Sky Enters USDH Bidding War: Proposes 4.85% Yield, Compliance & $25M DeFi Fund

Hyperliquid’s governance community is in the spotlight once again as Sky, the protocol formerly known as MakerDAO, has officially entered the bidding war to issue the upcoming USDH stablecoin. Announced just hours ago, Sky’s proposal raises the stakes by offering validators a 4.85% yield, positioning it above U.S. Treasury rates. The bid also includes an optional GENIUS Act–compliant structure to satisfy regulatory standards and a $25 million DeFi growth fund aimed at driving adoption on Hyperliquid. The move signals Sky’s determination to secure USDH issuance rights.

Background / Context

Hyperliquid, a rising star in the Ethereum Layer-2 ecosystem, announced plans to launch its own USDH stablecoin, designed to rival USDT and USDC while adding native DeFi incentives. The stablecoin will be backed by protocol revenue streams, offering holders both stability and yield opportunities. Governance has opened bidding to external partners, sparking a competitive race among major DeFi protocols to secure issuance rights. Sky’s proposal follows earlier interest from other players, each aiming to gain a foothold in Hyperliquid’s fast-growing ecosystem. 

By tying USDH issuance to validator incentives and compliance options, Hyperliquid is setting a precedent for more transparent and scalable stablecoin governance. The outcome of this bidding process could reshape competition in the stablecoin sector and set new standards for DeFi-native currencies.

Sky’s Proposal Details

Sky’s entry into the bidding war has immediately drawn attention, thanks to its mix of competitive yield and user-focused features. The proposal outlines a 4.85% annual yield for USDH holders, setting it apart from traditional stablecoins that often provide little to no return. Beyond yield, Sky emphasizes compliance readiness, offering an opt-in system where institutions can meet regulatory requirements without restricting everyday users. 

This hybrid approach balances DeFi’s open-access ethos with the growing demand for regulatory clarity. To strengthen adoption, Sky also announced the creation of a $25 million ecosystem fund dedicated to supporting projects that integrate USDH. Developers and liquidity providers could tap into this pool to kickstart innovation around the stablecoin. Together, these measures position Sky not just as a bidder but as a potential long-term steward of Hyperliquid’s stablecoin vision, signaling its intent to play a pivotal role in shaping USDH’s growth.

Market and Industry Reaction 

The news of Sky’s bid quickly rippled through the community, prompting reactions from traders, developers, and analysts. The conversation highlights three main themes:

• User excitement over yield → Retail and DeFi users see the 4.85% annual yield as a major upgrade compared to traditional stablecoins. Many believe this could attract fresh liquidity into Hyperliquid’s ecosystem.

• Debate over compliance → The optional GENIUS Act compliance feature has split opinions. Supporters view it as a forward-looking step to align with U.S. policy, while skeptics worry it could dilute DeFi’s open ethos.

• Analyst caution on competition → Market watchers point out that Paxos, Frax, and Agora already have strong proposals in play. Still, Sky’s $25M growth fund could sway validator support by fueling adoption projects.

Together, these responses suggest that Sky’s proposal hasn’t just added another option — it has raised the stakes for every bidder in the USDH race.

Related: Stacks Launches 35 Percentage Annual Yield on USDh, Setting Record for Bitcoin Layer 2 DeFi

Conclusion

Sky’s late entry into Hyperliquid’s USDH bidding war has added a new layer of intensity to an already competitive process. By combining a 4.85% yield, optional regulatory compliance, and a $25 million growth fund, the protocol formerly known as MakerDAO has positioned itself as a serious contender for stablecoin issuance. While rival bids from Paxos, Frax, and Agora remain strong, Sky’s proposal has shifted the conversation by addressing both investor returns and long-term ecosystem growth. As Hyperliquid validators prepare to make their decision, the outcome could influence not only USDH’s trajectory but also the wider future of stablecoin governance.

FAQs

What is Hyperliquid’s USDH stablecoin?

USDH is a new stablecoin planned by the Hyperliquid network. Unlike traditional options, it will be tied to validator incentives and protocol revenue, aiming to combine stability with on-chain yield for holders.

Why is Sky bidding to issue USDH?

Sky, formerly MakerDAO, is competing for USDH issuance rights to expand its role in the stablecoin sector. Its proposal highlights a 4.85% yield, compliance flexibility, and a $25 million fund to boost adoption.

How does Sky’s proposal compare to Paxos, Frax, and Agora?

• Paxos: Focuses on compliance and yield distribution.

• Frax: Offers full yield return to users.

• Agora: Emphasizes infrastructure partnerships.

• Sky differentiates itself with regulatory options and a growth fund, making it a more ecosystem-driven approach.

When will a decision on USDH issuance be made?

Hyperliquid validators are expected to vote in the coming weeks, after the network’s latest upgrade. The outcome will decide which protocol manages USDH issuance and sets the direction for its launch.