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Bitcoin Developers Launch BTC-Backed Stablecoin As Rune Token
Cryptocurrency developers have leveraged the recently introduced Runes token standard to launch a brand new dollar-pegged stablecoin native to the Bitcoin blockchain.
But there’s a twist: its developers told Decrypt that the token, USDh, is backed and redeemable for BTC rather than real money. In fact, the stablecoin offers holders a return that they say could rise to 25% annually.
“USDh is Bitcoin through and through, meaning the protocol is not based on fiat currencies and can operate completely outside of the traditional banking system,” said Jakob Schillinger, founder and CEO of Hermetica, the stablecoin protocol behind USDh.
Runes is a new token standard for Bitcoin launched by Ordinals creator Casey Rordamor in April, and is now more widely used than the Ordinals and BRC-20 standards that preceded it. Runes is known to be much more data-efficient than its predecessors and has more potential to unlock practical Bitcoin-based assets beyond meme coins.
Hermetica’s model differs from more widely used stablecoins like Tether (USDT) and Circle USD (USDC), which rely on centralized financial institutions to provide custody of the assets backing their tokens. Such firms now control well over $145 billion in both tokens, including a combination of cash and cash equivalents, primarily U.S. Treasury bonds.
Tether and Circle earn a yield from the T-bills they hold and keep all the profits generated by that debt. They also have the power to seize or freeze any tokens held by their users, as they have repeatedly done in response to Sanctions requirements established by the United States Department of the Treasury.
In contrast, Hemetica’s design pays the yield generated by the protocol to its token holders. Those holders are also immune to the risk of de-pegging that can plague traditional stablecoin holders in the event of a bank failure, as seen with USDC during the fall of Silicon Valley Bank last year.
“The protocol does this by pairing a spot BTC position with a perpetual short futures position,” Schillinger explained. The protocol’s design mimics that of Ethena, the pioneers of the Ethereum-based USDe stablecoin, whose $3.4 billion token generates returns for investors on the short position they regularly hold.
Given that Bitcoin’s DeFi ecosystem is in its infancy, Hermetica believes its protocol can tap into the estimated $360 billion of “idle” capital in the ecosystem from those looking to generate yield. “Over the past 4.5 years, the annualized return from funding rates has been 12%,” Schillinger noted.
In a press release, Hemetica said it intends to scale its native Bitcoin DeFi using batteries, a layer 2 blockchain of Bitcoin created for smart contract compatibility. Stacks was recently cleared of any wrongdoing by regulators for potential securities fraud after three years of investigation.
The Stacks protocol is already integrated with Liquidium, a layer 1 peer-to-peer protocol for borrowing and lending Bitcoin-based assets.
“A trustless native stablecoin is essential for any blockchain ecosystem,” Liquidium CEO Robin Obermaier said of the move. “Enabling users to use stablecoins in Bitcoin DeFi applications is the next big thing for Bitcoin.”
By Ryan-Ozawa.