# Introducing Terminal Finance By [Terminal Finance](https://paragraph.com/@terminal-finance) · 2025-06-23 --- _We’d like to thank the following people for their valuable contributions to the early discussions and design of Terminal Finance:_ [_Nick_](https://x.com/n2ckchong) _(Ethena Labs),_ **_Ben_** _(Curve),_ [_Andre_](https://x.com/AndreCronjeTech) _(Sonic),_ [_Marc_](https://x.com/lemiscate) _(ACIAAVE),_ [_Durden_](https://x.com/durdenwannabe) _(Lifinity),_ [_Kento_](https://x.com/KentoInami) _(UXD) and others._ The Institutional Case for Yield-Bearing Stablecoins ---------------------------------------------------- Stablecoins are evolving. Yield-bearing assets are rapidly gaining market share as crypto participants — and increasingly institutions — seek stable digital dollars that natively generate return. [As these actors enter the space](https://www.paradigm.xyz/2025/03/tradfi-tomorrow-defi-and-the-rise-of-extensible-finance), yield-bearing stablecoins are becoming part of the core infrastructure for storing and using on-chain dollars. Over the past year, the market cap of this asset class has grown by >500%, with [Ethena](https://x.com/ethena_labs) and [Spark](https://x.com/sparkdotfi) now representing over $10 billion in total circulating value. Additional players have also become active in this segment, with Circle introducing [a reward-bearing version](https://www.coinbase.com/fr/blog/Coinbase-Wallet-USDC-Rewards) of USDC within Coinbase Wallet and [Aave](https://x.com/aave) actively working on a new iteration of [GHO](https://www.theblock.co/post/344819/aave-community-pushes-gho-stablecoin-growth-with-governance-votes-including-proposal-for-yield-bearing-savings-token). At the forefront of this shift is Ethena’s USDe, becoming one of DeFi’s and CeFi’s most widely adopted assets: * **3rd largest USD asset** — $6B+ supply in just a year. * **Fastest USD asset to reach $5B supply** in crypto history. * **sUSDe represents 50%** of the total USDe supply. * **$300M+ in revenue** — 2nd fastest crypto startup to reach $100 million in revenue. Now, Ethena is expanding its vision by developing [Converge](https://x.com/convergeonchain), the settlement layer for TradFi and digital dollars, in collaboration with [Securitize](https://x.com/Securitize). Beyond passive return, yield-bearing stablecoins are unlocking a new paradigm for institutional trading — where liquidity can earn, compound, and scale across markets. Problems ======== 1. **_Lack of Secondary Market Liquidity_** One of the key challenges in the current landscape is the thin liquidity available on secondary markets for yield-bearing stablecoins, making large trades impractical. For instance, in March 2025, the market could only absorb $6M in USDe sales before experiencing a 4% price impact, leading Aave to [hard peg](https://app.aave.com/governance/v3/proposal/?proposalId=262) USDe to USDT to manage risks. 2. **_Capital Inefficiency_** Swapping interest-accruing stablecoins for other assets leads to friction in capital flows — especially for institutions that require seamless, large-scale conversion. To convert sUSDe to USDe at scale, market participants are subject to Ethena’s redemption mechanism and its 7-day waiting period, making it unworkable for active institutional strategies. 3. **_Impermanent Loss_** In automated market makers (AMMs), yield accrual causes impermanent loss — which, in the case of yield-bearing stablecoin pools like sUSDe/USDT, is permanent due to the positive yield. This creates a structural disincentive for providing liquidity in meaningful size. 4. **_Absence of a liquidity layer_** The upcoming Converge chain does not include a native liquidity protocol, creating barriers for capital deployment and project launches within the ecosystem. Without a dedicated market infrastructure, institutional asset trading on Converge stands as fragmented. Solution -------- We believe the market needs a place where yield-bearing stablecoins can be traded efficiently while preserving their unique benefits — including at institutional scale. That’s what Terminal Finance aims to do. 1. **_Marketplace for institutional asset trading_** Terminal Finance is a spot decentralized exchange designed with the needs of institutional trading in mind. It supports the exchange of reward-bearing assets, a familiar concept in TradFi where income-generating instruments are widely used. By combining concentrated liquidity with a refined yield-management model, it intends to offer deep liquidity. 2. **_sUSDe at the core_** On Terminal Finance, yield-bearing assets are managed as redeemable wrappers that accumulate returns over time. In the case of sUSDe, the wrapper inflates as yield accrues, ensuring 1 redeemable token remains equivalent to 1 USDe. This design enables pools to earn sUSDe yield passively without deviating from dollar parity, allowing sUSDe to reliably serve as the protocol’s base currency. 3. **_Yield-Skimming_** Terminal Finance pools are structured to mitigate price drift and impermanent loss by skimming the accrued yield. This preserves liquidity while enabling savings on digital dollars to keep growing — a feature particularly relevant for those managing capital over longer horizons (an upcoming Mirror post will focus on this). 4. **_Liquidity Hub_** Terminal Finance acts as the main venue for trading and liquidity on Converge, offering permissionless access to swap assets and supply capital. In parallel, a permissioned product will be made available to support institutions — with the infrastructure needed for larger trades, tokenized assets, and regulatory considerations. Deploying on Converge --------------------- The disparity between TradFi, CeFi, and DeFi interest-rate markets highlights the need for a TradFi-oriented chain — aligning them could unlock significant opportunities. We’ve already seen this disparity play out when sUSDe launched on Aave. At the time, **sUSDe was yielding 25%** in CeFi while DeFi rates sat around 10%. That led to a rapid $1B TVL growth within days, as users borrowed cheap dollars in DeFi to capture the CeFi yield — a clear-cut 1500 basis points arbitrage. But the same disconnect exists at an even larger scale between TradFi and DeFi. In TradFi, capital can often **be sourced at SOFR + 100bps**, while sUSDe can offer >15% return. This kind of spread is unsustainable long term, and a TradFi-integrated chain like Converge is what enables that gap to compress — by making these arbitrage loops executable and scalable. A **liquid secondary market around sUSDe** will play a key role in that process by allowing capital to move freely across TradFi, CeFi, and DeFi — unlocking the arbitrage opportunities that drive rate convergence in the first place. Just as importantly, it sets the foundation for **institutional asset trading** where stable, yield-bearing primitives can be used as base collateral to transact across tokenized real-world assets, crypto pairs and other emerging on-chain instruments. Converge, backed by Securitize and Ethena, is uniquely positioned to onboard institutional capital into digital markets — and **Terminal Finance is here to build its liquidity layer**. _The Terminal Finance team will continue sharing detailed updates as we roll out key milestones in the coming weeks. In the meantime, feel free to follow us on_ [_X_](https://x.com/Terminal_fi) _and join our_ [_Discord_](https://discord.com/invite/jTzSsvhnEF) _&_ [_Telegram_](https://t.me/terminal_fi) _for early updates on how you can support Terminal and get involved as an early user._ --- *Originally published on [Terminal Finance](https://paragraph.com/@terminal-finance/introducing-terminal-finance-4)*