Hyperliquid-first, Hyperliquid-aligned

Behind Hyperliquid's stablecoin bidding war is a major shift in the platform's stablecoin strategic thinking. In the middle of this year, the Hyperliquid team considered issuing its own native USD stablecoin and reserved the "USDH" ticker for this purpose, temporarily prohibiting others from registering the code through the on-chain domain name auction mechanism. Hyperliquid's unique Ticker auction system allows anyone to bid to register new asset symbols, but USDH, as a potential platform-exclusive stablecoin, was initially reserved by the official and not opened. The community once thought that the official would directly launch the USDH stablecoin. However, after careful consideration, the team chose to "delegate" the USDH issuance rights to the ecosystem, by introducing multiple bidding schemes and letting the community vote to decide the ownership. Previous incidents have led the community to question Hyperliquid's over-centralization, and this decision is seen as an important signal for Hyperliquid's ecological governance to move towards community openness and win-win cooperation. The official abandoned the opportunity to exclusively issue stablecoins and instead gave up this cake to the bidder who can give the most profit to the community through bidding. The multi-stablecoin operation model will also bring broader expansion channels for Hyperliquid.

This shift has clear motivations and background. On the one hand, changes in the interest rate environment have made stablecoin reserve interest an income source that cannot be ignored. According to the current risk-free interest rate of about 4%-5%, nearly $6.00B in stablecoin deposits on the Hyperliquid chain can generate more than $200.00M in interest income each year. In the past, most of these revenues flowed to centralized issuers such as USDC, and the Hyperliquid ecosystem did not directly benefit. As the platform grows, this situation of "making wedding clothes for others" becomes increasingly difficult to ignore. On the other hand, over-reliance on USDC also brings excessive concentration and compliance risks. Hyperliquid hopes to introduce a platform-native stablecoin to enhance autonomy and incorporate interest income and seigniorage income into the chain system, thereby strengthening HYPE token value support and ecological blood-making functions.

Therefore, when the team decided to open the USDH bidding, it also set a clear value orientation "Hyperliquid-first, Hyperliquid-aligned", giving priority to solutions that can return most of the revenue to the community and enhance the value of Hyperliquid tokens. It is worth noting that the Hyperliquid Foundation currently holds a large amount of HYPE equity, and the official promises not to use this part of the voting rights, and will ultimately follow the community voting results. However, the influence of team founder Jeff Yan as a key figure on the trend cannot be ignored. The community generally believes that the official tends to choose a plan where "the majority of profits go to the community". This special decision-making mechanism ensures to some extent that the bidding results are in line with Hyperliquid's long-term interests, and also sets a dark bid for bidders, whoever can transfer the most revenue to the Hyperliquid ecosystem has the greatest chance of winning.

What tricks did the various institutions use to bid?

The contenders for the USDH issuance rights have shown their unique abilities and offered chips to attract the Hyperliquid community. Paxos, Frax, Agora, and Native Markets have successively submitted detailed proposals, and other projects such as Ethena are eager to try. Despite their different backgrounds, these programs all highlight a theme, interest binding and ecological profit-sharing.

Paxos (Compliance Advantages and Buyback Model)

Established compliant stablecoin institution Paxos (which has issued USDP and PayPal USD) was the first to submit a proposal. Paxos promises to build USDH into a compliant USD stablecoin "first launched by Hyperliquid", fully compliant with the US Stablecoin Innovation Act (GENIUS) and the EU MiCA regulatory standards. Technically, USDH will be operated by the Paxos Labs department and natively issued on Hyperliquid's two chains (HyperEVM and HyperCore).

In terms of profit distribution, Paxos has put forward a bright promise to take out 95% of the interest generated by the USDH reserve and use it to repurchase HYPE tokens in the secondary market, and then return the repurchased proceeds to ecological projects, validators and users. According to estimates, if USDH fully replaces the existing approximately $5.70B USDC stock on Hyperliquid, this mechanism will bring nearly $190.00M in buyback orders to HYPE each year. In addition, Paxos will leverage its deep traditional financial network resources: promote the integration of HYPE assets in dozens of financial institutions it serves, such as PayPal, Venmo, MercadoLibre, Nubank, and Interactive Brokers, to enhance the mainstream reach of the Hyperliquid ecosystem. Paxos also promises to provide a free one-click conversion channel between USDC and USDH to smooth the user migration experience.

