Ethena Labs Joins Bid for Hyperliquid’s USDH Stablecoin Control

TLDR

• Ethena Labs enters the race to control Hyperliquid’s USDH stablecoin alongside five other bidders.
• Ethena’s proposal includes backing USDH with USDtb and creating a validator “guardian network.”
• The protocol promises to return 95% of reserve revenue to the Hyperliquid community if selected.
• Ethena Labs plans to cover costs for migrating Hyperliquid’s markets from USDC to USDH.

Ethena Labs has officially entered the race to control Hyperliquid’s USDH stablecoin, becoming the sixth bidder in the competition. This contest, now open to various DeFi projects, will determine which team holds sway over billions in liquidity and revenue on Hyperliquid, a leading decentralized derivatives exchange. The outcome will significantly impact the future of USDH and its role in the broader DeFi ecosystem.

Ethena’s Proposal for USDH Backed by USDtb

In its bid, Ethena Labs is proposing a version of USDH fully backed by USDtb, a stablecoin connected to BlackRock’s BUIDL fund. USDtb is set to be issued through Anchorage Digital Bank. This proposal aims to create a secure and transparent foundation for the USDH stablecoin, a crucial component of Hyperliquid’s liquidity operations.

Notably, Ethena Labs has committed to returning 95% of reserve revenue to the Hyperliquid community if selected. The protocol also plans to implement safeguards by establishing an elected “guardian network” of Hyperliquid validators, which would oversee USDH’s stability and operations. This governance approach contrasts with models where the stablecoin issuer has full control.

Migration and Ecosystem Incentives

Ethena’s plan includes covering the costs associated with migrating Hyperliquid’s markets from USDC to USDH. Additionally, the protocol has pledged at least $75 million in ecosystem incentives, a figure that could potentially rise to $150 million. These incentives are designed to support the Hyperliquid ecosystem and encourage growth after the switch to USDH.

In terms of infrastructure, Ethena proposes partnerships with Securitize to introduce tokenized funds and equities to the HyperEVM platform. This partnership would facilitate the launch of hUSDe, a synthetic dollar designed for the Hyperliquid ecosystem. Ethena Labs also suggests offering instant liquidity through its established stablecoin infrastructure, aiming to enhance the liquidity flow on Hyperliquid.

The Growing Competition for USDH Control

Ethena’s bid follows proposals from several other key players in the DeFi space, including Paxos, Frax Finance, Agora, Native Markets, and Sky, formerly known as MakerDAO. The competition has become increasingly heated, with each bidder presenting unique proposals for controlling the USDH stablecoin.

Hyperliquid has opened a community process to select the ultimate issuer for USDH. Native Markets, a venture led by Hyperliquid advocate Max Fiege, was the first to submit a proposal. However, this plan, which would see USDH issued via Stripe’s stablecoin payment processor, Bridge, has faced substantial opposition from the Hyperliquid community.

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