Hermetica Unveils Novel Bitcoin-Backed Yield-Generating Synthetic Dollar
Summary:
Hermetica is set to release the first Bitcoin-secured synthetic US dollar that generates yield in June, a significant step for Bitcoin-centric decentralized finance (DeFi). Called USDh, the synthetic dollar will permit a potential yield of up to 25%, offering Bitcoin users an option to earn yield on their US dollars without relying on the banking system or non-Bitcoin products. Despite concerns about the sustainability of such yield, Hermetica's CEO Jakob Schillinger insists the 25% APY is achievable and stems from futures funding rates. He also anticipates explosive growth in Bitcoin DeFi, predicting it will match or even surpass Ethereum DeFi in the next five years.
Hermetica recently revealed the forthcoming arrival of a novel Bitcoin-secured synthetic US dollar that generates yield, marking a groundbreaking milestone in the field of decentralized finance (DeFi) exclusive to Bitcoin. Scheduled for a June release, this innovative synthetic dollar, labeled USDh, will allow users to earn returns as high as 25%, as stated in the information shared by Hermetica with Cointelegraph. The introduction of USDh allows Bitcoin enthusiasts to hold and accumulate yield on their US dollars, all while sidestepping the dependency on the banking system or the necessity to engage with products unrelated to Bitcoin. This was noted by Jakob Schillinger, founder and CEO of Hermetica Labs. Schillinger shared his insights with Cointelegraph, suggesting that USDh will usher in enhanced liquidity and fresh applications for Bitcoin DeFi, enabling Bitcoin users to trade, lend, and conduct transactions in a dollar asset backed entirely by Bitcoin. Being a Stacks-native DeFi protocol on Bitcoin, Hermetica belongs to the broader Bitcoin DeFi (BTCFi) initiative intended to provide DeFi functionality to the premier global blockchain network.
The notion of achieving a yield of 25% over the long-term was brought into question following the launch of the first Bitcoin-backed synthetic dollar. Two months back, Ethena launched USDe that promised a return of 27.6%, raising doubts about the sustainability of the platform. These reservations might apply to Hermetica's USDh due to its 25% APY, substantially exceeding the 20% return offered by Anchor Protocol on TerraUSD (UST) prior to the algorithmic stablecoin issuer Terra's collapse in May 2022. However, Schillinger insists that the yield is achievable and results from futures funding rates. Schillinger further clarified: "The market’s demand for long leverage influences this Bitcoin-unique yield. Our backtest data collected from January 2021 through March 2024 indicates an average annual return of 11.71%. In the bull market of 2022, the yearly return was 26.11%." Schillinger asserted that the demand for Bitcoin futures will ensure a sustainable yield for USDh, as there exists a structural requirement for long leverage in the Bitcoin futures markets. Schillinger holds the view that the debut of Ordinals significantly accelerated BTCFi's growth. Schillinger stated: "We forecast that Bitcoin DeFi will equal, if not surpass, Ethereum DeFi in size within the next five years. We have already seen months where Ordinals' trading volumes have outpaced combined volumes for Ethereum and Solana NFTs. With over $1T in dormant BTC capital, Bitcoin DeFi is poised for phenomenal expansion.
Published At
5/6/2024 4:00:00 PM
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