Overall, the Paxos program is based on compliance and credibility, supplemented by huge repurchases and broad channel resources, and is evaluated as "full of sincerity", which not only takes care of legal compliance and initial liquidity access, but also directly empowers HYPE, and even opens up legal currency and traditional financial cooperation space.

Frax (Full Revenue Payment and DeFi Standard)

Decentralized USD stablecoin protocol Frax Finance also quickly followed up and submitted a proposal. Frax's proposal focuses on "maximizing profit-sharing" and on-chain governance, promising to return 100% of USDH's underlying revenue to the Hyperliquid community. Specifically, USDH will be pegged 1:1 to Frax's existing stablecoin frxUSD as a reserve asset, and frxUSD is backed by high-quality bond assets such as Blackstone Group's BUIDL fund and generates revenue. Frax proposes to use all the interest earned from holding these bonds to reward HYPE holders. At the same time, Frax supports users to freely exchange USDH between USDT, USDC, frxUSD and legal currency, which is as convenient as centralized institutions. It is worth noting that the Frax program emphasizes that the liquidity and distribution of USDH are governed by HYPE, rather than being led by Frax itself, so as to avoid conflicts of interest. Compared with Paxos, Frax offers more attractive conditions. They choose not to take commissions, not to ask for tokens or revenue sharing, and will pass the FraxNet account layer. 100% of the underlying treasury bond income will be distributed to Hyperliquid users in an on-chain programmed manner. Under the condition of the current $5.50B stablecoin deposit and a 4% annualized treasury bond interest rate, this means that $220.00M in revenue will flow back into Hyperliquid every year.

However, the disadvantage is that Frax is slightly inferior in terms of traditional reputation, compliance licenses and financial institution networks in reserve management. In other words, Frax embodies the radical DeFi standard, maximizing profit-sharing to the community, but lacks the strong regulatory endorsement and traditional industry support of Paxos.

Agora (Neutral Alliance and Full Profit Sharing)

Emerging stablecoin infrastructure company Agora (founder Nick van Eck has a Wall Street asset management background) has also joined the battle. Agora just completed a $50.00M financing led by Paradigm in July, and the market value of its first stablecoin AUSD is approximately $130.00M. Its proposal is characterized by the introduction of the concept of a "stablecoin issuance alliance", with Agora providing on-chain issuance technology, Rain Company providing compliant legal currency deposit and withdrawal solutions, and cross-chain communication protocol LayerZero ensuring the multi-chain interoperability of USDH. And Moonpay's president also announced joining the alliance a few hours ago, perhaps in response to community leader mlm's "FOMO" tweet released by Dragonfly partner Rob for Agora, and also specifically announced that he would ask Paradigm co-founder Matt Huang to recuse himself from this vote (Paradigm is also an investor in Stripe, Tempo, MoonPay and Agora Finance).

In terms of revenue distribution, Agora promises to share 100% of the USDH reserve interest revenue with the Hyperliquid ecosystem, which can be in the form of HYPE repurchase or injection into community assistance funds. At the same time, Agora emphasizes its "neutral" positioning, focusing on serving Hyperliquid, and will not use USDH to access other payment networks, brokerage businesses or cross-chain issuance, and will not do anything that competes with or conflicts with the interests of the Hyperliquid ecosystem. This is seen as a response to Paxos, alluding to the fact that large issuers such as Paxos have multi-chain and multi-institutional layouts, and there may be problems with impure profit distribution. However, community comments believe that although Agora's concept is close to Hyperliquid's interests, the details of interest redistribution and ecological synergy in its proposal are not as transparent as the first two, and the external incremental resources it can bring are relatively limited. In short, Agora provides an idea of a "customized stablecoin led by Hyperliquid", but it does not have the influence of Paxos in terms of scale and resources.

Native Markets (Differentiated Thinking of Local Team)

The Native Markets proposal was proposed by Max, a community leader who previously led the listing of Hyperliuquid DAT on the listed company Hyperion, and he also triggered the most discussions among community members of all proposals. The team is led by former Uniswap Labs President and Chief Operating Officer Mary-Catherine Lader and builder Anish Agnihotri. Native Markets also promises that USDH complies with the US GENIUS regulatory standards and inherits the team's issuer Bridge's global compliance qualifications and legal currency channel capabilities. Bridge was acquired by payment giant Stripe last year, and Native plans to use Bridge to complete the stablecoin legal currency channel docking. However, this also brings potential conflicts. Stripe recently joined forces with Paradigm to develop its own stablecoin chain Tempo. Bridge's involvement in it may mean that interests are intertwined, and this has also been hit by the Agora alliance.

