Updates
Stablecoin Showdown: The Battle for USDH
What happened? HyperLiquid invited proposals from stablecoin issuers to create $USDH on HyperLiquid.
It wouldn't have any special privileges immediately. But there's big potential.
Currently, the HyperLiquid bridge holds around $5.6B in USDC. That's ~7.8% of all USDC. If we assume a risk-free rate of 4%, Circle is pocketing ~$224M in yield from this.
Now imagine if HyperLiquid replaced that USDC with USDH. It can capture those yields directly and reinvest them into its ecosystem. That's essentially "free money" to fuel HyperLiquid's growth.
So when HyperLiquid invited proposals, it was complete chaos. Teams rushed in, undercut each other, and there were even accusations of backroom deals by HyperLiquid validators.
Yesterday was the deadline to submit proposals. So now, we can compare them side by side. Here are the major factors for evaluating the projects:
- Token design / Reserves. A good stablecoin must be backed by high-quality, liquid assets.
- Regulatory compliance. The Genius Act takes effect next year. Ideally, USDH should become compliant as fast as possible.
- Prior experience. Running a stablecoin at the scale of billions isn't a beginner's job. HL should reduce the execution risks.
- HYPE value-accrual. HyperLiquid doesn't want the issuer to extract all the value. We should check how the YPE ecosystem will benefit.
- Token liquidity. $USDH should be able to withstand millions in outflow. Otherwise, a stablecoin will depeg, which can have many negative impacts.
- Extra perks. Many of these teams promise other benefits like PayPal listings, DeFi integrations, and other partnerships.
Plenty of proposals, but seven proposals stood out. The table below compares them along the significant metrics.
A few things all the proposals have in common:
- USDH will be natively minted on HyperLiquid.
- Everyone is promising to back USDH with safe assets. No weird algo-mechanisms like Terra LUNA.
- Everyone is claiming to be compliant (or will be when the Genius Act comes into effect). But the topic is more nuanced. The exact details of the law aren't clear to me yet.
But there are very significant differences between the proposals as well.
Paxos offers integration with the PayPal ecosystem. Frax and Agora promised a 100% yield to HL. Ethena shared a KPI milestone-based approach. And so on.
If you want a single document that compares all seven proposals in detail, read this.
The winning proposal will be chosen by 19 HyperLiquid validators using stake-weighted voting on September 14th.
If you wanna bet who's gonna win, there's a Polymarket for you.
Currently, Native Markets leads with support from ~31% of stake. Since other proposals from Paxos and Ethena are objectively better, this created controversy of backroom deals between validators and Native Markets.
Both Paxos and Ethena have ~8% of the voting stake.
You can track validators and their endorsements here. There's an opportunity in monitoring endorsements from HyperLiquid validators and betting on Polymarket.
Anyhow, this USDH episode has already radically changed the crypto industry. Other chains are also creating their own stablecoins. MegaETH has announced its stablecoin. Even Solana is discussing a SOL-aligned stablecoin.
For a deeper analysis of different proposals, read this live article.
Announcement
We're Hiring a Researcher!
Do you love diving deep into DeFi? Want to join a fast-growing team shaping the future of crypto research?
We're hiring a Research Analyst to work directly with me and our global team (currently 7 people).
We're looking for someone who lives and breathes crypto. You've been through bull and bear markets, taken some hits, and still can't imagine doing anything else.
Here's what you get:
- Fully remote. Work from anywhere, on your schedule
- Paid in crypto ($2k a month usdc)
- Anon-friendly (if you want)
- No need for a degree or fancy resume. We only care about skill.
If this sounds like you, click the link below and apply.
Protocols
Lighter: A Worthy HyperLiquid Challenger?
HyperLiquid is the most successful project of this cycle. But now, there's a challenger.
The above chart tracks the TVL of Lighter, a new perp dex chain. Its TVL has grown from ~$200M in August to ~$400M today. That's massive.
The most successful crypto applications are Perp Dexes. And it's a cut-throat sector with many players. Why's Lighter growing massively?
#1. Points program
Arguably, HyperLiquid had the most successful points program. It created a cult-ish community around the project.
Part of the reason it was successful was that perpetual DEXes can better identify their aligned users vs mercenaries. If you're a chain, farmers can use bots to farm points. But with perp dexes, only true traders can successfully farm a lot of points.
Lighter is trying the same strategy to find real users of the protocol. Traders are bridging and farming it.
