Let’s discuss the much-talked-about $USDH stablecoin bidding event by @HyperliquidX.
On the surface, it appears to be a battle for interests among issuers like Frax, Sky, and Native Market. In reality, it’s an “open auction” for stablecoin minting rights that will reshape the rules of the stablecoin market going forward.
Drawing from @0xMert_’s insights, here are several perspectives:
1) The USDH minting rights battle exposes a fundamental tension between decentralized applications’ demand for native stablecoins and the need for unified stablecoin liquidity.
Simply put, every major protocol seeks its own “money printing authority,” but this inevitably leads to fragmented liquidity.
Mert proposes two solutions to this problem:
- “Align” ecosystem stablecoins by collectively agreeing to share a single stablecoin and proportionally distribute profits. The question arises: assuming USDC or USDT currently holds the strongest consensus as the aligned stablecoin, would they be willing to share a significant portion of their profits with DApps?
- Build a stablecoin liquidity pool (M0 model) using crypto-native thinking to create a unified liquidity layer—such as Ethereum as an interoperable layer—enabling seamless swaps between native stablecoins. However, who bears the operational costs of this liquidity layer? Who ensures the anchoring of different stablecoin architectures? How do we mitigate systemic risks from individual stablecoins losing their peg?
While these approaches seem reasonable, they only address liquidity fragmentation. Once the interests of each issuer are factored in, the logic becomes inconsistent.
Circle earns billions annually through passive income from 5.5% Treasury yields—why would it share this with protocols like Hyperliquid? In other words, when Hyperliquid gains the capability to spin off stablecoins from traditional issuers and establish its own platform, the “passive profit” model of issuers like Circle will face challenges.
Can the USDH auction incident be viewed as a protest against the “hegemony” of traditional stablecoin issuers? In my view, whether the rebellion succeeds or fails is irrelevant—what matters is the moment the uprising begins.
2) Why do I say this? Because the right to stablecoin profits will ultimately return to the value creators.
Under the traditional stablecoin issuance model, entities like Circle and Tether essentially operate as middlemen. Users deposit funds, which they use to purchase Treasury bonds or park at Coinbase to earn fixed lending interest—yet they pocket most of the profits.
Clearly, the USDH incident exposed a flaw in this logic: true value is generated by the protocols processing transactions, not merely by issuers holding reserve assets. From Hyperliquid’s perspective, why should it cede over $200 million in annualized Treasury yields to Circle when it processes over $5 billion in daily transactions?
Historically, stablecoin circulation prioritized “anchor stability” as the primary need. Thus, issuers like Circle, bearing substantial compliance costs, rightfully claimed this revenue stream.
However, as the stablecoin market matures and regulatory clarity emerges, this revenue stream will shift toward value creators.
Therefore, in my view, the significance of the USDH auction lies in defining a new value distribution rule for stablecoins: Those who control genuine transaction demand and user traffic gain priority in revenue distribution;
3) What will the endgame look like: Application chains dominating discourse while issuers become mere “backend service providers”?
Mert’s third proposal is intriguing—application chains generating revenue while traditional issuers’ profits approach zero? How should we interpret this?
Consider Hyperliquid: its annual transaction fees alone could generate hundreds of millions in revenue. By comparison, the stable but “negligible” potential returns from managing reserve bonds become irrelevant.
This explains why Hyperliquid chose to delegate issuance rights rather than self-issue. There’s simply no need—self-issuance would only increase “credit liabilities,” while the profits gained would pale in comparison to the far more lucrative fees from scaling transaction volumes.
Indeed, observe how Hyperliquid’s decision to delegate issuance triggered competitive responses: Frax pledged to return 100% of profits to Hyperliquid for HYPE buybacks; Sky offered a 4.85% yield plus $250 million in annual buybacks; Native Markets proposed a 50/50 revenue split—
Essentially, what began as a battle for interests between DApp developers and stablecoin issuers has evolved into an “internal competition” among three-party issuers. New entrants are forcing established players to alter the rules.
Mert’s fourth proposal sounds somewhat abstract. By that stage, stablecoin issuers’ brand value might be completely wiped out, or minting authority could be fully centralized under regulators, or perhaps some decentralized protocol—it remains unclear. That scenario likely belongs to the distant future.
In my view, this chaotic USDH auction battle signifies the end of the old guard’s era of effortless dominance. Its true significance lies in redirecting stablecoin yield rights back to the “applications” that create value—a monumental shift!
As for whether it constitutes “vote-buying” or lacks transparency, I see it merely as a window of opportunity before regulatory frameworks like the GENIUS Act take full effect. Watching the spectacle unfold is sufficient for now.
