Sky Joins USDH Stablecoin Bidding War as Fifth Major Protocol

Sky Protocol joined the intensifying competition to issue Hyperliquid’s USDH stablecoin as the fifth major bidder, promising 4.85% yields and $25 million in ecosystem development funding while facing pushback against frontrunner Stripe’s Bridge proposal.

Co-founder Rune Christensen submitted Sky’s comprehensive proposal offering access to $2.2 billion in instant USDC liquidity through existing infrastructure backing $8 billion in USDS and DAI stablecoins.

The protocol promises GENIUS Act compliance, customization, and native multichain deployment via LayerZero.

USDH powered by Sky

The best stablecoin offers so much more than just a stable medium of exchange – it should also deliver highly efficient returns, generated by actively developing, building and growing the ecosystem it lives in.

By using Sky to power USDH, the Hyperliquid…

— Rune (@RuneKek) September 8, 2025

Coalition Forms Against Stripe Dominance

The bidding war escalated following Hyperliquid’s Friday announcement seeking proposals for a “Hyperliquid-first, Hyperliquid-aligned, and compliant USD stablecoin.”

Native Markets submitted the initial proposal partnering with Stripe’s Bridge payment processor for USDH issuance.

Agora CEO Nick Van Eck mounted fierce opposition to the Stripe proposal, warning against relinquishing canonical stablecoin control to a “vertically integrated issuer with clear conflicts.”

He cited Stripe’s planned Tempo blockchain as creating potential user migration risks away from Hyperliquid.

MoonPay joined Agora’s coalition, with president Keith Grossman announcing regulated payment rails support.

Dragonfly partner Rob Hadick endorsed the MoonPay addition as creating the “unarguable best” proposal for USDH issuance.

VanEck CEO Jan van Eck appealed directly to the Hyperliquid community, supporting his son Nick’s Agora bid.

Dear Hyperliquid community,
 
We are impressed by your product, the technology, the decentralized governance, and the method of your rollout.
 
And we think we can be part of a trusted, compliant solution.
 
We provide research to the community, for free, in an effort to be…

— Jan van Eck (@JanvanEck3) September 8, 2025

He emphasized the firm’s bullish Hyperliquid research and multi-month token holdings while warning against being “gang-tackled” in proposal discussions.

Paxos also submitted competing proposals promising 95% of interest earnings toward HYPE buybacks, leveraging the acquisition of Molecular Labs for a native ecosystem experience.

Frax Protocol offered returning all USDH earnings to the community through frxUSD backing.

Sky’s Infrastructure Advantage and Yield Strategy

Sky’s proposal leverages the protocol’s proven seven-year security track record, managing over $8 billion across USDS and DAI without losses to stablecoin holders.

According to the protocol, the infrastructure has survived multiple crypto cycles while building Lindy effects through continuous operation.

The protocol offers 4.85% returns on all USDH held on Hyperliquid, exceeding current Treasury bill rates through diversified collateral management.

USDH would inherit technical architecture identical to DAI and USDS tokens, providing immediate access to Peg Stability Module liquidity totaling $2.2 billion in USDC.

The system enables large-scale off-chain redemptions through websites including spark.fi, sky.money, and defisaver.com.

The proposal claimed there would be native conversion capabilities between USDH and sUSDS, providing unlimited access to Sky Savings Rate yields currently at 4.75%.

The multichain deployment through LayerZero enables Sky’s $8 billion collateral portfolio deployment directly on Hyperliquid with low risk premiums.

Sky committed $25 million for Hyperliquid Genesis Star creation, an autonomous project designed to bootstrap massive DeFi ecosystem growth.

The model follows Spark’s success in achieving $1.2 billion total value locked through exclusive token farming mechanisms.

The protocol plans to relocate its $250 million annual buyback system from Uniswap to Hyperliquid, currently using $36 million yearly for SKY token purchases, with plans to increase to $150 million annually.

The migration would establish Hyperliquid as the standard for protocol token buybacks.

Hyperliquid’s Record Performance Drives Stablecoin Demand

According to a Cryptonews report earlier this month, Hyperliquid’s August revenue reached $106 million from perpetual futures trading, marking 23% growth while capturing 70% DeFi perpetuals market share.

Monthly trading volume hit $383 billion with $1.25 billion annualized revenue despite operating with just 11 employees.

Trading activity peaked at $29 billion daily volume, generating $7.7 million in fees.

🚀 Hyperliquid smashes revenue record with $106M in August, dominating 70% of the DeFi perps market as lean 11-employee team outperforms financial giants.#HyperLiquid #DeFihttps://t.co/EsYDUloLz8

— Cryptonews.com (@cryptonews) September 2, 2025

Total value locked climbed from $230.48 million in April to $762.57 million currently, while cumulative perpetual futures volume reached $2.57 trillion. The exchange outpaced Robinhood for three consecutive months in trading volume.

HYPE token maintains strong performance at current levels near $47, gaining over 400% since April, with Arthur Hayes projecting potential 126x returns by 2028.

Hayes’ thesis assumes a stablecoin supply reaching $10 trillion while Hyperliquid becomes the largest crypto trading venue.

Institutional adoption accelerated through Anchorage Digital custody services and Circle’s native USDC deployment.

The lean operational model relies on automation replacing traditional finance departments for settlement, reconciliation, and compliance functions.

Looking forward, Sky has voiced commitment to Hyperliquid ecosystem development regardless of vote outcomes, citing natural alignment between projects focusing on real profits and useful decentralized infrastructure.