The developers of USDh, a stablecoin built on Bitcoin layer 2 Stacks, have completed a deal to bring about $3 million in liquidity to the token.
Decentralized finance (DeFi) protocol Hermetica has secured the liquidity it says will make it the largest stablecoin on Stacks, through collaboration with Bitcoin lending protocol Zest.
The two plan to offer returns on USDh through lending against sBTC, the bitcoin-backed bridge asset that users can use to place their bitcoin wealth in the Stacks ecosystem.
The initial liquidity boost could create a near-term window of higher returns, Hermetica said, with annual percentage yield (APY) projections as high as 50%. It currently offers an average APY of 18%, Hermetica said in an emailed statement Wednesday.
Stablecoins play an integral role in the crypto-economy, allowing users to hold their assets in a token that is not prone to such significant ebbs and flows in value because they are tied to a fiat currency (usually the US dollar).
The provision of stablecoins would therefore obviously be an important development in Bitcoin’s evolution into a network that can support DeFi capabilities, a trend that has gained momentum in the last few years.
However, it should be pointed out that the $3 million in liquidity that USDh provides 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.
Read More: Circle Enters Tokenization Race By Acquiring Hashnote, $1.3B Real-World Asset Issuer
