Hyperliquid is launching USDH, its native USD-pegged stablecoin.
The platform currently holds $5.6 billion in USDC deposits but loses an estimated $220 million annually in Treasury yield to Circle.
USDH aims to recapture this value for the Hyperliquid ecosystem through validator voting on September 14, 2025.
Key Takeaways
Revenue Recapture: USDH redirects $220+ million in annual Treasury yields from external issuers back to HYPE holders and ecosystem participantsValidator Vote: Six major stablecoin issuers competing, with Native Markets leading at 56-74% win probability on PolymarketFee Reduction: 80% lower fees for USDH trading pairs compared to other stablecoins on the platformCompliance First: All proposals emphasize GENIUS Act and MiCA compliance for institutional adoptionEcosystem Benefits: 95-100% of reserve yields flow back through HYPE buybacks, user rewards, or the Assistance Fund
What is USDH?
USDH is Hyperliquid’s proposed native stablecoin designed to maintain a 1:1 peg with the US dollar.
Unlike Circle’s USDC or Tether’s USDT, USDH will be built specifically for Hyperliquid’s Layer-1 blockchain, operating across both HyperCore (for trading) and HyperEVM (for smart contracts).
The stablecoin addresses a critical issue: Hyperliquid users currently deposit billions in USDC, but Circle captures all the Treasury yield from those reserves.
With 95% of the platform’s $5.6 billion in stablecoin deposits being USDC (representing 7.6% of USDC’s total supply), this represents significant value leakage from the ecosystem.
USDH won’t receive special privileges on the platform but will serve as a core settlement asset with reduced trading fees.
The Hyperliquid Foundation reserved the USDH ticker specifically for a “Hyperliquid-first, Hyperliquid-aligned, and compliant USD stablecoin.”
How USDH Works
Technical Architecture
USDH will maintain its dollar peg through full collateralization with low-risk assets.
While the exact mechanism depends on the winning issuer, all proposals share these core features:
Reserve Backing: US Treasury Bills, repurchase agreements, and cash deposits at regulated banks1:1 Redeemability: Direct mint and redemption with USD through authorized participantsOn-chain Transparency: All trades, orders, and liquidations executed transparently on Hyperliquid’s blockchain
The Competitive Bidding Process
Hyperliquid announced the USDH initiative on September 5, 2025, through Discord, creating an unprecedented auction for stablecoin issuance rights.
The process works as follows:
Proposal Submission: Closed September 10, with six major biddersValidator Indication: By September 11, validators signal their preferenceFinal Vote: September 14, 10-11 AM UTC, weighted by staked HYPEGas Auction: Winner must still win standard deployment auction
The Hyperliquid Foundation abstains from voting to ensure neutrality.
As of September 10, Native Markets leads with 21% of validator votes from 4 validators.
The Bidders: Who Wants to Issue USDH?
Native Markets (Leading Candidate)
Probability: 56-74% on PolymarketBacking: BlackRock off-chain reserves, Superstate/Bridge on-chainRevenue Share: Meaningful proceeds to Assistance Fund, yield to HYPE buybacksStrengths: Deep Hyperliquid ties, $20M+ ecosystem fundConcerns: New venture, timing controversy (received funding 5 hours before announcement)
Paxos (Major Contender)
Probability: 35% on PolymarketBacking: T-bills, repos, USDG (Global Dollar)Revenue Share: 95% to HYPE buybacks, 5% cap for Paxos after milestonesStrengths: PayPal integration promised, 70+ financial partners, acquired Molecular LabsConcerns: External issuer, only 3% validator votes currently
Ethena Labs (Late Entry)
Entry Date: September 9, 2025Backing: USDtb via Anchorage Digital, 100% BlackRock BUIDLRevenue Share: 95% net revenue to ecosystemStrengths: $75-150M for ecosystem incentives, zero security incidents on $23B volumeConcerns: Lower community enthusiasm, 10% Polymarket odds
Other Bidders
Sky (formerly MakerDAO): Offers 4.85% yields, $25M DeFi fund, but seen as overly complexFrax Finance: 100% yield pass-through, DeFi-native approach, but lacks fiat infrastructureAgora: Institutional backing from VanEck/State Street, coalition with Rain and LayerZero
Benefits of Using USDH
Direct Value Accrual
Instead of losing $220 million annually to external issuers, USDH keeps Treasury yields within Hyperliquid.
At current deposit levels and 4% APR, this translates to significant value for HYPE holders through buybacks that reduce token supply.
Cost Savings
80% fee reduction for USDH trading pairsNo bridge fees or delaysDirect fiat on/off-ramps planned by multiple bidders
Native Integration
USDH will work seamlessly with Hyperliquid’s 100,000 orders-per-second infrastructure, eliminating the friction of external stablecoins.
