Hyperliquid's USDH Auction Draws 10 Major Institutions for $220M Revenue

An unprecedented auction for the issuance rights of a stablecoin is transforming the power dynamics within the cryptocurrency market. On September 5, the decentralized exchange Hyperliquid announced a public auction for the issuance rights of its native stablecoin, USDH. This move has attracted intense competition from ten major institutions, all vying for an annual revenue stream of up to 220 million dollars.

The auction, decided by validator votes, marks an unprecedented democratization of stablecoin selection. Hyperliquid, a leading decentralized derivatives trading platform with daily trading volumes in the tens of billions, aims to reduce its reliance on external stablecoins like USDC and redirect value, such as bond yields, back into its own ecosystem.

The proposals from the bidders vary significantly, ranging from fiat collateral to decentralized collateralized debt positions. Ethena Labs has pledged to return 95% of reserve earnings to the community, while Paxos emphasizes its enterprise infrastructure and regulatory advantages. Frax Finance, on the other hand, offers a zero-fee solution. According to the prediction market, Native Markets currently leads with a 74% chance of winning, followed by Paxos at 15%, and Ethena at 12%. The competition will conclude with an on-chain vote on Sunday.

Beyond the immediate financial gains, this auction has far-reaching implications for the governance and control of stablecoins. Analysts view it as a litmus test for traditional financial institutions and native DeFi teams vying for dominance in the next generation of stablecoin infrastructure.

Hyperliquid's decision to auction the issuance rights of USDH is a first in the history of stablecoins. The platform, which handles nearly 400 billion dollars in monthly trading volume and generated 106 million dollars in fees in August alone, currently relies heavily on USDC for its on-chain dollar liquidity, with a circulating supply that once reached 5.7 billion dollars.

The auction has drawn ten major institutions, including Ethena Labs, Paxos, Frax Finance, Sky Ecosystem, Curve Finance, Native Markets, Bastion Platform, and Agora. The winning bidder will control the issuance rights of USDH, estimated to reach tens of billions of dollars, and receive an annual share of approximately 220 million dollars in reserve earnings.

The deadline for proposal submissions is September 10 at 10:00 UTC, with validator voting set to begin on September 14. Voting power is calculated based on staked amounts, and the foundation will effectively abstain, ensuring community-led decision-making.

The auction represents a significant shift in the stablecoin market's power structure. Traditionally, issuers like Circle and Tether have enjoyed a quasi-central bank status, reaping massive interest earnings from reserve assets. Hyperliquid's approach introduces a new paradigm: top protocols can leverage their "asset gravity" to demand revenue sharing, customized services, and ecosystem empowerment from stablecoin issuers. This shift could transform stablecoin issuers from their lofty "central bank" roles into competitive "commercial banks."

The successful launch of USDH could mean that billions of dollars in annual interest earnings will be directly attributed to the community rather than external issuers. If other top protocols follow suit, this model could fundamentally reshape the value distribution mechanism of stablecoins, driving profits back to the DeFi ecosystems that truly create value.

This competition is seen as a crucial test for traditional financial institutions and native DeFi teams vying for control over the next generation of stablecoin infrastructure. The outcome will influence the direction of stablecoin governance, determining whether regulatory compliance or decentralized innovation will prevail.

As the cryptocurrency ecosystem matures, more "ecosystem-native" stablecoins may emerge, deeply integrated with specific ecosystems and designed to serve their long-term development. This trend signals a shift from "universal currency" to "ecosystem dollars."

Overall, Hyperliquid's bold experiment is poised to disrupt the stablecoin market dominated by giants like Tether and Circle. It will force these titans to reassess their relationships with DeFi protocols and potentially adopt more proactive cooperation and revenue-sharing strategies to address emerging challenges.