The decentralized finance (DeFi) world is watching closely as a high-stakes competition unfolds on Hyperliquid, the leading perpetual futures exchange in the DeFi ecosystem. The prize? The exclusive right to build and issue the protocol’s new native stablecoin, USDH.
This strategic move, announced by the Hyperliquid team, is designed to pivot the platform away from reliance on external stablecoin providers. Currently, Hyperliquid’s spot markets are denominated in established giants like Circle’s USDC and Tether’s USDT. By launching its own native asset, Hyperliquid aims to capture additional revenue, solidify its economic sovereignty, and deepen the utility within its own growing ecosystem.
The decision won’t be made in a boardroom but by the network’s validators. Following an upcoming network upgrade, these key stakeholders will vote on proposals from various organizations bidding for the privilege. So far, six proposals have been submitted, but a few have quickly risen to the top as community favorites.
Here’s a look at the frontrunners in this groundbreaking stablecoin auction.
Paxos: The Institutional Heavyweight
Leading the pack is Paxos, a New York-regulated fintech and trust company with a proven track record in the digital assets space. As the issuer of the PayPal USD (PYUSD) stablecoin and the Pax Dollar (USDP), Paxos brings a formidable reputation for regulatory compliance and institutional-grade asset management.
Their proposal outlines a model where USDH would be backed by a conservative portfolio of U.S. Treasury Bills, repurchase agreements, and their own Global Dollar stablecoin. A key selling point for the Hyperliquid community is Paxos’s plan to direct 95% of the interest earned from these reserve assets to fund buybacks of the protocol’s native HYPE token. This mechanism would directly reward HYPE stakeholders and create a powerful value-accrual model, aligning with the incentives of the decentralized community.
Other Noteworthy Contenders
While Paxos is a standout, the open nature of the bidding process has attracted a diverse set of proposals, including from specialized DeFi native protocols and algorithmic stablecoin architects. These entities are likely pitching models that leverage over-collateralization with crypto assets or innovative algorithmic mechanisms to maintain the peg—common approaches in DeFi that contrast with Paxos’s off-chain, asset-backed philosophy.
The variety of proposals highlights a central debate in the stablecoin arena: the trade-off between the capital efficiency of decentralized models and the stability and regulatory clarity offered by traditional finance-backed assets. As noted by industry analysts at CoinDesk, the choice Hyperliquid’s validators make could signal a broader trend of DeFi protocols seeking licensed partners to bridge the gap to traditional finance.
Why This Move Matters for Hyperliquid
Hyperliquid is not a small player testing the waters. According to data from DefiLlama, the exchange has processed a monumental $378 billion in trading volume over the past month, establishing itself as a dominant force. Introducing USDH is a logical next step in its maturation, reducing counterparty risk and building a more resilient, self-sustaining economic flywheel.
The success of USDH will depend on its ability to achieve deep liquidity and unwavering trust from users. By handing this critical decision to its validators, Hyperliquid is staying true to its decentralized principles, allowing its community to shape the very foundation of its future economy. All eyes are now on the upcoming network upgrade, which will trigger one of the most significant governance votes in recent DeFi history.
