Recently, the bidding war for USDH issuance rights initiated by HyperLiquid attracted participation from institutions like Circle, Paxos, and Frax Finance. Some even proposed ecosystem incentives as high as $20 million, reflecting the strategic importance DeFi protocols place on native stablecoins.

The Value of DeFi Stablecoins
Unlike centralized stablecoins such as USDT and USDC, DeFi native stablecoins (e.g., DAI, GHO, crvUSD, FRAX) emphasize decentralization, censorship resistance, and transparency. They serve as the core settlement units within protocol ecosystems, reducing reliance on external stablecoins and retaining value from activities like trading and lending within their own ecosystems.

Typical Protocol Cases

• MakerDAO (now rebranded as Sky) uses an over-collateralization model for DAI and explores real-world assets (RWA) for backing.

• Aave’s GHO is collateralized by aTokens, with its minting volume surpassing 350 million.

• Curve’s crvUSD supports multiple mainstream assets as collateral, and its LLAMMA mechanism optimizes the liquidation experience.

• Frax Finance’s frxUSD has shifted to full collateralization and entered the LSD赛道 (Liquid Staking Derivatives) for growth.

Key Pillars of Success

• Endogenous scenarios (e.g., lending, trading, derivative margins).

• Deep liquidity (trading pairs with mainstream assets and stablecoins).

• Composability (integration with other protocols).

• Yield-driven incentives (providing sustainable returns for users).

In the future, the competition for DeFi stablecoins will shift from issuance mechanisms to trading scenarios and application ecosystems. Only stablecoins with high-frequency usage demand, deep liquidity, and yield-generating capabilities will stand out.

Summary
The recent bidding war for USDH issuance rights ignited by HyperLiquid saw fierce competition from players like Circle, Paxos, and Frax Finance. Some giants even offered $20 million in ecosystem incentives as a bargaining chip. This storm not only demonstrates the immense appeal of DeFi protocol-native stablecoins but also offers a glimpse into the logic of stablecoins in the DeFi world.

This opportunity invites us to reexamine: What are DeFi protocol stablecoins, and why are they so highly valued? Moreover, as issuance mechanisms mature, what truly determines their success or failure?

Why Are DeFi Stablecoins So Coveted?
Before delving into this question, we must acknowledge a fact: The stablecoin market is still dominated by centralized issuers (e.g., USDT and USDC). With strong compliance, liquidity, and first-mover advantages, they serve as the most critical bridge between the crypto world and the real world.

However, a force pursuing purer decentralization, censorship resistance, and transparency continues to drive the development of DeFi native stablecoins. For a decentralized protocol with daily trading volumes often reaching billions of dollars, the value of a native stablecoin is self-evident.

It is not only the core pricing and settlement unit within the platform, significantly reducing reliance on external stablecoins, but also locks value from trading, lending, and liquidation within its ecosystem. Taking USDH and HyperLiquid as an example, its定位 is not merely to replicate USDT but to become the "heart" of the protocol—functioning as margin, a pricing unit, and a liquidity hub.

This means that whoever controls USDH issuance rights will occupy a crucial strategic position in HyperLiquid’s future landscape. This is the fundamental reason why the market responded swiftly after HyperLiquid extended its olive branch, with even Paxos and PayPal offering $20 million in ecosystem incentives as a bargaining chip.

In other words, for DeFi protocols极度依赖流动性, stablecoins are not just "tools" but "pivots" encompassing on-chain economic activities like trading and value circulation. Whether for DEXs, lending platforms, derivative protocols, or on-chain payment applications, stablecoins play a central role as a dollarized settlement layer.

From imToken’s perspective, stablecoins are no longer a single-narrative tool but a multi-dimensional "asset collection." Different users and needs correspond to different stablecoin choices (extended reading: "The Worldview of Stablecoins: How to Build a User-Centric Classification Framework?").

In this classification, "DeFi Protocol Stablecoins" (e.g., DAI, GHO, crvUSD, FRAX) form an independent category. Compared to centralized stablecoins, they emphasize decentralized attributes and protocol autonomy—anchored by the protocol’s mechanism design and collateral assets, striving to摆脱 reliance on单一 institutions. This is why, despite market fluctuations, numerous protocols continue to experiment.

The Paradigm Debate Started by DAI
The evolution of DeFi native stablecoins is essentially a paradigm debate revolving around scenarios, mechanisms, and efficiency.

1. MakerDAO (Sky)’s DAI (USDS)
   As the pioneer of decentralized stablecoins, MakerDAO’s DAI introduced the paradigm of over-collateralized minting, allowing users to deposit collateral like ETH into vaults to mint DAI. It has withstood multiple tests of extreme market conditions.

