Hyperliquid's USDH Stablecoin Race: Competition Intensifies Amid Fairness Concerns

The launch of Hyperliquid's new stablecoin, USDH, has sparked fierce competition among various corporate and DeFi players, each presenting distinct strategies. As the vote date of September 14 approaches, doubts arise regarding whether the selection process truly favors the most capable candidates or if it's biased toward certain participants.

Key Takeaways

Hyperliquid is introducing USDH, a new stablecoin aimed at reducing dependence on USDC.
The competitive landscape is diverse, featuring unique proposals from various contenders.
Key evaluation criteria include regulatory compliance, liquidity, collateral diversification, and yield potential.
Some stakeholders express concerns about transparency and fairness in the bidding process, particularly regarding Native Markets.

Hyperliquid USDH stablecoin

Competition for USDH Launch

Hyperliquid is set to launch its own stablecoin, USDH, which has initiated a competitive race among both corporate and DeFi-oriented teams. The exchange has recently released a request for proposal (RFP) for the USDH ticker, and the winning bidder is expected to manage substantial trading volumes and a key percentage of reserve revenue.

This move to create a new stablecoin appears to be aimed at decreasing reliance on Circle's USDC, which accounts for a large portion of Hyperliquid’s approximately $5.5 billion in reserves, generating around $200 million annually for Circle. By launching USDH, Hyperliquid may retain more yield internally and gain enhanced control over liquidity management, allowing users a more significant role in the platform.

Diverse Approaches to USDH

As of now, the RFP has garnered considerable interest, with contenders employing varied approaches. Research analyst Sam, known by the handle @0xCryptoSam, highlighted on social media that the primary focus for USDH is securing a long-term, synergistic partner. This decision hinges on revenue potential and the value of Hyperliquid’s HYPE token.

Key factors for bidders include compliance with GENIUS standards, high HYPE buybacks, diverse collateral, and robust liquidity. Ethena’s proposal stands out in the crowd, as noted by Sam, who remarked on their commitment to develop the USDH product further than what USDC currently offers. Their innovative plan includes launching reward-based collateral and a prime brokerage model that utilizes various underlying assets like BTC, HYPE, or USDe for collateral.

Competitive Landscape

In contrast, Paxos offers a more traditional approach tailored for institutions, providing regulatory assurance and a solid track record. On the other hand, Frax and Sky appeal to the DeFi community, emphasizing transparency and yield generation. Native Markets relies heavily on platform alignment; however, the absence of prior stablecoin experience adds an element of unpredictability.

The impending vote on September 14 will reveal how Hyperliquid intends to reconcile regulatory compliance with its ambitions in the DeFi space. Although many teams are eagerly preparing competitive bids, there are lingering worries about the genuine consideration of some proposals.

Concerns Over Fairness

Haseeb Qureshi, partner manager at Dragonfly, referred to the USDH RFP as "a bit of a farce" in a recent social media post. He asserted that bidders are concerned that validators may lean towards Native Markets. According to Qureshi, Native Markets' proposal surfaced shortly after the RFP announcement, suggesting they had prior information. Other bidders rushed to compile their submissions in a short time frame, raising suspicions that the entire RFP process could have been designed to favor Native Markets.

In a follow-up post, Qureshi revealed that a significant number of bidders privately believe the selection process unfairly favors Native Markets, with more than half of the USDH bidders discreetly agreeing but remaining silent to avoid backlash.