This episode reveals the high-stakes battle for Hyperliquid's native stablecoin, USDH, where DeFi giants and TradFi institutions are forced to lobby a new class of crypto-native whales for control over the protocol's multi-billion dollar future.
The State of the USDH Proposal Race
- Polymarket Odds: At the time of recording, a Polymarket contract shows Native Markets in the lead at 57%, followed by Ethena at 39%. Other major players like Sky, Paxos, and Agora are trailing significantly, indicating a strong community preference for a crypto-native solution.
- The New Power Brokers: Rob and Andy note that this race forces established financial players to appeal directly to influential, anonymous community members who control significant voting power, a complete inversion of traditional capital dynamics.
Vance Spencer (Framework): The Case for Sky and Strategic Alignment
- Framework's Position: Vance clarifies that Framework is a top-20 HYPE holder, has incubated a top market maker on the platform, and has team members contributing to the open-source ecosystem. Their involvement is deep and long-term.
- The Stablecoin Engine: The core of Vance's thesis is that a successful stablecoin could add hundreds of millions in annual revenue to Hyperliquid's assistance fund, providing the "other engine" needed to propel HYPE to a potential $500 valuation.
- Sky's Unique Proposal:
- Superior Yield: Sky offers a yield structure designed to beat the SOFR (Secured Overnight Financing Rate), the benchmark rate for dollar-denominated derivatives and loans. This is achieved by diversifying collateral beyond T-bills into assets like Ethena's basis trade and AAA-rated CLOs.
- The Hyperliquid Star: Sky proposes creating a dedicated, semi-autonomous economic unit for Hyperliquid. This "Star" would manage risk capital, have its own farmable token for the community, and inject significant liquidity, mirroring the community-centric upside of the Native Markets proposal.
- Jurisdictional Risk vs. Compliance: Vance raises a critical strategic point about over-reliance on U.S. regulation. He questions the wisdom of choosing a purely MiCA-compliant (Markets in Crypto-Assets regulation) stablecoin, which ties Hyperliquid's fate entirely to the U.S. financial system and its interest rate policies.
"Are we sure we want to put all the eggs of the hyperliquid basket, you know, right there at this moment?" - Vance Spencer
Rune Christensen (Sky): A Vision for a Technologically Superior Stablecoin
- Shared Ethos: Rune highlights that Sky was the first protocol to implement buybacks, a core feature of Hyperliquid's tokenomics, showing a deep alignment in creating sustainable, value-accruing systems.
- Risk-Adjusted Return: The fundamental principle of Sky's USDS stablecoin is maximizing risk-adjusted return. This is achieved through a sophisticated framework that extends banking's Basel III capital requirements to crypto assets, allowing Sky to safely deploy capital into higher-yielding, diversified strategies.
- Deploying the Balance Sheet: Rune explains that winning the USDH ticker would provide the security assurances needed for Sky to deploy a significant portion of its $8 billion balance sheet into the Hyperliquid ecosystem. This would be managed through the proposed Hyperliquid Star, guided by the Hyperliquid community itself.
- Beyond the Ticker: For Sky, the USDH ticker is a symbolic validation that would "100x" the energy and synergy between the two ecosystems. Regardless of the outcome, Sky plans to launch a Hyperliquid Star and integrate deeply with the platform.
Lorenzo (USDT Zero): The Agnostic Infrastructure Provider
- Strategic Abstention: Lorenzo explains that USDT0 opted out of the race because they believe USDT is already the ideal stablecoin for traders and the field was becoming too crowded. Their goal is to remain a neutral, foundational layer for the ecosystem.
- A Validator's View: As a validator, USDT0 is taking its time to evaluate all proposals. Lorenzo emphasizes the complexity of launching a successful stablecoin, noting that reaching multi-billion dollar scale is "absolute madness" and requires immense distribution.
- The Revenue Share Debate: Lorenzo agrees that running a stablecoin is difficult and that issuers need incentives. He notes that Tether's success comes from pure utility, as users hold it to escape hyperinflation, not to earn yield. This creates a different, more resilient business model compared to yield-bearing stablecoins that are sensitive to interest rate changes.
- The Tether Gold Thesis: Lorenzo presents a forward-looking view on stablecoins denominated in assets other than the US dollar, specifically Tether Gold (XAUT). He argues that a gold-backed stablecoin offers a hedge against USD debasement and is a perfect, decentralized collateral for DeFi.
Ryan Watkins (Syncracy): The Practical Era of Crypto
- Focus on Internal Adoption: Ryan argues that the immediate priority for the USDH winner isn't external adoption, but winning over the existing $5-6 billion of USDC on Hyperliquid. This requires building trust, providing incentives, and integrating deeply with HIP-3 markets and HyperEVM protocols.
- The Case for Institutional Grade: Contrary to Vance's view, Ryan believes USDH should be a "no-frills," MiCA-compliant, and institutionally-backed stablecoin. This would increase user confidence, attract larger depositors, and strengthen Hyperliquid's brand as it competes with major centralized exchanges.
- Hyperliquid's 'Zero to One' Moment: Ryan attributes Hyperliquid's success to a combination of technological performance, superior user experience (no gas fees per transaction), aggressive asset listings, and a cultural shift in DeFi that prioritized product quality over ideological purity.
- The Ethena Thesis: Ryan is extremely bullish on Ethena, noting its relentless shipping pace and key integrations (Binance, MegaETH). He sees a clear path for USDe to grow its supply by tens of billions. In a rate-cutting environment, crypto funding rates are expected to rise, making Ethena's yield model even more attractive compared to T-bills.
Conclusion
This episode highlights that the USDH vote is a referendum on Hyperliquid's future identity: will it embrace institutional legitimacy or double down on its crypto-native roots? Investors and researchers must monitor the outcome, as the winning proposal will define the protocol's next major revenue engine and its strategic path forward.
