The developers of USDh, a stablecoin built on Bitcoin layer 2 Stacks, have reached a deal to provide approximately $3 million in liquidity to the token.
Decentralized finance (DeFi) protocol Hermetica has secured liquidity, which it says will make it the largest stablecoin on Stacks, through collaboration with Bitcoin lending protocol Zest.
Both plan to offer yield on USDh through loans against sBTC, the bitcoin-backed bridging asset that users can use to park their bitcoin wealth in the Stacks ecosystem.
The initial liquidity boost could create a window for higher returns in the near term, Hermetica said, with projections of an annual percentage yield (APY) of up to 50%. It currently offers an average APY of 18%, Hermetica said in an emailed announcement Wednesday.
Stablecoins play a vital role in the crypto economy, providing users with a way to hold their assets in a token that is not subject to such large ebbs and flows in value because they are pegged to a fiat currency (usually US dollars).
The provision of stablecoins would therefore naturally be an important development in Bitcoin’s evolution into a network capable of supporting DeFi capabilities, a trend that has accelerated over the past two years.
It is worth pointing out, however, that the $3 million in liquidity provided by USDh is minimal compared to dominant crypto stablecoins. USDT and USDC have market capitalizations of over $138 billion and $51 billion respectively, highlighting the relative infancy of the Bitcoin DeFi sector.
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