive structure where Paxos earns no fees until certain total value locked (TVL) milestones are achieved. Bhau Kotecha, co-founder of Paxos, has even mentioned the possibility of collaboration with Native Markets, inspired by a suggestion from investor Mike Dudas to merge their proposals.
While this competition intensifies, USDT0, a cross-chain variant of Tether’s USDT, announced it would not be participating in this bidding, leaving an open landscape for the remaining contenders. Each protocol is making efforts to resonate with the Hyperliquid community, with Agora’s proposal bolstered by Jan van Eck, CEO of the $130 billion VanEck investment firm, while Ethena took a more humorous approach, parodying Eminem’s “Stan” to grab attention.
Sky, which co-founded DAI, highlighted the successful track record of its project in its proposal. They suggested that Hyperliquid would receive 4.85% APR on all USDH issued, with an impressive mention of deploying their $8 billion balance sheet into Hyperliquid alongside a $25 million grant to establish “Hyperliquid Star,” aimed at fostering DeFi growth.
Ethena also entered the fray with its innovative plan to back USDH entirely by its own stablecoin, USDtb, supported by BlackRock’s BUIDL fund. They committed to returning “at least 95%” of USDH reserve revenues back to Hyperliquid in the form of HYPE purchases and promised a minimum of $75 million in combined cash and token incentives to enhance growth.
Despite the fervent competition, Hyperliquid’s underlying infrastructure continues to advance. The HyperEVM blockchain, which launched its mainnet in February, now ranks as the eighth-largest blockchain by total value locked, standing at $2.6 billion, a significant increase from just $400 million at the beginning of the year. The HYPE token has also emerged as one of the top-performing assets, surging more than 1700% since its launch to reach an all-time high of $55.7, reflecting the growing interest and activity surrounding Hyperliquid’s ecosystem.
As the bidding war for USDH continues, key players in the DeFi space are closely monitoring each development, suggesting that the true challenge may lie ahead in the scaling and integration of the new stablecoin into the broader financial landscape. The competition to tip the scales and capture market share continues to evolve, raising questions about the future dynamics of stablecoins in an increasingly fragmented market.
