Ethena, Hyperliquid, and USDH: A Stablecoin Saga in the Making

Dive into the drama surrounding Hyperliquid's USDH stablecoin, Ethena's surprising withdrawal, and the rise of Native Markets.

The Hyperliquid ecosystem is buzzing with activity, and at the center of it all is the quest for a native stablecoin, USDH. It's been a wild ride, with unexpected twists and turns that have everyone on the edge of their seats. Let's break down what's been happening.

Ethena's Exit: Community Over Corporate Power

Ethena Labs, initially a strong contender in the USDH race, made a surprising move by withdrawing its proposal. This decision came after the Hyperliquid community voiced concerns about Ethena's non-native status and broader ambitions beyond just USDH. Guy Young, Ethena's founder, acknowledged these concerns, highlighting the importance of community alignment within the Hyperliquid ecosystem. This shows how much decentralized governance values community input, even over well-funded proposals.

Native Markets Takes the Lead

With Ethena stepping aside, Native Markets, led by Stripe, has emerged as the frontrunner. Their focus on building specifically within the Hyperliquid ecosystem resonated with validators, leading to a significant lead in validator support. Native Markets proposes using Stripe's Bridge infrastructure for USDH issuance, with revenue split between HYPE token buybacks and ecosystem growth. While some criticize their proposal of allocating only 50% of yield back to the community (compared to the 95% offered by others), their 'native' approach appears to have struck a chord.

The Stakes Are High

The USDH contest is about more than just a ticker symbol. Hyperliquid holds a massive $5.5 billion in USDC deposits, representing a significant chunk of the total USDC in circulation. The winner of the USDH race could potentially capture an estimated $220 million in annual treasury yield, benefiting the Hyperliquid ecosystem and HYPE token holders.

Controversy and Community Skepticism

Despite Native Markets' lead, the process hasn't been without its critics. Some have questioned the team's experience and the speed at which they gained validator support, suggesting a potentially rushed vote. Others argue that proposals from Paxos and Ethena offered more attractive terms. However, as Guy Young of Ethena pointed out, the situation exemplifies the ethos of Hyperliquid: a fair playing field where new players can win the community's favor.

Hyperliquid's Future

Regardless of who ultimately wins the USDH race, the competition has highlighted Hyperliquid's commitment to community-driven governance and its ambition to reduce reliance on bridged assets. The outcome will significantly impact Hyperliquid's risk profile and growth trajectory for years to come.

My Two Satoshis

While Native Markets'