Sky Protocol Shakes Up Stablecoin Market with 4.85% Yield on USDH

Another day, another protocol promising yields that would make traditional bankers blush.

Sky Protocol just tossed its hat into the crowded stablecoin ring—this time with USDH, boasting a headline-grabbing 4.85% APY. No lock-ups, no funny business. Just straight-up yield, served daily.

How’re they doing it? Leveraged liquidity strategies, algorithmic rebalancing, and a dash of good old-fashioned DeFi magic. Sky claims its system auto-compounds rewards while dynamically managing risk—cutting exposure during volatility and ramping up when markets calm.

Who’s this for? Yield-starved degens, cautious stablecoin stackers, and anyone tired of earning 0.01% in their legacy savings account while inflation does its thing.

Risks? Always. Smart contract vulnerabilities, oracle failures, the classic 'protocol gets drained' scenario. Sky says its audits are clean and its treasury diversified—but then again, so did everyone else right before things went sideways.

One thing’s clear: in a world where central banks move at glacial speed, DeFi isn’t asking for permission. It’s building better banks, one yield-bearing stablecoin at a time. Even if half these projects flame out, the other half might just change finance forever.

Just remember: high yield usually means high risk. Or as Wall Street veterans might say—if it looks too good to be true, it probably is… until it isn’t.

TLDR

• Sky Protocol is the fifth major bidder for Hyperliquid’s USDH stablecoin.
• The proposal promises 4.85% yield on all USDH held on Hyperliquid.
• Sky commits $25 million to fund Hyperliquid ecosystem development.
• Proposal includes multichain deployment and GENIUS Act compliance options.
  

Sky Protocol has entered the competition to issue Hyperliquid’s USDH stablecoin, becoming the fifth major bidder. The protocol proposes a 4.85% yield on USDH deposits and pledges $25 million for ecosystem growth.

Co-founder Rune Christensen submitted the proposal, highlighting access to $2.2 billion in instant USDC liquidity through infrastructure backing $8 billion in USDS and DAI stablecoins. Sky’s bid offers customization, GENIUS Act compliance, and multichain deployment via LayerZero.

Competition and Community Response

Hyperliquid opened a call for proposals for a “Hyperliquid-first” stablecoin last Friday. Native Markets initially proposed partnering with Stripe’s Bridge for issuance.

The proposal faced opposition from Agora CEO Nick Van Eck, citing potential conflicts of interest and migration risks from Hyperliquid. MoonPay joined the coalition against Stripe, with Dragonfly partner Rob Hadick supporting the MOVE as strengthening the bid.

Van Eck appealed to the Hyperliquid community, emphasizing long-term support and token holdings, while Paxos and Frax Protocol also submitted proposals with different yield and buyback strategies.

Sky’s Proposal and Technical Advantages

Sky emphasizes a seven-year track record managing over $8 billion in USDS and DAI without losses. The protocol offers 4.85% returns on all USDH deposits, exceeding U.S. Treasury bill rates.

The system uses technical architecture similar to DAI and USDS, granting immediate access to Peg Stability Module liquidity totaling $2.2 billion in USDC. Sky also plans off-chain redemptions via spark.fi, sky.money, and defisaver.com, and allows native conversion between USDH and sUSDS.

Multichain deployment through LayerZero allows Sky to deploy its $8 billion collateral portfolio on Hyperliquid efficiently, while minimizing risk. The protocol also commits $25 million for Hyperliquid Genesis Star, an autonomous project to grow the DeFi ecosystem.

Hyperliquid Growth and Market Performance

Hyperliquid’s August revenue reached $106 million from perpetual futures trading, capturing 70% of DeFi perpetuals market share. Daily trading volumes peaked at $29 billion, generating $7.7 million in fees.

Total value locked increased from $230.48 million in April to $762.57 million, while HYPE token maintains strong performance near $47, gaining over 400% since April. Institutional adoption continues through Anchorage Digital custody and Circle’s USDC deployment.

Sky’s commitment to the Hyperliquid ecosystem extends beyond the USDH vote. Christensen stated, “By using Sky to power USDH, the Hyperliquid community will gain advantages no other stablecoin project can offer.”

Hyperliquid validators will vote on the winning proposal following the network’s next upgrade, which is yet to be announced.