Crypto developers have leveraged the newly introduced Runes token standard to launch an all-new dollar-pegged stablecoin native to the Bitcoin blockchain.
But there’s a twist: its developers told Decrypt that the token, USDh, is backed by and redeemable for BTC rather than actual cash. In fact, the stablecoin offers a yield to holders that they said could soar as high as 25% per year.
“USDh is Bitcoin all the way down, which means the protocol doesn't rely on fiat rails and can operate completely outside the traditional banking system,” said Jakob Schillinger, founder & CEO of Hermetica, the stablecoin protocol behind USDh.
Runes is a new token standard for Bitcoin launched by Ordinals creator Casey Rordamor in April, and is now more frequently used than the Ordinals and BRC-20 standards that came before it. Runes is known to be far more data efficient than its predecessors and has more potential for unlocking practical Bitcoin-based assets beyond meme coins.
Crypto, CBDCs and Stablecoins Are the Future, Says Former CFTC Chair
Despite heading the Digital Dollar Project as a co-founder and executive chairman, J. Christopher Giancarlo believes that CBDCs aren’t the only way forward in finance. “The sometimes fashional debate at conferences, such as this, between CBDC's and stablecoins and crypto is a complete and false choice,” Giancarlo said at the Financial Times Crypto and Digital Assets Summit earlier today. “The global future is all of the above: crypto, CBDCs, stablecoins, and more.” This is music to the ears of m...
Hermetica’s model differs from more widely used stablecoins like Tether (USDT) and Circle USD (USDC), which rely on centralized financial institutions to provide custody of the assets backing their tokens. Those firms today control well over $145 billion across both tokens, including a combination of cash and cash equivalents—mainly U.S. treasury bills.
Tether and Circle earn a yield from the T-bills they hold and keep all profits generated from that debt for themselves. They also have the power to seize or freeze any tokens held by their users, as they have repeatedly done in response to sanctions requirements established by the U.S. Treasury Department.
By contrast, Hemetica’s design pays out the yield generated by the protocol to its token holders. Those holders are also immune to de-pegging risk that can plague traditional stablecoin holders in the event of a bank failure, as seen with USDC during the fall of Silicon Valley Bank last year.
“The protocol accomplishes this by coupling a spot BTC position with a short perpetual futures position,” explained Schillinger. The protocol’s design mimics that of Ethena, pioneers of the Ethereum-based stablecoin USDe, whose $3.4 billion token generates yield for investors on the short position it regularly holds.
Lightning Labs Is Bringing Stablecoins to the Bitcoin Blockchain: CEO
The developer behind Bitcoin's Lightning Network has tested a protocol designed to enable stablecoins to be issued on the Bitcoin blockchain, its CEO said. Speaking at the Financial Times Crypto and Digital Assets Summit this week, Lightning Labs CEO Elizabeth Stark said that the developer had recently executed a test transaction on the Lightning Network with an asset created using the Taproot Assets protocol. "We've released an early part of the code in October, and actually just on this past T...
Given that Bitcoin’s DeFi ecosystem is nascent, Hermetica believes its protocol can tap into the estimated $360 billion of “idle” capital in the ecosystem from those looking to generate yield. “Over the past 4.5 years, the annualized yield from funding rates has been 12%,” Schillinger noted.
In a press release, Hemetica said it intends to scale its Bitcoin-native DeFi using Stacks, a Bitcoin layer-2 blockchain built for compatibility with smart contracts. Stacks was recently cleared of wrongdoing by regulators for potential securities fraud following three years of investigation.
The Stacks protocol already has an integration with Liquidium, a layer-1-based peer-to-peer protocol for borrowing and lending Bitcoin-based assets.
“A reliable native stablecoin is crucial for every blockchain ecosystem,” said Liquidium CEO Robin Obermaier on the matter. “Enabling users to utilize stablecoins in Bitcoin DeFi applications is the next major milestone for Bitcoin.”
Edited by Ryan Ozawa.
