Hermetica, a company specializing in Bitcoin-native decentralized finance (DeFi), has made an exciting announcement. They are set to launch the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities. This innovative product, known as USDh, will be released in June and promises users yields of up to 25%.
The main advantage of this new synthetic dollar is that it allows Bitcoin holders to earn yield on their U.S. dollars without relying on the traditional banking system or investing in non-Bitcoin-related assets. Jakob Schillinger, the founder and CEO of Hermetica Labs, explained the significance of this development.
Hermetica is part of the Bitcoin DeFi (BTCFi) movement, which aims to bring DeFi capabilities to the original blockchain network. One of the key catalysts for BTCFi was the introduction of Ordinals, according to Schillinger.
The launch of the BTC-backed synthetic dollar follows the recent release of Ethena’s USDe, which offered a yield of 27.6%. However, concerns were raised about the sustainability of such high yields. Similarly, there may be concerns about Hermetica’s USDh, as its 25% annual percentage yield (APY) is higher than the 20% offered by Anchor Protocol on TerraUSD (UST) before Terra’s collapse in May 2022.
Schillinger reassured that the yield for USDh is sustainable and is derived from futures funding rates. He also mentioned that the demand for Bitcoin futures will help maintain the yield.
The introduction of more utility and DeFi capabilities around Bitcoin is becoming increasingly popular. Schillinger believes that Ordinals played a crucial role in the growth of BTCFi.
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