Less known is that DAI was also one of the earliest DeFi protocol stablecoins to embrace RWA (Real World Assets). As early as 2022, MakerDAO began experimenting with allowing asset originators to convert real-world assets into tokenized loans, seeking broader asset backing and demand scenarios for DAI.

In the latest rebranding from MakerDAO to Sky and the launch of USDS as part of its endgame plan, MakerDAO aims to attract a different user base from DAI with the new stablecoin, further expanding adoption from DeFi to off-chain scenarios.

1. Aave’s GHO
   Interestingly, Aave, with lending as its core business, has moved closer to MakerDAO by launching GHO—a decentralized, collateral-backed, dollar-pegged DeFi native stablecoin.

Its logic is similar to DAI: It is an over-collateralized stablecoin minted using aTokens as collateral. Users can use assets in Aave V3 as collateral for over-collateralized minting. The only difference is that all collateral is productive capital, generating interest (aTokens) depending on borrowing demand.

From an experimental comparison perspective, MakerDAO relies on minting rights to expand its ecosystem, while Aave衍生出 a stablecoin from its mature lending场景. These two provide templates for DeFi protocol stablecoin development along different paths.

As of writing, GHO’s minting volume has exceeded 350 million, showing steady growth over the past two years, with market recognition and user acceptance gradually rising.

1. Curve’s crvUSD
   Since its launch in 2023, crvUSD has supported多种主流资产 as collateral, including sfrxETH, wstETH, WBTC, WETH, and ETH, covering major LSD (Liquid Staking Derivatives) categories. Its unique LLAMMA liquidation mechanism also makes it more user-friendly.

As of writing, crvUSD’s minting volume has exceeded 230 million. Notably, wstETH alone accounts for about half of crvUSD’s total minting volume, highlighting its deep integration and market advantage in the LSDfi space.

1. Frax Finance’s frxUSD
   Frax Finance’s story is the most dramatic. During the 2022 stablecoin crisis, Frax quickly adjusted its strategy by increasing full reserves to transition completely to a fully collateralized stablecoin, stabilizing its position.

A more critical step was its precise entry into the LSD赛道 over the past two years. Leveraging its ecological product frxETH and accumulated governance resources, it created highly attractive yields on platforms like Curve, successfully achieving a second growth curve.

In the latest USDH bidding war, Frax proposed a "community-first" plan, aiming to peg USDH to frxUSD at a 1:1 ratio. frxUSD is backed by BlackRock’s yield-bearing BUIDL on-chain treasury fund, with "100% of the underlying treasury yield distributed directly to HyperLiquid users through on-chain programmed methods, with Frax charging no fees."

From "Issuance" to "Trading": What Is the True Pivot?
From the above cases, we can see that, to some extent, stablecoins are a necessary path for DeFi protocols to evolve from "tools" to "ecosystems."

As a narrative largely forgotten after the盛夏 of 2020–2021, DeFi protocol stablecoins have been continuously evolving. From MakerDAO, Aave, and Curve to today’s HyperLiquid, we find that the focus of this battle has quietly changed.

The key is no longer the ability to issue but the scenarios for trading and application. Simply put, whether over-collateralized or fully reserved, issuing a dollar-pegged stablecoin is no longer a challenge. The real question is: "What can it be used for? Who will use it? Where can it circulate?"

As HyperLiquid emphasized when bidding for USDH issuance rights—serving the HyperLiquid ecosystem first and complying with standards—this is the true pivot for DeFi stablecoins:

• Endogenous Scenarios: A stablecoin’s "base area." For Aave, it’s lending; for Curve, it’s trading; for HyperLiquid, it will be derivative trading (margin assets). A powerful endogenous scenario provides the most原始 and loyal demand for a stablecoin.

• Liquidity Depth: The lifeline of a stablecoin lies in its trading pairs with other mainstream assets (e.g., ETH, WBTC) and other stablecoins (e.g., USDC, USDT). Having one or more deep liquidity pools is the foundation for maintaining price stability and meeting large-scale trading needs. This is why Curve remains a battleground for all stablecoins.

• Composability and Extensibility: Whether a stablecoin can be easily integrated by other DeFi protocols as collateral, lending assets, or base assets for yield aggregation determines the ceiling of its value network.

• Yield-Driven Incentives: In the存量博弈 DeFi market, yield is the most effective means to attract liquidity. Stablecoins that "make money for users" are more attractive.

In a nutshell, centralized stablecoins remain the underlying liquidity of DeFi. For all DeFi protocols, issuing native stablecoins is no longer merely a technical choice but a strategic layout关乎 ecological value closure. The true pivot has shifted from "how to issue" to "how to make it frequently traded and used."

This注定 that the future winners among DeFi stablecoins will inevitably be those "super assets" that provide their holders with the most solid application scenarios, the deepest liquidity, and the most sustainable yields—not just a "currency."

