Ethena joins the race to issue Hyperliquid’s USDH stablecoin with $5 billion liquidity mandate

Ethena Labs has entered the bidding competition for Hyperliquid’s USDH stablecoin, making it the sixth major contender to control the stablecoin tied to $5 billion in liquidity. Ethena’s proposal, announced in a Tuesday blog post, aims to stake a claim on one of the fastest-growing decentralized finance (DeFi) derivatives exchanges. The decision will ultimately determine which team controls billions in liquidity and revenue, significantly impacting the DeFi space.

The Ethena team, known for their USDe and USDtb tokens, is proposing a version of USDH that will be entirely backed by USDtb a stablecoin linked to BlackRock’s BUIDL fund and soon to be issued through Anchorage Digital Bank. If selected, Ethena has pledged to return 95% of reserve revenue to the Hyperliquid community, further reinforcing its commitment to the decentralized ethos.

Ethena’s strategic plan and ecosystem commitments

Ethena’s plan goes beyond simply issuing USDH. The proposal includes partnerships with Securitize to bring tokenized funds and equities to HyperEVM, the blockchain powering Hyperliquid. Additionally, Ethena plans to launch a Hyperliquid-native synthetic dollar, named hUSDe, which will integrate seamlessly into Hyperliquid’s ecosystem.

The company has also committed to covering the costs of migrating Hyperliquid’s markets from USDC to USDH, and is ready to commit at least $75 million in ecosystem incentives, with the potential to raise this amount to $150 million. In order to ensure security, Ethena proposed that USDH oversight be handled by a validator “guardian network”, rather than leaving control solely with the issuer. This structure would provide decentralized governance over the stablecoin.

Competition for USDH issuance heats up

Ethena’s bid follows proposals from several other prominent crypto entities, including Paxos, Frax Finance, Agora, Native Markets, and Sky (formerly MakerDAO). On Friday, Hyperliquid opened a community process to select the issuer for USDH, and each proposal has brought different visions for how the stablecoin should be issued.

The first proposal came from Native Markets, led by Max Fiege, and suggested using Stripe’s stablecoin payment processor, Bridge, but it has received significant pushback. Following that, Sky proposed backing USDH with its own resources and offering a 4.85% yield. Meanwhile, Agora, a crypto infrastructure company backed by VanEck and MoonPay, has put forth a proposal to return 100% of USDH reserve revenue to the Hyperliquid community.

Ethena’s track record and future vision

Ethena’s entrance into the USDH bidding follows its recent achievement as the world’s third-largest stablecoin issuer, behind Tether and Circle. Its flagship token, USDe, surpassed $10 billion in supply in under ten months, marking the fastest growth rate on record. As of writing, USDe has grown to a market value of over $12.9 billion, according to data from Token Terminal.

In its blog post, Ethena reiterated that its commitments to Hyperliquid are not conditional on winning the USDH bid. The company expressed admiration for Hyperliquid, calling it “one of the most impressive and important stories to emerge in the last 20 years” and pledged to create multibillion-dollar value for the network, regardless of the outcome of the bid.

The future of USDH and Hyperliquid

The USDH bidding process will conclude after Hyperliquid’s next network upgrade, at which point validators will hold a formal vote to decide the winning proposal. The date for this upgrade has not yet been announced. As bids continue to roll in, Hyperliquid’s native token, HYPE, reached an all-time high of $55.04 on CoinGecko, signaling growing excitement around the platform and its future developments.