Author: Squiffs

Compiled by Jia Huan, ChainCatcher

Hyperliquid's planned launch of its native stablecoin USDH has become one of the most eye-catching competitions in the DeFi field in recent years, with various institutions and DeFi projects vying for the voting support of validator nodes.

However, Haseeb Qureshi, a partner at the crypto investment firm Dragonfly, claims that a "backroom deal" already existed in this competition. He posted on X (formerly Twitter): "I've heard from multiple bidders that all validators are only interested in Native Markets and haven't seriously considered any other parties. It's as if a backroom deal was already in place. The fact that Native Markets' proposal was released shortly after the USDH Request for Proposals (RFP) was published seems to indicate they were tipped off."

Following Qureshi's post, CL, an anonymous crypto trader and spokesperson for Hypurrscan, which holds 15% of Hyperliquid's total voting power, publicly expressed support for Native Markets. However, Alex Svanevik, founder of Nansen, which operates The Hypurr Collective, Hyperliquid's largest validator node, strongly refuted Qureshi's accusations.

Svanevik responded: “This is untrue. Our team has invested significant effort in reviewing proposals and engaging with bidders to find the best fit for Hyperliquid. I have received numerous private messages and calls from USDH bidders this week. We have been proactively engaging with them.”

Native Markets Proposal

Over the past week, the competition for USDH issuance has intensified, with DeFi giants including Sky (formerly Maker), Ethena, Paxos, and Agora all submitting formal proposals. Notably, Dragonfly has invested in Agora and Ethena, both of which have also submitted USDH proposals and are currently competing.

Haseeb's criticism centers on the Native Markets proposal, which calls for natively minting a stablecoin on the HyperEVM while maintaining compliance with the GENIUS Act and inheriting fiat onramps from its issuer, Bridge (a subsidiary of Stripe).

Stripe just announced its upcoming permissionless Layer 1 blockchain Tempo last week, which is expected to simplify the process of onboarding fiat currencies to Hyperliquid, which currently requires an on-chain cross-bridge solution.

Native Markets team members include Max Fiege, formerly of Liquity and Barnbridge, and Anish Agnihotri, former president and COO of Uniswap Labs.

Unlike other proposals that suggest using most of USDH revenue to repurchase HYPE, Native Markets proposes to use 50% of reserve earnings for Hyperliquid Assistance Fund to repurchase HYPE, while the other 50% is used to reinvest in USDH growth.

Competition between Ethena, Sky, and Paxos

Paxos quickly submitted a revised proposal last night. The proposal includes a partnership with PayPal to list HYPE on PayPal and Venmo, free fiat on-ramps, $20 million in ecosystem incentives, and an "AF-first incentive structure" where Paxos will not charge any fees until it reaches a TVL milestone.

In the latest development in the dispute, Paxos co-founder Bhau Kotecha said he is willing to work with Native Markets.

The idea stemmed from a tweet from investor Mike Dudas, who wrote: “Isn’t the most obvious solution for USDH simply a merger of the Native Markets and Paxos proposals? Native Markets handles the front end (Hyperliquid native, deeply integrated into the ecosystem), and Paxos handles the back end (GENIUS Act compliant, multi-billion dollar issuer, PayPal/Venmo distribution channels)?”

Meanwhile, the cross-chain version of Tether’s stablecoin, USDT0, announced that it would not participate in the competition.

Beyond formal proposals, these protocols are actively seeking support from the Hyperliquid community. Agora's proposal included a public address at X by Jan van Eck, CEO of VanEck, an investment firm with $130 billion in assets. Ethena, on the other hand, took a more humorous approach, parodying lyrics from Eminem's song "Stan" in a playful letter to Hyperliquid founder Jeff Yan.

Sky's proposal has also attracted considerable attention, with co-founder Rune Christiansen publishing it in the Hyperliquid Discord group last night. The proposal highlights the successful history of Sky and DAI, promising Hyperliquid a 4.85% annualized yield on all USDH issued on Hyperliquid. Sky may deploy its $8 billion balance sheet on Hyperliquid, as well as provide a $25 million grant to create "Hyperliquid Stars" designed to independently develop DeFi on Hyperliquid.

Ethena, a synthetic dollar protocol, launched its own proposal on September 9th. This proposal envisions USDH being 100% backed by USDtb, a stablecoin backed by BlackRock's BUIDL fund. Ethena's proposal also pledges to return "at least 95%" of USDH reserve revenue to the Hyperliquid ecosystem in the form of HYPE purchases and provides "at least $75 million in cash and token incentives to develop the HIP-3 frontend."

Sky and Ethena issue the third and fourth largest stablecoins by market capitalization, respectively, behind Circle's USDC and Tether's USDT. Ethena's USDe has a market capitalization of nearly $13 billion, while Sky's DAI has a market capitalization of approximately $5 billion. However, their combined market share is still far less than the two market giants: USDC has a market capitalization of $72 billion and USDT has a market capitalization of $169 billion.

As traditional institutions and DeFi projects continue to intensify their competition, HyperEVM builders are focusing on their future mission. Charlie, a contributor to Felix Protocol, told The Defiant: "The real work on the entire USDH scheme will begin at launch, because the real question will be how to scale to $5 billion."

He cited a post on X, explaining that for USDH to truly impact Hyperliquid, it needs to focus on more than just yield rebates or HYPE token buybacks. "I wouldn't rule out USDT/USDe/USDC getting in on the action if they see that as a path to winning election. We need to see a clearer path to dismantling USDC's dominance for these USDH proposals to become more attractive."

It’s worth noting that while Tether’s subsidiary USDT0 withdrew from the competition earlier today, it’s unclear whether this means Tether has officially withdrawn as well, and Circle has remained silent on the matter so far.

Hyperliquid's Growth

The growth of perpetual contract exchanges and Layer 1 has been a recurring theme in 2025.

Hyperliquid currently accounts for over 35% of all cryptocurrency revenue, with annualized revenue reaching $1.28 billion, 99% of which goes to the Hyperliquid Aid Foundation to repurchase HYPE tokens.

Hyperliquid’s Layer 1 blockchain, HyperEVM, has been on a sustained upward trend since its mainnet launch in February, currently ranking as the eighth-largest blockchain with $2.6 billion in total value locked (TVL), compared to just $400 million in TVL at the beginning of 2025.

Meanwhile, the HYPE token has been one of the best-performing crypto assets since its launch in November 2024. The token, which debuted with a fully diluted valuation of approximately $3 billion, has surged over 1,700% since its launch, reaching an all-time high of $55.7 overnight.