The competition for the issuance of Hyperliquid’s native stablecoin, USDH, has intensified with the introduction of a significant contender: Sky, previously known as MakerDAO. Sky has proposed leveraging its substantial $8 billion balance sheet alongside its seven years of operational history and a noteworthy B- credit rating from S&P, marking it as the first credit rating granted to a decentralized finance (DeFi) protocol.
Hyperliquid, which recorded nearly $400 billion in trading volume last month, is actively inviting various issuers to participate in the race for USDH, a stablecoin that promises more than just stable value; it aims to provide efficient returns generated through a robust ecosystem. Currently, Hyperliquid holds approximately $5.5 billion in USDC deposits, representing about 7.5% of the total supply of that stablecoin, making it a highly attractive opportunity for potential partners.
Operations are set in motion with validators scheduled to cast their votes on September 14, while the Hyperliquid Foundation has opted to abstain from the voting process.
Sky’s proposal underscores several features that distinguish it from competitors. It offers an impressive 4.85% return on USDH held on the Hyperliquid platform, surpassing even Treasury bills. This return is part of a broader strategy geared towards HYPE buybacks and the creation of an Assistance Fund. Additionally, Sky has committed to providing $2.2 billion in instant redemption liquidity via its Peg Stability Module, aimed at fostering confidence among institutional traders concerning large-scale transactions.
Beyond the promise of yield and liquidity, Sky’s proposal emphasizes investment in the broader ecosystem. It includes a notable $25 million allocation for the “Hyperliquid Genesis Star,” a token farm drawing inspiration from Spark, which has successfully attracted over $1 billion in total value locked (TVL). This initiative is expected to catalyze DeFi development on the Hyperliquid platform, potentially drawing in billions in deposit capital. Sky has also vowed to relocate its native buyback engine—boasting profits exceeding $250 million annually—onto Hyperliquid.
In contrast, other competitors have pitched their proposals differently. Paxos has promised that 95% of reserve earnings will be allocated to HYPE buybacks, along with a no-fee migration process for USDC users. Frax’s offering is centered around a “community-first” wrapper model that promises direct distribution of 100% of the Treasury yield to users.
Meanwhile, Agora, backed by financial heavyweights like State Street, VanEck, and MoonPay, has assured that 100% of net revenue will contribute to HYPE buybacks, highlighting a commitment to neutrality. In the race, Native Markets, which is aligned with Stripe’s Bridge, has encountered skepticism within the community due to perceived conflicts of interest stemming from its association with Stripe’s Tempo blockchain and ownership of the wallet provider Privy.
With the emergence of Ethena, which has hinted at its own bid, the validators face a complex decision-making landscape in the upcoming virtual polls. The outcome will not only shape the future structure of USDH in terms of compliance, yield to users, and alignments with Hyperliquid’s operational ethos but will also define whether Hyperliquid’s monetary foundation is affiliated with a traditional stablecoin institution, a pioneering DeFi initiative, or a corporate entity venturing into the blockchain space.