Native's plan stated that it would inject the reserve interest profits into Hyperliquid's community assistance fund, similar to Agora, focusing on ecological feedback. Overall, Native Markets, as the least famous bidder, has the advantage that the team has deeply cultivated the Hyperliquid chain and has a deep understanding of the local ecosystem, but both brand appeal and external cooperation opportunities that can be brought to Hyperliquid are relatively limited.

Ethena Labs

In addition, projects such as Ethena Labs are also rumored to be participating in the bidding. Ethena is a new decentralized derivative stablecoin. Its founding team claimed to have submitted a USDH proposal to Hyperliquid as early as the fall, but has not received a response. Its Twitter "Intern" even posted a Meme-style tweet of Eminem's STAN "shouting" to Hyperliquid founder Jeff after the bidding news was announced, complaining that the plan he submitted seemed to have disappeared (the main idea of the Stan song is that a fan of Eminem chose to commit suicide with his wife and children because he did not receive a reply from his idol for a long time). This episode reflects from the side that Hyperliquid initially had reservations about the screening of bidders, and also made the community curious about what different path Ethena, as a platform that uses LSD and perpetual hedging to build non-USD reserve stablecoins, would propose if it joined.

When institutions "serve" the community, the stablecoin 2.0 era is coming

Faced with several attractive proposals, the Hyperliquid community has recently launched a heated discussion, and the overall public opinion tends to support proposals that give a high percentage of profits and enhance the value of HYPE. Many token holders have responded positively to the Paxos and Frax proposals, believing that both are in line with the guidance of "giving the majority of benefits to the community". Among them, Paxos has won the favor of another group of supporters with its compliance reputation and huge resources. Although it only promises 95% interest profit sharing, it indirectly empowers HYPE by repurchasing HYPE, which may bring more sustained token demand support. At the same time, Paxos channels are expected to introduce incremental traditional financial users to Hyperliquid. However, some people also pointed out that the implementation details of "redistributing" the repurchase income to ecological partners in the Paxos plan are uncertain, and they are worried that the actual benefits to the community will be discounted. Frax's approach of directly returning all revenue to users is regarded as an extreme example of "trust-free, zero commission", and the revenue is distributed on the chain through HYPE governance, which is transparent and efficient. In contrast, the revenue under the Frax model is directly distributed to HYPE pledgers by the contract, the room for manipulation is smaller, and the Crypto native community trusts it more. Many people prefer the Frax model that can be directly distributed to users on the chain.

This bidding war has also prompted a wider range of industry participants to express their views. Jeremy Allaire, CEO of USDC issuer Circle, was the first to speak out. He posted on the X platform, welcoming competition and saying, "Don't believe the hype, Circle will also enter the HYPE ecosystem in a big way." The biggest impact of this USDH auction may be on Circle, which has forced Circle to promote some programs that are beneficial to Hyperliquid. The first plan they proposed was to directly issue native USDC on the Hyperliquid chain (previously mostly cross-chain). Some analysts believe that if the new issuer of USDH successfully rises, USDC's exclusive position on Hyperliquid will be broken, which will undoubtedly make matters worse for USDC, which has a declining market share. However, for the Hyperliquid community, what is more concerned is whether the final plan can fulfill the promise of benefits to HYPE holders, and whether the platform can get rid of its over-reliance on centralized stablecoins and achieve true value internal circulation.

As the vote approaches, the ownership of USDH issuance rights will soon be revealed. This competition is not only a game between several institutions, but also a touchstone for testing the evolution of the current stablecoin model in the crypto market. No matter who wins in the end, it is certain that stablecoin issuance is moving from a situation where a few companies dominate to a new stage where major trading platforms and ecosystems compete. Recently, projects including Circle's new chain Arc, Stripe and Paradigm's Tempo chain, decentralized stablecoins such as Ethena's Converge, and Metamask's mUSD have emerged one after another. The popularity of the stablecoin track is unprecedented, and innovative models are emerging one after another. In the Hyperliquid case, we see that stablecoin issuers are willing to give up almost all revenue in exchange for scenario distribution, which was unimaginable in the past. It is foreseeable that once USDH is successfully launched and verifies the positive cycle of "returning revenue to the community and feeding back value to the ecosystem", other trading platforms or public chains may follow suit, triggering a major change in the industry's stablecoin strategy, and perhaps the "stablecoin 2.0 era" will begin. [LFG]