On Thursday, Hubble Protocol—the Solana-based decentralized finance (DeFi) protocol behind stablecoin USDH—announced the completion of a $5 million fundraising round.

Led by Multicoin Capital, the raise brings Hubble’s total financing to date to $15 million. Past investors in the protocol include DeFiance Capital, Delphi Digital, Crypto.com Capital, Jump Capital, and others. 

Hubble markets its signature financial product, USDH, as a “censorship-resistant, decentralized stablecoin.” Unlike other popular stablecoins like Circle’s USDC or Tether’s USDT—which are able to maintain their peg to the value of the US dollar by maintaining large reserves of US currency held at regulated American financial institutions—USDH is backed exclusively by cryptocurrencies. 

By limiting USDH’s exposure to American banks, Hubble claims it is reducing both the stablecoin’s ability to be censored by the American government, and its need to answer to centralized institutions. 

On Hubble, users can mint and borrow USDH in exchange for other crypto assets, at a ratio of up to 80% loan to value. Today’s fundraise will support development of new products and services that will allow users to transact or earn further yield on USDH throughout the Solana DeFi network.

“We want USDH to be the most trusted, most ubiquitous, decentralized, over-collateralized stablecoin in the world,” said Hubble co-founder Marius Ciubotariu, in a statement to Decrypt. “In order to achieve that, we have to continue to innovate with synergistic products and integrations that make USDH the most attractive stablecoin to hold, transact, or lend.”

Centralization and censorship resistance have been front of mind for the crypto community since last month, when the U.S. Treasury Department blacklisted a number of wallet addresses associated with sanctioned Ethereum coin-mixing tool Tornado Cash. In the aftermath of those sanctions, Circle preemptively froze all USDC present in those blacklisted wallets.

Privacy advocates decried the move as corporate compliance with unjust government censorship, and major DeFi organizations like MakerDAO publicly mulled over whether to fully divest from the stablecoin, which currently constitutes the majority of the DAO’s reserves. 


The price of censorship resistance, however, may be stability.

USDT and USDC, by far the largest stablecoins by market capitalization, are often relied upon because of their backing by vast stores of audited US dollars that, even in the case of huge crypto market swings, are overwhelmingly likely to retain their value. In the event of a run on these stablecoins, Circle and Tether have sufficient liquidity on hand-–in American fiat and other real assets—to cover any potential losses. 

Cryptocurrency-backed USDH, on the other hand, is potentially at risk of a liquidity crunch if crypto markets tank so severely that this collateral falls below the alleged dollar-redeemable value of the roughly 34 million USDH tokens currently in circulation. Such an event could trigger a run on the stablecoin, and drop its value below $1, in what’s known as a “de-pegging.” 

“If you're a small stablecoin much like we are, then in the event of an extreme sell event, there might be some kind of peg loss,” conceded Hubble co-founder Thomas Short, to Decrypt. “It wouldn't take as much as it would for Maker—that would take billions of dollars. We would take millions of dollars. Nothing is safe from a bank run.”

De-pegging events, on a larger scale, have had disastrous repercussions. In May, Terra’s stablecoin, UST, de-pegged after crypto prices plummeted, wiping out $40 billion in value and sending devastating ripple effects across the crypto ecosystem. 

There are key differences between UST and USDH, however. UST was not backed by any collateral, and instead relied upon an algorithm which attempted to leverage Terra’s native token, LUNA, to keep UST at a $1 value. Further, USDH is a far smaller-scale stablecoin, with a current market capitalization of $8.48 million, according to CoinMarketCap.

“There are only a few ways to safely build a decentralized stablecoin, and Hubble’s over-collateralization approach has been tested through all market conditions,” said Spencer Applebaum, Principal at today’s round leader, Multicoin Capital. 

Nonetheless, Hubble’s proposed solution to balancing stability and autonomy highlights the dilemma currently gripping decentralized finance. In the months and years to come, DeFi institutions will have to choose between the likely bear market-proof stability offered by dollar-affiliated stablecoins, and marketable claims to censorship resistance and full decentralization. 


“There are two different types of risks,” said Short. “You have regulatory risk, and then you have market risk. Each leans in the other direction. And the idea is to try and find a balance.”

Daily Debrief Newsletter

Start every day with the top news stories right now, plus original features, a podcast, videos and more.