Tech giants compete for the distribution rights of Hyperliquid stablecoin USDH. Who will reap the billions in ecological revenue?

Original: Odaily Odaily Planet Daily (@OdailyChina)

Author: Wenser (@wenser 2010)

Original title: Hyperliquid stablecoin USDH becomes the “darling of the industry”, giants ignite the battle for distribution rights

Benefiting from the pre-market, launch, and turbulent market conditions of XPL and WLFI, Hyperliquid achieved a revenue of $106 million in August, a month-on-month increase of 23%; the monthly contract trading volume approached $400 billion, with a DEX Perp market share of about 70%. As the undisputed “cash cow” in the industry today, the official focus on the “high-performance L1 public chain” concept has also brought infinite possibilities to Hyperliquid's stablecoin landscape.

On September 5, Hyperliquid officially announced that the stablecoin code USDH reserved by the protocol will be released through an on-chain validator voting process, with the voting taking place entirely on Hyperliquid L 1. The process is similar to delisting voting, and the selected team must participate in regular spot deployment Gas auctions. The official stated that USDH, as a high-demand standardized code, will be used to build compliant, Hyperliquid-prioritized native stablecoins. Following the news, major stablecoin issuers have presented their own “USDH issuance plans.” Odaily will briefly analyze the different plans for Hyperliquid's native stablecoin USDH and the competition among the issuers behind it.

USDH becomes a battleground for stablecoin issuers, with giants like Paxos and Agora entering the fray

On September 5th, Hyperliquid officially announced on the Discord community that,

1. The structure of the spot market will be optimized in the next network upgrade. The fees for spot trading pairs between two spot quoted assets, as well as the rebate for orders and the contribution of user trading volume, will be uniformly reduced by 80% to improve liquidity and reduce user friction.

2. The USDH stablecoin code currently reserved by the protocol will be released through transparent on-chain validator voting. Voting will be conducted entirely on-chain through ultra-liquid L1 transactions, similar to how delisting voting works. Since USDH is a highly demanded standard token code, validators will vote to select the most capable team to build the locally minted, Hyperliquid-prioritized stablecoin. Teams interested in using this code can submit proposals in the new “usdh forum sub-channel,” and should include the user addresses of the selected validator quorum, which will be used for deploying USDH. Please note that approved teams must still participate in the usual spot deployment Gas auctions. Furthermore, the officials emphasize: “The USDH code is very suitable for Hyperliquid priority, Hyperliquid consistent and compliant dollar stablecoins; after the next network upgrade, validators will be able to vote to allow user addresses to purchase the USDH stablecoin code.”

3. In terms of context, starting from the testnet, spot quote assets will become permissionless in the future. Subsequently, staking requirements and reduction standards will be announced.

Subsequently, the official supplementary information stated: “This vote is only for the USDH token. USDH will not receive any special privileges due to its token nature. Hyperliquid's native financial primitives and general programmability constitute a chain uniquely optimized for stablecoin issuance and payments. There will continue to be multiple stablecoins on the Hyperliquid blockchain, with new stablecoin teams joining the Hyperliquid ecosystem. USDH is just one of many stablecoins. As mentioned earlier, before the technical implementation, becoming a quoted asset will become permissionless.”

Regarding the timeline: Proposals should be published before September 10th, 10:00 UTC; validators should indicate who they will vote for before September 11th, 10:00 UTC; validators should vote between September 14th, 10:00-11:00 UTC to allow users time to stake with validators that match their votes.

Voting is based on the staked share. Validators will vote by submitting the address corresponding to the team they support. Foundation validators will vote to select the team with the most votes from non-foundation based on the validator commitments made on September 11 (weighted by equity as of September 14), effectively abstaining.

Participants: 3 major stablecoin issuers + 2 project parties showcase their talents

As of now, the Hyperliquid community's USDH sub-channel has 5 stablecoin issuance proposals. In addition to well-known stablecoin issuers such as Paxos, Agora, and Frax, Native Markets, led by Max Fiege, and the Konelia team have also presented their own USDH issuance plans.

Based on the existing information, major stablecoin issuers have mature issuance plans and rich compliance experience, and the final winner may emerge from among them.

In addition, major publishers have briefly introduced their advantages in the proposals -

• Paxos emphasized its compliance expertise and strong partnership network globally. According to a member of the Paxos Labs team, Paxos has begun establishing partnerships within the Hyperliquid ecosystem in preparation for the successful deployment of USDH. Its initial partners include: FalconX, Looping Collective, HyperLend, Pendle, HybraSwap, Hyperswap, Neko, HypurrFi, DotHYPE, RubFi, Nunchi, and others.
• The Frax team emphasized its “decentralized vision” similar to Hyperliquid, stating: “Frax has designed, transported, and operated multiple stablecoins worth billions of dollars across various cycles, with zero security incidents. Our advantages lie in rigorous incentives and mechanism design, along with a strong performance record. We are committed to decentralization and surpassing all unlocks in the long run, rather than for extraction, which is why the collateral yield for USDH will flow back at a 0% acceptance rate.”
• Agora spokesperson Nick van Eck emphasized the advantages of being backed by the asset management giant VanEck and collaborating with well-known platforms such as the credit card payment network Rain with 2 billion users, interoperability infrastructure LayerZero, and EtherFi. Additionally, he highlighted Agora's neutrality as a publisher and took the opportunity to criticize Paxos, stating: “Agora does not have its own settlement network or brokerage business (unlike Paxos).”
• Max Fiege's leading Native Markets emphasizes its “localization attributes,” planning to “donate a considerable portion of its reserve earnings to aid funds; USDH will be minted directly on HyperEVM, with HyperCore transfer enabled from day one; USDH will also inherit the global compliance attributes and issuance channels of the issuer Bridge (a subsidiary of Stripe).” Thanks to Max's deep involvement and reputation in the Hyperliquid community, the proposal's comment section received considerable support.
• The stablecoin issuance plan proposed by the Konelia team has been met with indifference and even ridicule from community members due to its reliance on the “automatic compound yield of short-term U.S. Treasury bonds” and its emphasis on MEV protection, which is currently not prioritized in the Hyperliquid ecosystem.

