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 the 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 on USDh through lending against sBTC, the bitcoin-backed bridging asset that users can use to put their bitcoin wealth in the Stacks ecosystem.
The initial liquidity boost could create a short-term window of higher yields, Hermetica said, with projections of an annual percentage yield (APY) as high as 50%. It currently provides an average APY of 18%, Hermetica said in an emailed announcement on Wednesday.
Stablecoins play an integral role in the crypto economy, giving users a means of holding their assets in a token that isn’t prone to such significant ebbs and flows in value, because they are pegged to a fiat currency (usually the U.S. dollar).
Provision for stablecoins therefore would naturally be an important development in Bitcoin’s evolution into a network that can support DeFi capabilities, a trend that has gathered momentum in the last couple of years.
It should be pointed that, however, that the $3 million in liquidity that USDh provides is tiny compared to the dominant stablecoins in crypto. USDT and USDC have market caps of over $138 billion and $51 billion respectively, highlighting the relative infancy of the Bitcoin DeFi sector.
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