The developers behind USDh, a pioneering stablecoin built on Bitcoin’s second layer Stacks, have successfully orchestrated a deal to instill approximately $3 million in liquidity to the token. This significant achievement was announced in a recent collaboration with Bitcoin lending protocol, Zest.
The decentralized finance (DeFi) protocol Hermetica is the entity that has secured this liquidity. Hermetica’s recent collaboration with Zest is anticipated to make USDh the largest stablecoin on Stacks, a Bitcoin layer designed to bring smart contracts and decentralized applications (DApps) to Bitcoin (BTC).
The partnership’s primary objective is to offer yield on USDh through lending against sBTC, a bitcoin-backed bridging asset. This innovative approach allows users to leverage their bitcoin wealth within the Stacks ecosystem.
Hermetica has pointed out that this initial liquidity boost could potentially create a short-term window of higher yields. Projections are promising, with an estimated annual percentage yield (APY) that could reach as high as 50%. This is a significant increase from Hermetica’s current average APY of 18%, as stated in an announcement email sent out on Wednesday.
Stablecoins have become an essential component within the crypto economy, offering users a reliable means of maintaining their assets in a token format that isn’t subject to significant ebbs and flows in value. This is because stablecoins are typically pegged to a fiat currency, most commonly the U.S. dollar.
The provision for stablecoins is, therefore, a natural and crucial development in Bitcoin’s ongoing evolution into a network that can support DeFi capabilities. This is a trend that has been gaining traction over the last several years.
However, it’s important to put into perspective that the $3 million in liquidity that USDh provides, albeit significant, is minuscule when compared to the liquidity of the dominant stablecoins within the crypto sphere. For instance, USDT and USDC boast market caps of over $138 billion and $51 billion respectively. This disparity underscores the relative infancy of the Bitcoin DeFi sector.
In a related development, Circle, a global fintech company, has entered the tokenization race by acquiring Hashnote, a $1.3 billion real-world asset issuer. This acquisition marks a significant development in the rapidly evolving world of cryptocurrency and blockchain technology.
In conclusion, the partnership between Hermetica and Zest and the resulting liquidity boost for the USDh stablecoin is a significant milestone in the nascent world of Bitcoin DeFi. It presents new opportunities for investors and further cements the importance of stablecoins in the broader crypto economy.