This matters for high-frequency traders who need sub-second settlement.
Ecosystem Incentives
Proposals include substantial ecosystem funding:
Native Markets: $20M+ ecosystem fundEthena: $75-150M for builders and marketsSky: $25M for DeFi developmentPaxos: $20M incentive program
How to Get and Use USDH
Obtaining USDH
Once launched, users will have multiple paths:
Direct Minting: Deposit USD or approved stablecoins for 1:1 USDHDEX Swaps: Convert USDC/USDT to USDH on HyperliquidFiat Ramps: Several bidders promise integrated fiat gatewaysMigration Programs: Most proposals include free USDC-to-USDH conversion
Usage on Hyperliquid
Trading: USDH pairs receive 80% fee discountCollateral: Use for perpetual futures marginLiquidity Provision: Earn from spot market makingStaking: Some proposals include yield-bearing variants
Cross-Chain Functionality
While USDH is Hyperliquid-first, most proposals include multichain expansion:
Agora and Sky propose LayerZero integrationPaxos offers deployment across major chainsNative Markets focuses on Hyperliquid initially
Risks and Considerations
Depegging Risk
All stablecoins face potential depegging during extreme market conditions.
Mitigation strategies include:
Over-collateralization requirementsDiversified reserve assetsRegular third-party audits1:1 redemption guarantees
Liquidity Bootstrapping
USDH must build sufficient liquidity to handle Hyperliquid’s massive trading volumes.
Bidders target $5 billion in supply with 99.5% uptime and less than 20 basis point peg deviation.
Regulatory Compliance
The GENIUS Act (signed July 2025) and EU’s MiCA regulations set strict standards.
All bidders emphasize compliance, but requirements may change as regulations develop.
Platform Risk
USDH’s success depends on Hyperliquid maintaining its 70% DeFi perpetuals market share.
Any platform issues could impact the stablecoin’s adoption and utility.
Market Impact and Statistics
Current Metrics
Hyperliquid Volume: $398-400B monthly perpetuals, $20B spotPlatform Revenue: $110M monthly feesUSDC Holdings: $5.5B (95% of platform stablecoins)Lost Yield: ~$220M annually at 4% Treasury rates
HYPE Token Response
Since the USDH announcement:
Price: $46.56-$52.23 (up 18-20% weekly)Market Cap: $13.8-17.4B (rank #11-16)All-Time High: $51.84 (September 8, 2025)
Stablecoin Market Context
Total stablecoin market cap exceeds $285 billion.
Hyperliquid’s $5.5B USDC represents 7% of Circle’s total supply, making USDH a significant competitive threat.
For context on broader stablecoin news, ecosystem-specific stablecoins are gaining traction post-GENIUS Act.
Future Outlook
Immediate Timeline
September 14, 2025: Validator vote (10-11 AM UTC)Post-vote: Gas auction for deployment rightsNetwork Upgrade: USDH launch with fee reductionsQ4 2025: Full ecosystem integration
Long-term Vision
Winning proposals promise:
Institutional fiat rails (SWIFT, ACH integration)Payment cards and merchant acceptanceCross-chain expansion while remaining Hyperliquid-firstTokenized real-world assets on HyperEVM
Conclusion
USDH transforms Hyperliquid’s economics by redirecting $220+ million in annual Treasury yields from external issuers back to the ecosystem.
The September 14 validator vote will determine which of six competing issuers, with Native Markets currently leading at 56-74% probability, will build this critical infrastructure.
For users, USDH means 80% lower trading fees, direct value accrual through HYPE buybacks, and native platform integration.
Success hinges on the winning issuer’s execution and Hyperliquid maintaining its 70% DeFi perpetuals market share.
With $5.6 billion in deposits and 100,000 orders per second capacity, Hyperliquid has the scale to make USDH a significant player in the stablecoin market.
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FAQs
1. Is USDH fully decentralized?
No proposal offers full decentralization. All maintain some centralized elements for regulatory compliance and reserve management. The level varies from DeFi-native approaches (Frax) to regulated entities (Paxos).
2. What happens if USDH depegs?
Each issuer guarantees 1:1 USD redemption, providing a price floor. Additionally, arbitrage mechanisms and market makers help maintain the peg during normal conditions.
3. Can I use USDH outside of Hyperliquid?
Yes, but with limitations. While most proposals include cross-chain plans, USDH is designed as “Hyperliquid-first” with primary utility on the native platform.
4. How is USDH audited?
All bidders commit to regular third-party audits of both smart contracts and reserves. Established issuers like Paxos and Agora already undergo routine audits for existing operations.
5. What are the fees for using USDH?
Basic operations (mint/redeem) will have minimal or zero fees. Trading fees are 80% lower than other stablecoin pairs. Specific fee structures depend on the winning issuer.