Recently, the bidding war for USDH issuance rights initiated by HyperLiquid attracted participation from institutions like Circle, Paxos, and Frax Finance. Some even proposed ecosystem incentives as high as $20 million, reflecting the strategic importance DeFi protocols place on native stablecoins.

The Value of DeFi Stablecoins
Unlike centralized stablecoins such as USDT and USDC, DeFi native stablecoins (e.g., DAI, GHO, crvUSD, FRAX) emphasize decentralization, censorship resistance, and transparency. They serve as the core settlement units within protocol ecosystems, reducing reliance on external stablecoins and retaining value from activities like trading and lending within their own ecosystems.

Typical Protocol Cases

• MakerDAO (now rebranded as Sky) uses an over-collateralization model for DAI and explores real-world assets (RWA) for backing.

• Aave’s GHO is collateralized by aTokens, with its minting volume surpassing 350 million.

• Curve’s crvUSD supports multiple mainstream assets as collateral, and its LLAMMA mechanism optimizes the liquidation experience.

• Frax Finance’s frxUSD has shifted to full collateralization and entered the LSD赛道 (Liquid Staking Derivatives) for growth.

Key Pillars of Success

• Endogenous scenarios (e.g., lending, trading, derivative margins).

• Deep liquidity (trading pairs with mainstream assets and stablecoins).

• Composability (integration with other protocols).

• Yield-driven incentives (providing sustainable returns for users).

In the future, the competition for DeFi stablecoins will shift from issuance mechanisms to trading scenarios and application ecosystems. Only stablecoins with high-frequency usage demand, deep liquidity, and yield-generating capabilities will stand out.

Summary
The recent bidding war for USDH issuance rights ignited by HyperLiquid saw fierce competition from players like Circle, Paxos, and Frax Finance. Some giants even offered $20 million in ecosystem incentives as a bargaining chip. This storm not only demonstrates the immense appeal of DeFi protocol-native stablecoins but also offers a glimpse into the logic of stablecoins in the DeFi world.

This opportunity invites us to reexamine: What are DeFi protocol stablecoins, and why are they so highly valued? Moreover, as issuance mechanisms mature, what truly determines their success or failure?

Why Are DeFi Stablecoins So Coveted?
Before delving into this question, we must acknowledge a fact: The stablecoin market is still dominated by centralized issuers (e.g., USDT and USDC). With strong compliance, liquidity, and first-mover advantages, they serve as the most critical bridge between the crypto world and the real world.

However, a force pursuing purer decentralization, censorship resistance, and transparency continues to drive the development of DeFi native stablecoins. For a decentralized protocol with daily trading volumes often reaching billions of dollars, the value of a native stablecoin is self-evident.

It is not only the core pricing and settlement unit within the platform, significantly reducing reliance on external stablecoins, but also locks value from trading, lending, and liquidation within its ecosystem. Taking USDH and HyperLiquid as an example, its定位 is not merely to replicate USDT but to become the "heart" of the protocol—functioning as margin, a pricing unit, and a liquidity hub.

This means that whoever controls USDH issuance rights will occupy a crucial strategic position in HyperLiquid’s future landscape. This is the fundamental reason why the market responded swiftly after HyperLiquid extended its olive branch, with even Paxos and PayPal offering $20 million in ecosystem incentives as a bargaining chip.

In other words, for DeFi protocols极度依赖流动性, stablecoins are not just "tools" but "pivots" encompassing on-chain economic activities like trading and value circulation. Whether for DEXs, lending platforms, derivative protocols, or on-chain payment applications, stablecoins play a central role as a dollarized settlement layer.

From imToken’s perspective, stablecoins are no longer a single-narrative tool but a multi-dimensional "asset collection." Different users and needs correspond to different stablecoin choices (extended reading: "The Worldview of Stablecoins: How to Build a User-Centric Classification Framework?").

In this classification, "DeFi Protocol Stablecoins" (e.g., DAI, GHO, crvUSD, FRAX) form an independent category. Compared to centralized stablecoins, they emphasize decentralized attributes and protocol autonomy—anchored by the protocol’s mechanism design and collateral assets, striving to摆脱 reliance on单一 institutions. This is why, despite market fluctuations, numerous protocols continue to experiment.

The Paradigm Debate Started by DAI
The evolution of DeFi native stablecoins is essentially a paradigm debate revolving around scenarios, mechanisms, and efficiency.

1. MakerDAO (Sky)’s DAI (USDS)
   As the pioneer of decentralized stablecoins, MakerDAO’s DAI introduced the paradigm of over-collateralized minting, allowing users to deposit collateral like ETH into vaults to mint DAI. It has withstood multiple tests of extreme market conditions.

