The developers of USDh, a stablecoin built on Bitcoin layer 2 Stacks, have struck a deal to bring approximately $3 million in liquidity to the token.
Decentralized finance protocol (DeFi) Hermetica has secured liquidity, which it says will make it the largest stablecoin on Stacks, through a partnership with Bitcoin lending protocol Zest.
The two plan to provide returns on USDh through lending against sBTC, the bitcoin-backed bridge asset that users can use to place their bitcoin assets into the Stacks ecosystem.
The initial liquidity boost could create a period of higher rates in the near term, Hermetica said, with projections of annualized yields (APY) of up to 50%. It currently offers an average APY of 18%, Hermetica said in an emailed announcement Wednesday.
Stablecoins play an integral role in the crypto economy, offering users a way to hold their assets in a token that is not susceptible to such significant ebbs and flows in value because they are pegged to a fiat currency (usually the US dollar).
Providing stablecoins would therefore obviously be an important development in Bitcoin’s evolution towards a network that can support DeFi capabilities, a trend that has gained momentum in recent years.
However, it should be noted that the $3 million in liquidity that USDh offers is small 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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