Crypto developers have leveraged the newly introduced Runes token standard to launch an all-new dollar-pegged stablecoin native to the Bitcoin blockchain.
But there’s a twist: its developers told Decrypt that the token, USDh, is backed by and redeemable for BTC rather than actual cash. In fact, the stablecoin offers a yield to holders that they said could soar as high as 25% per year.
“USDh is Bitcoin all the way down, which means the protocol doesn’t rely on fiat rails and can operate completely outside the traditional banking system,” said Jakob Schillinger, founder & CEO of Hermetica, the stablecoin protocol behind USDh.
Runes is a new token standard for Bitcoin launched by Ordinals creator Casey Rordamor in April, and is now more frequently used than the Ordinals and BRC-20 standards that came before it. Runes is known to be far more data efficient than its predecessors and has more potential for unlocking practical Bitcoin-based assets beyond meme coins.
Hermetica’s model differs from more widely used stablecoins like Tether (USDT) and Circle USD (USDC), which rely on centralized financial institutions to provide custody of the assets backing their tokens. Those firms today control well over $145 billion across both tokens, including a combination of cash and cash equivalents—mainly U.S. treasury bills.
Tether and Circle earn a yield from the T-bills they hold and keep all profits generated from that debt for themselves. They also have the power to seize or freeze any tokens held by their users, as they have repeatedly done in response to sanctions requirements established by the U.S. Treasury Department.
By contrast, Hemetica’s design pays out the yield generated by the protocol to its token holders. Those holders are also immune to de-pegging risk that can plague traditional stablecoin holders in the event of a bank failure, as seen with USDC during the fall of Silicon Valley Bank last year.
“The protocol accomplishes this by coupling a spot BTC position with a short perpetual futures position,” explained Schillinger. The protocol’s design mimics that of Ethena, pioneers of the Ethereum-based stablecoin USDe, whose $3.4 billion token generates yield for investors on the short position it regularly holds.
Given that Bitcoin’s DeFi ecosystem is nascent, Hermetica believes its protocol can tap into the estimated $360 billion of “idle” capital in the ecosystem from those looking to generate yield. “Over the past 4.5 years, the annualized yield from funding rates has been 12%,” Schillinger noted.
In a press release, Hemetica said it intends to scale its Bitcoin-native DeFi using Stacks, a Bitcoin layer-2 blockchain built for compatibility with smart contracts. Stacks was recently cleared of wrongdoing by regulators for potential securities fraud following three years of investigation.
The Stacks protocol already has an integration with Liquidium, a layer-1-based peer-to-peer protocol for borrowing and lending Bitcoin-based assets.
“A reliable native stablecoin is crucial for every blockchain ecosystem,” said Liquidium CEO Robin Obermaier on the matter. “Enabling users to utilize stablecoins in Bitcoin DeFi applications is the next major milestone for Bitcoin.”
Edited by Ryan Ozawa.