The recent vote on the USDH token on Hyperliquid has drawn significant attention, reflecting a broader trend where platforms are increasingly recognizing the economic value of stablecoins and seeking better partnership terms.

• Closed vs. Open Ecosystems: Stablecoin issuers find it easier to guide users within closed systems (e.g., custodial platforms or wallets), while challenging dominant stablecoins like USDC and USDT in open ecosystems remains difficult.

• Two Tiers of Success:

  • On-platform monetization: Generating revenue from user balances within the issuer’s own application.

  • Off-platform adoption: Circulating beyond the issuer’s own products—a far more challenging goal achieved only by a few.

• Pillars of Off-Platform Adoption: Liquidity, fiat ramps, utility, and interoperability are dominated by USDC and USDT.

• Custody and Control Matter: Non-custodial apps and DEXs have minimal influence; CEXs sit in the middle; custodial wallets and apps hold the most sway and can promote their stablecoins more freely.

• Future Outlook: A surge of stablecoins is expected, but most will succeed only within their "walled gardens." Very few will break through by targeting new markets with weaker network effects.

The Hyperliquid vote for USDH was more symbolic than decisive. As an open, permissionless platform, Hyperliquid allows anyone to deploy stablecoins and create trading pairs. While USDC still dominates, the vote highlighted a key trend: platforms are now actively pursuing the economic benefits of stablecoins.

Similar dynamics are unfolding elsewhere:

• The Solana community noted that ~$450 million in value annually flows from its ecosystem to Circle and Tether, indirectly supporting competing chains like Base.

• MetaMask launched mUSD, and MegaETH adopted a similar strategy on its new L2 network.

The logic is clear: if you have users, why surrender value to others?

The incentives are straightforward: stablecoin balances generate yield. The more balances held, the more revenue earned. For financial platforms, this represents a new income stream.

Success, however, operates on two levels:

1. On-Platform Monetization: Capitalizing on user balances within the issuer’s own app, wallet, or exchange. This is the easier route, as the platform already controls these balances.

2. Off-Platform Adoption: Having the stablecoin circulate beyond the issuer’s own products, earning yield from balances outside direct control. So far, only USDT and USDC have achieved this at scale.

Issuing a stablecoin is easy; driving adoption—especially off-platform—is not.

Platforms without full custody can guide users through incentives or UX design, but they often face resistance. Overly aggressive promotion may harm the user experience. For CEXs, slight yield advantages rarely offset the revenue from maximizing wallet share and trading activity. For DEXs like Hyperliquid, displacing USDC is even harder due to its deep liquidity and entrenched user habits.

Off-platform adoption hinges on four pillars:

• Liquidity: Can users easily swap the stablecoin for other assets (BTC, ETH, SOL) at low slippage?

• Fiat Ramps: How many channels exist for converting between fiat and the stablecoin?

• Utility: What can the stablecoin be used for—trading, lending, payments, conversions?

• Interoperability: How seamlessly does it move across chains and platforms?

USDC and USDT dominate these areas globally, reinforcing their network effects. Challengers may thrive within their own ecosystems, but once users transact elsewhere, they revert to the dominant stablecoins.

The ability to promote a native stablecoin depends largely on custody and control:

• Lowest Influence: Non-custodial apps and DEXs. They can only influence through UI prominence, subsidies, or incentives.

• Medium Influence: CEXs. They custody balances but remain market-driven. They can subsidize preferred trading pairs or unify order books.

• Highest Influence: Custodial wallets and apps. These operators control the keys and can display dollar balances while deciding the backing asset.

The pattern is clear: the closer to custody and user interface, the greater the influence—and the less reliant on competing purely on liquidity.

Stablecoin success isn’t about who can issue, but who can enforce adoption.

• In open ecosystems, liquidity favors incumbents.

• In closed systems, custody and UI control determine outcomes.

We can expect a flood of stablecoins from wallets, exchanges, L2s, and consumer apps. Most will remain confined as "walled garden" assets—useful and profitable internally but rarely circulating beyond their native platforms.

The few that break through will likely do so by targeting new markets with weaker network effects, not by directly challenging USDC or USDT. Each attempt will serve as a valuable experiment in the evolution of digital money.

