Hermetica Launches Bitcoin-backed Synthetic Dollar

Hermetica, a Bitcoin-based DeFi protocol, has launched USDh, a dollar-pegged asset native to the world’s most valuable blockchain.

The project touts USDh as the “first Bitcoin-backed, yield-bearing synthetic dollar outside the fiat system.”

USDh’s stability mechanism is similar to that of Ethereum-based Ethena. Hermetica hedges its spot BTC holdings with short futures positions to ensure that USDh can always be redeemed for $1 worth of BTC. The funding fees accrued from these short positions are the source of yield for USDh stakers.

While the project claims a staking yield of “up to 25%,” the app shows that sUSDh – the staked version of the token – is currently yielding 11.7%.

Hermetica is leveraging the Runes protocol, launched in April as a more efficient way to inscribe data on Bitcoin. The protocol aims to reduce the footprint of BRC-20s, the previous iteration of fungible tokens responsible for clogging up the network and driving up fees.

USDh can be purchased with Bitcoin on NFT marketplace Magic Eden, which showcases a 24-hour trading volume of just $10,000 since the token launched on July 16 – a far cry from the hype that accompanied the launch of Ethena’s USDe, which now boasts a $3.4 billion market capitalization.

Users can stake their USDh on the Hermetica app and also have the option to borrow BTC against their holdings using Liquidium, a Bitcoin-based lending platform for Ordinals and Runes.

The tepid response to the launch could be due to a lack of awareness, as Bitcoin’s DeFi ecosystem is still in its infancy. Still, the emergence of a Bitcoin-native stable asset can be seen as a positive development if it can scale, as it offers Bitcoiners – who have long been wary of bridging assets to other blockchains – an alternative to the centralized stablecoins that dominate the market.