Hyperliquid’s USDH Stablecoin Race Sparks Fairness Debate

Have you ever wondered what it takes to launch a new player in the fast-paced world of cryptocurrency? The race to create Hyperliquid’s USDH stablecoin has the crypto community buzzing, with big names and innovative DeFi teams throwing their hats into the ring. It’s not just about who can build the best stablecoin—it’s about trust, fairness, and who gets to control billions in trading volume. As the September 14 vote looms, whispers of favoritism are raising eyebrows, and I can’t help but feel this competition is more than meets the eye.

The USDH Battle: A New Era for Hyperliquid

Hyperliquid, a rising star in the decentralized finance (DeFi) space, is making waves with its bold move to launch USDH, a native stablecoin aimed at shaking up its reliance on Circle’s USDC. With roughly $5.5 billion in reserves currently tied to USDC, Hyperliquid is eyeing a chance to keep more of the estimated $200 million in annual yield in-house. This isn’t just about saving a few bucks—it’s about reshaping how liquidity and reserves are managed while giving users a bigger stake in the platform’s future. The request for proposal (RFP) for USDH has drawn a crowd of contenders, each with their own vision for what this stablecoin could become.

But here’s the kicker: the process isn’t as straightforward as it seems. Rumors are swirling that the deck might be stacked in favor of certain players, leaving some to question whether this is a fair fight or a carefully orchestrated show. Let’s dive into the players, their strategies, and why this race matters.

Who’s in the Ring? The USDH Contenders

The competition for USDH is a fascinating mix of established crypto giants and scrappy DeFi innovators, each bringing a unique approach to the table. Here’s a breakdown of the key players vying to shape Hyperliquid’s stablecoin future:

• Ethena Labs: Proposing a USDH backed by USDtb, tied to BlackRock’s BUIDL fund, Ethena promises to funnel 95% of reserve revenue back to Hyperliquid. Their plan to cover migration costs from USDC and introduce reward-incentivized collateral makes them a standout.
• Paxos: Known for BUSD and PayPal’s PYUSD, Paxos is leaning on its regulatory credentials, promising compliance with NYDFS and EU MiCA standards. They’re also eyeing integration with PayPal and Venmo for broader adoption.
• Frax Finance: This DeFi player wants to mint USDH at parity with frxUSD and Treasuries, directing all Treasury yield to Hyperliquid users. It’s a decentralized dream for yield-focused investors.
• Sky Ecosystem: Formerly MakerDAO, Sky offers a decentralized model with a 4.85% yield and an $8 billion balance sheet. Their Hyperliquid Star initiative aims to fuel platform growth.
• Agora: This privacy-focused DeFi protocol is all-in, pledging 100% of USDH net income to platform support or HYPE token buybacks, emphasizing community-driven growth.
• Native Markets: A lesser-known contender, Native Markets proposes a 50/50 yield split between platform growth and an Assistance Fund, but their lack of stablecoin experience raises questions.

Each contender brings something unique, but the real question is: what does Hyperliquid value most? Is it innovation, compliance, or pure revenue potential? In my opinion, Ethena’s forward-thinking approach—especially their idea of using assets like BTC or HYPE as collateral—feels like a game-changer, but Paxos’ regulatory clout can’t be ignored either.

Why USDH Matters: More Than Just a Stablecoin

At its core, USDH isn’t just another stablecoin—it’s a power move. Hyperliquid’s current reliance on USDC means Circle is pocketing a hefty chunk of reserve yield, estimated at $200 million annually. By launching USDH, Hyperliquid could redirect that revenue to its own ecosystem, boosting the value of its HYPE token and giving users more control over liquidity. It’s a classic case of cutting out the middleman, but with billions in trading volume at stake, the stakes are sky-high.

The number one priority for USDH is a long-term, synergistic partner. It’s about revenue potential and the value of Hyperliquid’s HYPE token.

