USDh Stablecoin Developers Secure $3M in Liquidity to Become Stacks' Largest Stablecoin

The developers of USDh, a stablecoin built on Bitcoin layer 2 Stacks, have completed a deal to bring around $3 million in liquidity to the token.

DeFi protocol Hermetica has secured around $3 million in liquidity for USDh, a stablecoin built on Bitcoin layer 2 Stacks.

The liquidity will be provided through collaboration with Bitcoin lending protocol Zest. The two protocols plan to offer yield on USDh through lending against sBTC, a bitcoin-backed bridging asset that users can use to put their bitcoin wealth in the Stacks ecosystem.

The initial liquidity boost could create a short-term window of higher yields, Hermetica said, with projections of an annual percentage yield (APY) as high as 50%. Hermetica currently provides an average APY of 18%, the protocol said in an emailed announcement on Wednesday.

Stablecoins play an integral role in the crypto economy, giving users a means of holding their assets in a token that isn't prone to such significant ebbs and flows in value, because they are pegged to a fiat currency (usually the U.S. dollar). Provision for stablecoins therefore would naturally be an important development in Bitcoin's evolution into a network that can support DeFi capabilities, a trend that has gathered momentum in the last couple of years.

It should be pointed out, however, that the $3 million in liquidity that USDh provides is tiny compared to the dominant stablecoins in crypto. USDT and USDC have market caps of over $138 billion and $51 billion respectively, highlighting the relative infancy of the Bitcoin DeFi sector.