The following are the deployment addresses proposed by existing stablecoin issuers:

Paxos——0x999000B7c80550C5D3858a9C9505dd9A3654B339 ;

Frax——0x6e74053a3798e0fc9a9775f7995316b27f21c4d2；

Agora——0x8010f766AA84bB0Cc57e7C0bf13149cF9BC62b65；

Native Markets——0xc4bb9B6FdA3112B381Cb94f571bc72db541e7577；

Konelia——0x274f2c145B413f76cD3ED52C05221ddAb0E582A1.

As the on-chain voting is not yet open, the feedback from the community proposal indicates that the corresponding proposals released by stablecoin issuers Paxos and Max Fiege have relatively high support.

Hyperliquid Community USDH Sub-channel Page

It is worth mentioning that Frax faced criticism from members of the Hyperliquid community due to its previous collaboration with the Luna algorithmic stablecoin UST, although it was later clarified that: “The partnership is the USDC/USDT/UST/Frax pool in Curve's 4th generation token pair pool, at that time they were the top four stablecoins in the EVM.”

Hyperliquid community members question Frax

Hyperliquid ecosystem project attitudes vary: some shout unfairness, while others directly abstain

Regarding the proposal vote for USDH, projects within the Hyperliquid ecosystem have also expressed their differing attitudes.

The liquidity staking agreement Kinetiq officially announced that it will re-delegate all rights to the Hyperliquid Foundation nodes from 12 PM Eastern Time on September 10 to 12 PM Eastern Time on September 15, in order to abstain from this vote.

The Hyperliquid ecosystem's over-collateralized stablecoin project Hyperstable team stated that they had planned to launch a decentralized and over-collateralized stablecoin supported by HYPE, HYPE LST, etc., since the end of last year. However, at that time, all tokens starting with USD were blacklisted, and USDH was included in that list. The sudden opening of USDH issuance now highlights that many teams (like Max Fiege) had received information in advance, which is extremely unfair. It is suggested that the USDH code continue to be added to the blacklist.

USDH is about to be launched, and Circle, the company behind USDC, is getting anxious

The competition for the issuance of USDH has not officially started yet, and as the only stablecoin in the Hyperliquid ecosystem, USDC, backed by Circle, is the first to take action—Circle co-founder and CEO Jeremy Allaire stated not to be misled by the hype. Circle will become a major participant and contributor in the Hyperliquid ecosystem. It is great to see others buying new dollar stablecoin codes and joining the competition, but USDC, with deep liquidity and almost instantaneous cross-chain interoperability, will definitely be warmly welcomed by the market.

It is worth mentioning that as early as July, Circle officially announced that the native USDC and CCTP V2 would soon be deployed on the Hyperliquid chain. However, more than a month later, the native USDC is still not online, and the emergence of USDH undoubtedly makes Circle feel threatened, with CEO Jeremy Allaire's response appearing somewhat weak. Ironically, the stablecoin USDe issuer Ethena Labs officially posted on the X platform today, hinting that they had sent a USDH proposal to Circle's CEO but had not received a response.

Stablecoin Issuers in Chaos: Just to Seize Distribution and Market Share

As the U.S. stablecoin regulation bill “GENIUS Act” is about to be enacted, the stablecoin sector is set to welcome a new round of explosion, and the emergence of USDH provides a new piece of cake for major stablecoin issuers.

For the currently somewhat saturated stablecoin market, Hyperliquid, with hundreds of thousands of high-frequency trading users and monthly trading volumes in the hundreds of billions, will undoubtedly bring a significant increase to the stablecoin market. This is also the reason why many issuers are competing for the USDH code deployment rights. BitMEX co-founder Arthur Hayes previously pointed out in a post that the key to the success of stablecoins lies in the distribution channels.

As Sam Kazemian, the founder of Frax, said, “For stablecoin issuers and infrastructure companies, the key point of competition among the parties submitting proposals for Hyperliquid stablecoin USDH is not the revenue sharing; the real value lies in achieving interoperability and deep 1:1 integration with Hyperliquid, this massive distribution scenario. In fact, all parties shortlisted for the proposals (Frax, Paxos, Agora) have expressed their willingness to return 100% of the profits.” (Odaily Note: The Paxos proposal uses 95% of the interest generated from the USDH reserves for repurchasing HYPE tokens, which will be distributed to users, validators, and partner agreements.)

If we use the retail industry as a metaphor, Hyperliquid is comparable to a beverage brand with its own retail channels, while Paxos, Agora, and Frax are akin to beverage manufacturing factories. What they are competing for now is this vast retail channel network.

For the Hyperliquid community, the main concern of most members remains how the issuance of USDH will serve the development of the Hyperliquid ecosystem, particularly the allocation of corresponding income for the buyback of HYPE tokens, as well as the previous activity levels of project team members within the Hyperliquid ecosystem and community.

It is worth mentioning that the issuance and application of USDH may bring Hyperliquid a potential annual revenue of up to $220 million. According to BitMEX co-founder Arthur Hayes, the stablecoin market is expected to reach $10 trillion by 2028, and under the development of the native stablecoin USDH, the price growth of HYPE as an ecological token is promising for the future.