Hyperliquid’s USDH Race Exposes the High-Stakes Game Fueling Stablecoin Dominance

Stablecoins aren't just digital dollars—they're the trillion-dollar battleground where protocols fight for supremacy. Hyperliquid's USDH push reveals how DeFi's quietest weapons pack the biggest financial punch.

The Architecture of Control

Behind every stablecoin mint lies a complex web of algorithmic mechanisms and liquidity incentives. Protocols don't just create stable assets—they engineer entire ecosystems around them, locking in value and dominating markets through sheer utility.

Yield Wars and Liquidity Mining

APR percentages become recruitment tools as platforms battle for market share. The real competition isn't between stablecoins—it's between underlying protocols fighting to become the default reserve currency of DeFi.

Regulatory Arbitrage Plays

While traditional finance debates compliance, DeFi builds. Stablecoin races demonstrate how decentralized platforms outmaneuver legacy systems by offering what banks still can't—global, permissionless dollar access. Another case of innovation moving faster than regulation—because why wait for paperwork when you can print digital dollars?

The winner-take-all dynamics of stablecoin adoption reveal DeFi's open secret: he who controls the stable assets controls the entire digital economy. And frankly, watching traditional finance scramble to keep up? Priceless.

Hyperliquid is shaking up the crypto world with a bold move: it’s launching its own stablecoin, USDH, and letting the community vote on who will issue it. With $5.6 billion in deposits and potential annual revenue of $220 million, the announcement has drawn top stablecoin issuers into a high-stakes scramble.

Things are getting interesting. Not familiar with what’s happening? Here’s the scoop.

$220M on the Table

Hyperliquid currently relies on USDC, but all the interest earned on these deposits goes to the external issuer. By launching USDH, the exchange could capture the returns itself. 

At a short-term Treasury yield of around 4%, the $5.6 billion in reserves could generate roughly $220 million a year – almost three times the revenue of Hyperliquid’s HLP vault.

Lower trading fees on spot pairs and improved liquidity are part of the plan. Hyperliquid hopes this will boost its spot trading volume, strengthen order books, and make the platform more competitive.

Who’s in the Race?

Hyperliquid’s public bidding process is unusual. Normally, stablecoin issuers are pre-selected or in-house. Here, Paxos, FRAX Finance, Agora, Native Markets, and Sky (formerly MakerDAO) are competing through a validator vote.

Each brings something different to the table:

• Paxos: NYDFS-regulated, offers HYPE token buybacks, links to PayPal infrastructure. This is the proposal most have welcomed. 
• Frax Finance: 100% of Treasury yields passed directly to users, no fees.
• Agora: Custody with State Street and VanEck, pledges all “net” income to the community.
• Native Markets: Hyperliquid-native team, contributes yield to a buyback fund.
• Sky: $2.2 billion liquidity offer, 4.85% yield, projecting $250 million annual revenue.

USDH powered by Sky

The best stablecoin offers so much more than just a stable medium of exchange – it should also deliver highly efficient returns, generated by actively developing, building and growing the ecosystem it lives in.

By using Sky to power USDH, the Hyperliquid…

Governance or Preselection?

Not everyone is convinced the vote is fair. Some community members call it “governance theater,” pointing out that Native Markets submitted its proposal within an hour of the announcement, and Frax followed just ten hours later. 

The short, five-day review window leaves questions about how detailed the evaluation can be.

What This Means for Hyperliquid

USDH could bring a major revenue boost and strengthen Hyperliquid’s ecosystem. It could reduce reliance on USDC and improve spot market liquidity.

But replacing USDC won’t be easy. Its long track record and DEEP liquidity make it the stablecoin of choice for many traders. For now, this remains a high-stakes experiment!