Less known is that DAI was also one of the earliest DeFi protocol stablecoins to embrace RWA (Real World Assets). As early as 2022, MakerDAO began experimenting with allowing asset originators to convert real-world assets into tokenized loans, seeking broader asset backing and demand scenarios for DAI.

In the latest rebranding from MakerDAO to Sky and the launch of USDS as part of its endgame plan, MakerDAO aims to attract a different user base from DAI with the new stablecoin, further expanding adoption from DeFi to off-chain scenarios.

1. Aave’s GHO
   Interestingly, Aave, with lending as its core business, has moved closer to MakerDAO by launching GHO—a decentralized, collateral-backed, dollar-pegged DeFi native stablecoin.

Its logic is similar to DAI: It is an over-collateralized stablecoin minted using aTokens as collateral. Users can use assets in Aave V3 as collateral for over-collateralized minting. The only difference is that all collateral is productive capital, generating interest (aTokens) depending on borrowing demand.

From an experimental comparison perspective, MakerDAO relies on minting rights to expand its ecosystem, while Aave衍生出 a stablecoin from its mature lending场景. These two provide templates for DeFi protocol stablecoin development along different paths.

As of writing, GHO’s minting volume has exceeded 350 million, showing steady growth over the past two years, with market recognition and user acceptance gradually rising.

1. Curve’s crvUSD
   Since its launch in 2023, crvUSD has supported多种主流资产 as collateral, including sfrxETH, wstETH, WBTC, WETH, and ETH, covering major LSD (Liquid Staking Derivatives) categories. Its unique LLAMMA liquidation mechanism also makes it more user-friendly.

As of writing, crvUSD’s minting volume has exceeded 230 million. Notably, wstETH alone accounts for about half of crvUSD’s total minting volume, highlighting its deep integration and market advantage in the LSDfi space.

1. Frax Finance’s frxUSD
   Frax Finance’s story is the most dramatic. During the 2022 stablecoin crisis, Frax quickly adjusted its strategy by increasing full reserves to transition completely to a fully collateralized stablecoin, stabilizing its position.

A more critical step was its precise entry into the LSD赛道 over the past two years. Leveraging its ecological product frxETH and accumulated governance resources, it created highly attractive yields on platforms like Curve, successfully achieving a second growth curve.

In the latest USDH bidding war, Frax proposed a "community-first" plan, aiming to peg USDH to frxUSD at a 1:1 ratio. frxUSD is backed by BlackRock’s yield-bearing BUIDL on-chain treasury fund, with "100% of the underlying treasury yield distributed directly to HyperLiquid users through on-chain programmed methods, with Frax charging no fees."

From "Issuance" to "Trading": What Is the True Pivot?
From the above cases, we can see that, to some extent, stablecoins are a necessary path for DeFi protocols to evolve from "tools" to "ecosystems."

As a narrative largely forgotten after the盛夏 of 2020–2021, DeFi protocol stablecoins have been continuously evolving. From MakerDAO, Aave, and Curve to today’s HyperLiquid, we find that the focus of this battle has quietly changed.

The key is no longer the ability to issue but the scenarios for trading and application. Simply put, whether over-collateralized or fully reserved, issuing a dollar-pegged stablecoin is no longer a challenge. The real question is: "What can it be used for? Who will use it? Where can it circulate?"

As HyperLiquid emphasized when bidding for USDH issuance rights—serving the HyperLiquid ecosystem first and complying with standards—this is the true pivot for DeFi stablecoins:

• Endogenous Scenarios: A stablecoin’s "base area." For Aave, it’s lending; for Curve, it’s trading; for HyperLiquid, it will be derivative trading (margin assets). A powerful endogenous scenario provides the most原始 and loyal demand for a stablecoin.

• Liquidity Depth: The lifeline of a stablecoin lies in its trading pairs with other mainstream assets (e.g., ETH, WBTC) and other stablecoins (e.g., USDC, USDT). Having one or more deep liquidity pools is the foundation for maintaining price stability and meeting large-scale trading needs. This is why Curve remains a battleground for all stablecoins.

• Composability and Extensibility: Whether a stablecoin can be easily integrated by other DeFi protocols as collateral, lending assets, or base assets for yield aggregation determines the ceiling of its value network.

• Yield-Driven Incentives: In the存量博弈 DeFi market, yield is the most effective means to attract liquidity. Stablecoins that "make money for users" are more attractive.

In a nutshell, centralized stablecoins remain the underlying liquidity of DeFi. For all DeFi protocols, issuing native stablecoins is no longer merely a technical choice but a strategic layout关乎 ecological value closure. The true pivot has shifted from "how to issue" to "how to make it frequently traded and used."

This注定 that the future winners among DeFi stablecoins will inevitably be those "super assets" that provide their holders with the most solid application scenarios, the deepest liquidity, and the most sustainable yields—not just a "currency."