Hermetica Unveils Bitcoin-Backed Synthetic Dollar, Aiming to Boost Bitcoin DeFi Landscape

Hermetica announces the launch of USDh, a Bitcoin-backed synthetic U.S. dollar offering up to 25% yield, set to release in June.
USDh aims to provide Bitcoiners with a way to earn on their dollars without relying on traditional banks or non-Bitcoin investments.
Despite high yield prospects, the sustainability of such returns remains under scrutiny, echoing concerns from past high-yield protocols.

Hermetica, a Stacks-native DeFi protocol operating on the Bitcoin blockchain, has announced the impending launch of USDh, the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities. Slated for release in June, this innovative financial product promises to offer users yields of up to 25%, according to an announcement shared with Cointelegraph.

Innovating Bitcoin DeFi

Jakob Schillinger, founder and CEO of Hermetica Labs, emphasized that USDh is designed to enhance liquidity and introduce new functionalities within the Bitcoin DeFi ecosystem. Hermetica is at the forefront of the burgeoning Bitcoin DeFi (BTCFi) movement, which seeks to expand decentralized finance capabilities directly on the world’s first blockchain network, leveraging its security and widespread adoption.

ICYMI: Hermetica is set to launch USDh, the first-ever #Bitcoin-backed synthetic U.S. dollar with yield-generating capabilities up to 25% annually
— BlockNews.com (@blocknewsdotcom) May 6, 2024

The proposed 25% annual percentage yield (APY) on USDh raises questions about the long-term sustainability of such high returns. This rate is reminiscent of previous high-yield protocols like the Anchor Protocol, which offered 20% yield on TerraUSD (UST) before its dramatic collapse in May 2022. Schillinger assures that the yield for USDh is sustainable, supported by backtest data from January 2021 to March 2024 showing an average APY of 11.71%. He explained that the yield is derived from futures funding rates which fluctuate based on market demand for long leverage on Bitcoin.

Prospects for Bitcoin DeFi

With the integration of innovations like Ordinals, which has already shown significant trading volumes, Schillinger is optimistic about the future of Bitcoin DeFi. He predicts that the sector could match or even eclipse the size of Ethereum DeFi in the next five years, fueled by over $1 trillion in latent Bitcoin capital.

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