The developers of USDh, a stablecoin built on Bitcoin layer 2 stacks, have completed a deal to bring around $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.
The two plan to offer yield in USDh through lending against sBTC, the bitcoin-backed bridge asset that users can use to put their bitcoin wealth into the Stacks ecosystem.
The initial liquidity boost could create a near-term window of higher returns, Hermetica said, with projections for an annual percentage yield (APY) of up to 50%. It currently provides an average APY of 18%, Hermetica said in an emailed announcement Wednesday.
Stablecoins play an integral role in the crypto economy, providing users with a means to hold their assets in a token that is not prone to such significant ebbs and flows in its value, because they are pegged to a fiat currency (usually the US dollar ).
Therefore, the provision of stablecoins would naturally be a major development in Bitcoin’s evolution towards a network that can support DeFi capabilities, a trend that has gained momentum in recent years.
However, it is worth noting that the $3 million in liquidity that USDh provides is small compared to the dominant stablecoins in cryptocurrencies. 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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