Hermetica Labs launches USDh, Bitcoin's first native synthetic USD

Hermetica Labs, a decentralized financial protocol built on bitcoin, launched USDh, the first synthetic US dollar native to bitcoin. The new offering allows users to earn returns of up to 25% without exposure to traditional finance.

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Introducing USDh

The first synthetic dollar with yield backed by bitcoin.

Backed by twitter.com/hashtag/bitcoin?src=hash&ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>#bitcoin – not banks
Get up to 25% performance
Native to bitcoin L1 and L2

Join the revolution now pic.twitter.com/lQCP3hS5Q9

– Hermetica (@HermeticaFi) twitter.com/HermeticaFi/status/1787471465354514569?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>May 6, 2024

The new synthetic dollar is designed to increase the liquidity and utility of the decentralized financial ecosystem formed around bitcoin through the L1 and L2 protocols. According to Hermetica CEO Jakob Schillinger, USDh will allow Bitcoiners to hold and earn returns on their dollar value while remaining fully backed by bitcoin.

“The USDh is an innovative synthetic dollar fully backed by bitcoin and outside the fiat system. No banks, no fiat, just bitcoin,” Hermetica Labs said in x.

The launch of USDh follows the introduction of Ethena's USDe in March, which offered a 27.6% yield and raised concerns about the long-term sustainability of the protocol. Similar questions may arise regarding Hermetica's 25% annual percentage yield (APY), which significantly exceeds the ill-fated Anchor Protocol's 20% return on TerraUSD (UST) before its collapse in May 2022.

Notably, Fantom founder Andre Cronje has spoken out about this trend, criticizing negative funding rates and unsecured stablecoins.

On this same topic, Schillinger states that the performance of USDh, derived from bitcoin futures funding rates, is sustainable due to the structural demand for long leverage in the bitcoin futures markets. Backdating data (compiled by Hermetica Labs) from January 2021 to March 2024 shows an average APY (annual percentage yield) of 11.71%, with an annual return of 26.11% during the 2022 bull market.

The introduction of Ordinals has been a major catalyst for the growth of bitcoin DeFi (BTCFi), says Schillinger. He believes BTCFi will equal and eclipse the size of ethereum DeFi within the next five years, citing cases where Ordinals trading volumes have exceeded those of ethereum and Solana nfts combined.