By Michael Scott
Hermetica, the crypto developer of USDh stablecoin, mirrors Ethena’s playbook to guarantee holders a 12% – 25% yield during a bull market.
Crypto developers tap the newly established Runes token standard to introduce dollar-pegged stablecoin to the Bitcoin blockchain. The developers explain that the USDh token is, besides backing, redeemable for Bitcoin (BTC) rather than typical cash, says Jakob Schillinger, Hermetica founder. Additionally, Hermatica reveals that the stablecoin offers a yield to the holders, though it could surge as high as 25% annually.
USDh Stablecoin Holders to Earn Payout
The USDh embodies Bitcoin entirely, implying that the protocol utilizes fiat rails and can operate autonomously from the traditional banking system, clarified Jakob Schillinger, Hermatica’s chief executive.
Runes involves the newly launched standard for the Bitcoin blockchain by the Ordinals developer Casey Rordamor. Since its unveiling in April, Runes has been frequently used relative to the BRC-20 and Ordinals standards.
Schillinger hails Runes for its data efficiency than its predecessors. Additionally, it harbors the potential to unlock the practical Bitcoin-based crypto beyond the typical meme coins.
Hermetica utilizes a unique model from the widely deployed approach by the global largest stablecoin, Tether (USDT), and second-ranked Circle USD (USDC).
The USDT and USDC pair depend on centralized financial institutions (CeFi) to offer custody to assets that back the tokens. The firms have seen their market capitalization hit $145 billion, supported by cash and cash equivalents — primarily US treasury bills.
Circle and Tether derive yield from the T-bills holding though retaining the profits earned from the debt. Moreover, the pair exercises the power to freeze and seize tokens held by sanctioned users and criminal actors in compliance with the requirements imposed by the US Treasury Department.
Conversely, Hermetica’s design guarantees the payout of the yield generated to the token holders. The USDh holders are immune to the de-pegging risk that conventional stablecoin holders face during bank failures. Such was evident during the Silicon Valley Bank (SVB) collapse in 2023.
Hermetica protocol overcomes the banking failures risk by coupling the spot BTC position by undertaking a short perpetual futures position, adds Schillinger. The design mirrors Ethena – the issuer of Ethereum-based stablecoin USDe. The USDe, now with a $3.4 billion market capitalization, facilitates the investors to reap yield on short positions held regularly.
Tapping Idle Capital in the Bitcoin Ecosystem
Schillinger notes that the Bitcoins decentralized finance (DeFi) ecosystem is still nascent. Fortunately, Hermatica considers the protocol uniquely positioned to tap the ecosystem’s $360 billion idle capital to generate yield. Such is possible with the protocol’s chief observing that the annualized yield derived from the funding rates is estimated to be 12% in the past 4.5 years.
Hermitica’s official statement assures the intention to scale the Bitcoin-native DeFi leveraging Stacks – layer-2 blockchain established to ensure compatibility with the smart contracts. The affiliation with Stacks coincides with the regulator’s recent clearance of wrongdoing to end the three-year investigation.
The Stacks protocol already features integration with Liquidium – a layer-1-based peer-to-peer protocol- that facilitates borrowing and lending BTC-based assets.
Liquidium chief executive Robin Obermaier urges the creation of reliable native stablecoin as critical for every blockchain ecosystem. Facilitating the users’ use of stablecoins within Bitcoin DeFi applications is a crucial milestone for the Bitcoin blockchain.