– Crypto research analyst

The analyst’s take hits the nail on the head. A stablecoin isn’t just a tool for transactions—it’s a strategic asset that can make or break a platform’s growth. For Hyperliquid, USDH could be the key to deeper integration with DeFi protocols, better liquidity management, and a stronger community. But choosing the right partner is critical, and that’s where things get murky.

Fairness Concerns: Is the Game Rigged?

Here’s where things get spicy. While the RFP process seems open and competitive, some in the crypto community are crying foul. One prominent voice called the process “a bit of a farce,” alleging that Native Markets, a relatively unknown player, might have had a head start. The speed of their proposal—dropped almost immediately after the RFP was announced—has raised suspicions of insider advantage.

Many bidders privately agree the process feels stacked, but they’re staying quiet to avoid backlash.

– Crypto industry insider

This kind of talk makes you wonder: is Hyperliquid genuinely looking for the best partner, or is this a done deal dressed up as a competition? In my experience, transparency is everything in crypto—when trust wavers, the community notices. If Hyperliquid wants USDH to succeed, they’ll need to address these concerns head-on before the September 14 vote.

Breaking Down the Proposals: What Stands Out?

Let’s take a closer look at what each contender is bringing to the table. I’ve put together a quick comparison to highlight the differences:

Ethena’s proposal feels like it’s pushing the boundaries of what a stablecoin can do, with ideas like using BTC or HYPE as collateral. Paxos, on the other hand, plays it safe with regulatory compliance, which could appeal to institutional players. Frax and Sky are doubling down on DeFi principles, while Agora’s privacy angle is intriguing. Native Markets? They’re the wildcard—aligned with Hyperliquid but lacking the experience of the others.

What’s at Stake for Hyperliquid?

The USDH decision isn’t just about picking a stablecoin—it’s about defining Hyperliquid’s place in the crypto world. A successful USDH could:

• Boost the HYPE token value through buybacks and ecosystem growth.
• Reduce reliance on external stablecoins like USDC.
• Attract new users with better yields and deeper DeFi integration.
• Position Hyperliquid as a leader in decentralized finance.

But if the process is perceived as unfair, Hyperliquid risks alienating its community. Trust is the currency of crypto, and any hint of favoritism could damage the platform’s reputation. Perhaps the most interesting aspect is how Hyperliquid balances innovation with stability—do they go bold with Ethena or play it safe with Paxos? The vote will tell.

The Bigger Picture: Stablecoins in 2025

Zooming out, the USDH race is part of a larger trend in the crypto space. Stablecoins are no longer just pegged tokens—they’re strategic tools for platforms, investors, and even regulators. With Bitcoin at $113,720 and Ethereum at $4,333, the market is hotter than ever, and stablecoins like USDH could play a pivotal role in managing volatility and driving adoption.

Here’s a quick look at the current crypto landscape:

1. Market Growth: Stablecoins like USDC and Tether dominate, with USDC alone boasting a $72 billion market cap.
2. DeFi Expansion: Platforms like Hyperliquid are pushing for more decentralized, user-driven ecosystems.
3. Regulatory Scrutiny: Compliance with NYDFS and MiCA is becoming a must for stablecoin issuers.

In this context, USDH isn’t just a Hyperliquid project—it’s a test case for the future of stablecoins. Will DeFi innovation win out, or will regulatory compliance take precedence? I’d bet on a hybrid approach, where platforms like Hyperliquid find a way to blend both worlds.

What’s Next for USDH?

As the September 14 vote approaches, all eyes are on Hyperliquid. Will they choose a partner that pushes the boundaries of DeFi, or one that prioritizes regulatory safety? And more importantly, will they address the fairness concerns head-on? In my view, transparency is non-negotiable—Hyperliquid needs to show the community that every proposal is getting a fair shake.

The USDH race is a microcosm of the broader crypto world: innovation, competition, and a dash of controversy. Whether it’s Ethena’s bold collateral ideas or Paxos’ regulatory reassurance, the winner will shape Hyperliquid’s future—and maybe even the stablecoin market as a whole. What do you think—will USDH redefine DeFi, or is this just another crypto storm in a teacup? The vote’s just days away, and I’m on the edge of my seat.