The expansion of a partnership between Hermetica, a premier Bitcoin (BTC) stablecoin issuer, and Stacks (STX), a Bitcoin Layer 2 (L2) network, was announced in a communication shared with Finbold on Thursday, April 17th. This strategic alliance was spawned in September 2024 when Hermetica introduced its synthetic dollar, USDh, to the Stacks network. Following this, Hermetica raised $1.7 million in a seed funding round. USDh, backed entirely by Bitcoin and pegged to the dollar, offers a 25% yield to its holders.
The recent development will see the USDh minting process being utilized for liquidations on Zest, Stacks’ lending protocol. This move is expected to amplify sBTC-backed loans, leveraging Hermetica’s smart contract infrastructure. This infrastructure can serve as a conduit for transferring liquidity from centralized exchanges to decentralized finance (DeFi) spaces, thereby stimulating the BTCfi flywheel.
Jakob Schillinger, CEO of Hermetica, deliberated on the objectives and advantages of this integration. He stated, “USDh is the first and only stablecoin designed to provide liquidity to Bitcoin-native DeFi. By powering Zest’s liquidations with USDh, we’re enabling scalable growth of sBTC-backed loans and establishing USDh as the core liquidity layer for Bitcoin-native finance. No other stablecoin has the infrastructure to deliver liquidity with this level of security and native Bitcoin backing.”
Tycho Onnasch, CEO of Zest Protocol, further illuminated the workings through which the network will profit. He remarked, “With native sBTC-to-USDh minting, we can now handle liquidations more easily and scale our sBTC loan offering. Hermetica has delivered a key primitive for real DeFi on Bitcoin, plugging directly into what we’re building at Zest: Stacks DeFi on the Bitcoin standard.”
The strengthened partnership has led to a significant expansion in the borrowing cap on the Zest Protocol, which now stands at over $1 million USDh, a threefold increase from the previous limit.
As we continue to witness an industry-wide push towards decentralized finance, this partnership serves as a testament to the synergistic capabilities of Bitcoin-backed stablecoins and Layer 2 networks. By providing a secure and efficient liquidity layer, this alliance is poised to propel the growth of Bitcoin-native finance, further cementing the role of DeFi in the contemporary financial landscape.