Additionally, farming Lighter requires invite codes.
#2. No fee on orders.
Right now, Lighter is not charging any taker or maker fees.
So traders are making a lot of volume. On peak days, it handles 100M+ daily txns. It's also consistently doing close to $6B in volume a day.
One downside is that this incentivizes washtrading. So a lot of this volume is not sustainable.
#3. It's a perp-optimized Ethereum L2.
Eth maxis have been saying that HyperLiquid should've been an L2 for a long time. Admittedly, there are some benefits.
- Doesn't have validator expenses.
- Stronger security guarantees from Ethereum.
- When Ethereum interoperability goes live, network effects will kick in.
Composability with Ethereum is a big deal. Theoretically, it'll be possible for you to use your L1 DeFi positions as margins on Lighter L2. But this future is probably some time away.
You can learn about the technical architecture here.
Like it or not, there's a large chunk of crypto whales that are ETH-aligned. And many of them are moving over to lighter since it's ETH-aligned.
Just like HyperLiquid had made many perp-specific optimizations, Lighter is doing the same with its L2.
If you want to farm Lighter airdrop, there are two options.
- Trade perps.
- Deposit to the Liquidity Provider Vault. It provides >55% APR.
Crypto usually rewards early adopters. And Lighter seems to be the next big perp DEX.
🚀 DeFi Catalysts
Linea airdrop claim is live. If you had farmed the chain, make sure to claim your airdrop.
Arbitrum is running the DRIP (DeFi Renaissance Incentive Program). It rewards DeFi actions on Arbitrum.
Aerodrome introduced the "Community Launch" initiative. It allows projects to launch tokens on Aerodrome directly.
MegaETH, a high-performance L2, announced its own stablecoin $USDm. It'll allow MegaETH to run the sequencer at cost.
Scroll is pausing its DAO governance and moving towards centralized governance. The details aren't clear yet.
Cap Money, the stablecoin focusing on yield, has got its first delegator and cap operator: Renzo Protocol and Concrete, respectively.
Ethena has partnered with Binance to embed USDe in Binance as spot pairs, integration with Binance Earn, and reward-bearing collateral.
Ondo Finance has launched Ondo Global Markets on Ethereum. It has already attracted >$80 M in value.
Lido introduced Lido Earn, stETH-powered vaults for advanced DeFi strategies. It has launched with two vaults with distinct strategies.
LayerZero introduced OVault. It allows apps to accept deposits and redemptions from 140+ chains in a single click.
Jupiter added Airdrop Checker to their portfolio section. You can scan your address to monitor everything related to airdrops.
Maple expanded syrupUSDC to Arbitrum. From day one, you can use it as collateral on many apps like Fluid, Morpho, and Euler.
Kamino has introduced the Loan Dashboard. It gives a detailed breakdown of interest like debt paid, collateral yield earned, and net interest to borrowers.
🚀 New Launches
Parallel Protocol launched its v3 with USDp, a decentralized, overcollateralized asset backed by a basket of assets and stablecoins.
Twyne went live on the Ethereum mainnet. It's a credit delegation protocol built on top of Euler. Borrowers can now rent unused borrowing power from lenders.
📰 Industry News
Nasdaq has submitted a filing to the SEC to facilitate the trading of tokenized securities on its markets.
Crypto faced a supply chain attack via Node Package Manager. While it was a huge risk, attackers only netted about $503 in crypto.
Kiln Finance is concerned about unauthorized access to wallets used for its staking operations. So they're exiting all their ETH validators.
Kinto, an L2 focused on providing "safe" finance using KYC, insurance, and AML & fraud, is shutting down. It was hacked in July.
🐦⬛ X Hits
- Sniping strategy for Polymarket.
- Another guide for prediction markets.
- Guide for Altcoin Treasury Companies.
- Savings rates as DeFi's benchmark pillars.
- A macro bull post on the market
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
Whenever you're ready, here's how we can help you:
- ⚙️ The DeFi Edge PRO - Designed for busy people who want to stay ahead of the curve. Leverage our research to save you hours each week, and to see what we're personally investing in. Join today.
- 🚀 The DeFi Edge Ventures - We identify, invest, and help amplify DeFi Protocols that positively impact the Crypto space.
You're receiving this email because you signed up for my newsletter. You can update your Preferences or Unsubscribe here.
113 Cherry St #92768, Seattle, WA 98104-2205
No comments:
Post a Comment