In the ever-evolving world of decentralized finance (DeFi), the competition to issue Hyperliquid’s native stablecoin, USDH, is heating up, with a new contender entering the fray. Sky, previously known as MakerDAO, has thrown its hat into the ring, offering a compelling proposal that could redefine the landscape. With an impressive $8 billion balance sheet, a seven-year track record, and an unprecedented B- rating from S&P for a DeFi protocol, Sky is setting itself apart as a formidable player in this high-stakes contest.
Sky’s Proposal: A Blend of Yield and Security
Sky’s proposal to power USDH isn’t just about boasting a robust financial backing; it’s about delivering value to users in tangible ways. Offering a 4.85% yield on all USDH held on Hyperliquid, Sky’s return rate surpasses even that of Treasury bills, making it an attractive option for investors looking for higher yields in a volatile market. Revenue generated from these returns is earmarked for HYPE buybacks and the Assistance Fund, illustrating Sky’s commitment to reinvesting in the ecosystem.
Moreover, Sky is pledging $2.2 billion in instant redemption liquidity through its Peg Stability Module. This feature is designed to provide institutional traders with the confidence they need to move large sums in and out of the stablecoin seamlessly, a critical component in maintaining liquidity and trust in the system.
Ecosystem Investment: The Hyperliquid Genesis Star
Beyond just yields and liquidity, Sky is looking to invest in the broader Hyperliquid ecosystem. Its proposal includes a $25 million initiative dubbed the “Hyperliquid Genesis Star,” inspired by Spark, a token farm within Sky that has already attracted over $1 billion in Total Value Locked (TVL). This move aims to bootstrap DeFi on Hyperliquid and potentially attract billions more in deposits.
Additionally, Sky intends to migrate its native buyback engine, which boasts over $250 million in annual profits, onto Hyperliquid. This transfer could significantly bolster the platform’s financial infrastructure and provide a more sustainable economic model for the future.
The Competition: Diverse Offerings and Strategic Pledges
While Sky’s proposal is compelling, it isn’t the only one on the table. Competitors have framed their offers in ways that appeal to different aspects of the DeFi community. Paxos, for instance, has pledged 95% of reserve earnings to HYPE buybacks and is offering a zero-fee USDC migration. This approach could appeal to those prioritizing cost-efficiency and HYPE token accumulation.
Frax, on the other hand, is taking a community-focused approach with a “community-first” wrapper model, where 100% of Treasury yield flows directly to users. This strategy aims to empower the user base and foster a more decentralized governance model.
Meanwhile, Agora, backed by industry giants like State Street, VanEck, and MoonPay, promises 100% of net revenue into HYPE buybacks, emphasizing neutrality and transparency. Their proposition might attract those wary of potential conflicts of interest and looking for a more straightforward revenue-sharing model.
Community Concerns and the Road Ahead
Not all proposals have been met with enthusiasm. Native Markets, closely aligned with Stripe’s Bridge, has faced pushback from the community over potential conflicts of interest related to Stripe’s Tempo blockchain and its ownership of wallet provider Privy. Such concerns highlight the importance of trust and perceived impartiality in the DeFi space.
As the September 14 voting deadline looms, validators face a difficult decision. The choice they make will not only determine the structure of USDH—whether it leans Genius-compliant, user-yielding, or Hyper-native—but also whether Hyperliquid’s monetary layer will be tied to a legacy stablecoin giant, a DeFi-native upstart, or a corporate payments firm with its own blockchain ambitions.
Conclusion: What’s at Stake
The decision-making process is more than just a technical choice; it’s a reflection of where the DeFi community wants to go. Will they prioritize higher yields and robust financial backing, as Sky proposes, or opt for community-driven and transparent models like those offered by Frax and Agora? Or will the allure of corporate stability and alignment with established financial institutions sway the vote in favor of players like Native Markets?
As validators head to the virtual polls, the outcome will undoubtedly shape the future of Hyperliquid and its native stablecoin, USDH. The DeFi landscape is poised for transformation, and the world is watching to see which path it will take.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
