TL;DR
- Hyperliquid’s USDH aims to reduce trading fees by 80% on select pairs.
- The exchange currently holds about 8% of Circle’s USDC supply.
- Three leading teams are competing to issue USDH: Native Markets, Ethena, and Paxos.
- Hyperliquid averages $57B in weekly volume, outpacing traditional exchanges.
- The outcome of the bidding could influence the future of stablecoins in crypto.
Hyperliquid, a rapidly growing crypto exchange, has recently initiated an exciting bidding process for its new native stablecoin, USDH. This move is part of a strategy to enhance market efficiency, reduce reliance on existing stablecoins like USDC, and stimulate its spot markets. The Request for Proposal (RFP) was announced last Wednesday, inviting stablecoin issuers to pitch their proposals to the Hyperliquid community.
The introduction of USDH is significant as it is designed to be used in select trading pairs, which will lower trading fees by 80%. This initiative is crucial for Hyperliquid as it seeks to transition from a primarily perpetual trading platform to a comprehensive exchange offering. Currently, Hyperliquid’s spot trading volumes lag behind its success in perpetual contracts, making the launch of a native stablecoin a strategic move to balance its offerings.
Hyperliquid’s current reliance on USDC presents vulnerabilities. The exchange holds approximately 8% of Circle’s USDC supply in its bridge, leading to a dependency on a third party and resulting in an annual revenue leak of around $100 million to Coinbase, which claims 50% of Circle’s revenue. By launching USDH, Hyperliquid aims to reclaim this revenue and reinvest it into its ecosystem, although the best approach to achieve this remains under discussion.
The bidding process for USDH has attracted significant interest, with proposals closing recently. Teams are competing fiercely to secure the opportunity to steward the new stablecoin, recognizing the potential for substantial revenue generation. Hyperliquid currently boasts an impressive average weekly trading volume of $57 billion, surpassing some traditional financial markets, and has been responsible for up to 35% of all blockchain revenue at times.
Three primary contenders have emerged in the bidding process: Native Markets, Ethena, and Paxos. Each team offers unique advantages that align with Hyperliquid’s vision for a compliant and organically developed stablecoin.
Native Markets: This team is seen as the most aligned with Hyperliquid’s ethos, led by experienced individuals from the crypto space. Their proposal includes revenue-sharing models that prioritize Hyperliquid’s growth, though concerns about their immediate bid timing have arisen.
Ethena: Known for its DeFi credibility, Ethena has a broader focus that has raised some concerns among voters. Their proposal promises significant financial backing to grow USDH but may not align perfectly with Hyperliquid’s specific objectives.
Paxos: Initially considered a safe choice, Paxos gained traction with a revised proposal that includes partnerships and incentives. Their experience in navigating regulatory challenges adds to their appeal, though they are perceived as more corporate compared to the other contenders.
The outcome of this bidding war is crucial not only for Hyperliquid but also for the broader crypto landscape. The successful launch of USDH could set a precedent for other exchanges to develop their native stablecoins, potentially reshaping the market dynamics surrounding existing stablecoins like USDC and Tether.
As the crypto community observes this competition, it highlights the growing recognition of the value that native stablecoins can bring to exchanges. The decision on which team will be selected to issue USDH will have implications that extend beyond Hyperliquid, influencing how stablecoins are integrated into various ecosystems.
In conclusion, Hyperliquid’s initiative to launch USDH represents a significant development in the crypto space, showcasing the potential for innovation and growth when exchanges build valuable products organically. The outcome of the bidding process will be closely watched as it could pave the way for future advancements in the stablecoin market.
Sources: Bankless
See also: What is DeFi?
See also: How to store Bitcoin safely
This article is a summarized news brief for informational purposes only. Not financial advice.
Sources
- Hyperliquid’s USDH Bidding War — https://www.bankless.com/read/hyperliquids-usdh-bidding-war