The recent vote on the USDH token on Hyperliquid has drawn significant attention, reflecting a broader trend where platforms are increasingly recognizing the economic value of stablecoins and seeking better partnership terms.

• Closed vs. Open Ecosystems: Stablecoin issuers find it easier to guide users within closed systems (e.g., custodial platforms or wallets), while challenging dominant stablecoins like USDC and USDT in open ecosystems remains difficult.

• Two Tiers of Success:

  • On-platform monetization: Generating revenue from user balances within the issuer’s own application.

  • Off-platform adoption: Circulating beyond the issuer’s own products—a far more challenging goal achieved only by a few.

• Pillars of Off-Platform Adoption: Liquidity, fiat ramps, utility, and interoperability are dominated by USDC and USDT.

• Custody and Control Matter: Non-custodial apps and DEXs have minimal influence; CEXs sit in the middle; custodial wallets and apps hold the most sway and can promote their stablecoins more freely.

• Future Outlook: A surge of stablecoins is expected, but most will succeed only within their "walled gardens." Very few will break through by targeting new markets with weaker network effects.

The Hyperliquid vote for USDH was more symbolic than decisive. As an open, permissionless platform, Hyperliquid allows anyone to deploy stablecoins and create trading pairs. While USDC still dominates, the vote highlighted a key trend: platforms are now actively pursuing the economic benefits of stablecoins.

Similar dynamics are unfolding elsewhere:

• The Solana community noted that ~$450 million in value annually flows from its ecosystem to Circle and Tether, indirectly supporting competing chains like Base.

• MetaMask launched mUSD, and MegaETH adopted a similar strategy on its new L2 network.

The logic is clear: if you have users, why surrender value to others?

The incentives are straightforward: stablecoin balances generate yield. The more balances held, the more revenue earned. For financial platforms, this represents a new income stream.

Success, however, operates on two levels:

1. On-Platform Monetization: Capitalizing on user balances within the issuer’s own app, wallet, or exchange. This is the easier route, as the platform already controls these balances.

2. Off-Platform Adoption: Having the stablecoin circulate beyond the issuer’s own products, earning yield from balances outside direct control. So far, only USDT and USDC have achieved this at scale.

Issuing a stablecoin is easy; driving adoption—especially off-platform—is not.

Platforms without full custody can guide users through incentives or UX design, but they often face resistance. Overly aggressive promotion may harm the user experience. For CEXs, slight yield advantages rarely offset the revenue from maximizing wallet share and trading activity. For DEXs like Hyperliquid, displacing USDC is even harder due to its deep liquidity and entrenched user habits.

Off-platform adoption hinges on four pillars:

• Liquidity: Can users easily swap the stablecoin for other assets (BTC, ETH, SOL) at low slippage?

• Fiat Ramps: How many channels exist for converting between fiat and the stablecoin?

• Utility: What can the stablecoin be used for—trading, lending, payments, conversions?

• Interoperability: How seamlessly does it move across chains and platforms?

USDC and USDT dominate these areas globally, reinforcing their network effects. Challengers may thrive within their own ecosystems, but once users transact elsewhere, they revert to the dominant stablecoins.

The ability to promote a native stablecoin depends largely on custody and control:

• Lowest Influence: Non-custodial apps and DEXs. They can only influence through UI prominence, subsidies, or incentives.

• Medium Influence: CEXs. They custody balances but remain market-driven. They can subsidize preferred trading pairs or unify order books.

• Highest Influence: Custodial wallets and apps. These operators control the keys and can display dollar balances while deciding the backing asset.

The pattern is clear: the closer to custody and user interface, the greater the influence—and the less reliant on competing purely on liquidity.

Stablecoin success isn’t about who can issue, but who can enforce adoption.

• In open ecosystems, liquidity favors incumbents.

• In closed systems, custody and UI control determine outcomes.

We can expect a flood of stablecoins from wallets, exchanges, L2s, and consumer apps. Most will remain confined as "walled garden" assets—useful and profitable internally but rarely circulating beyond their native platforms.

The few that break through will likely do so by targeting new markets with weaker network effects, not by directly challenging USDC or USDT. Each attempt will serve as a valuable experiment in the evolution of digital money.