Ethena, the team behind the USDe synthetic dollar, has withdrawn its bid to issue the USDH stablecoin on Hyperliquid. This decision follows concerns raised by community members and validators about Ethena not being a native Hyperliquid project.
In a recent announcement on X, Ethena acknowledged the community’s pushback and congratulated Native Markets, now the leading contender in the USDH race. According to Ethena Labs founder Guy Young, the process demonstrated a fair chance for emerging players under the Hyperliquid ecosystem.
Ethena’s exit significantly impacts the bidding landscape, with multiple teams vying to issue Hyperliquid’s native stablecoin, USDH. Polls from the prediction market Polymarket currently favor Native Markets with a 92% chance of winning, followed by Paxos at about 7%.
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Concerns Over USDH Bidding Fairness
Despite Ethena’s positive view of the bidding process, some critics question the fairness and credibility of Native Markets. Haseeb Qureshi from Dragonfly noted that the process appeared biased in favor of Native Markets, suggesting pre-arranged advantages including early proposal submission.
Other notable participants like Paxos and Agora have raised questions about the fairness, emphasizing their stronger track records in fiat-backed stablecoin issuance compared to Native Markets.
Lilian Aliaga from OAK Research expressed skepticism about Native Markets’ ability to scale USDH into a multi-billion dollar stablecoin, hinting at possible bias influencing voting commitments.
Conversely, industry experts recognize that Native Markets might be the appropriate choice due to their native Hyperliquid integration, though leaders like Paxos remain highly respected in the stablecoin space.
David Lawant of FalconX highlighted the high stakes involved, noting that $5 billion USDC on Hyperliquid equates to roughly 10% of Circle’s business or about $200 million in annual revenues tied to this decision.
Understanding the USDH Governance Vote
The USDH vote constitutes Hyperliquid’s first significant governance challenge beyond asset delistings. The entire process takes place onchain, with voting power determined by HYPE token stakes. A proposal needs a two-thirds majority of total staked tokens to be accepted.
After validators declare their preferences, delegators can shift their stakes toward validators that echo their interests. Key stakeholders like the Hyperliquid Foundation and Kinetiq control around 63% of the stake but have pledged to abstain from voting.
The voting timeline is tight: proposals ended Wednesday, followed by a 24-hour validator declaration and a short redelegation window. The final vote is scheduled for Sunday, between 10:00 and 11:00 UTC.
Native Markets’ USDH Proposal
Native Markets is a new entity competing to become the issuer of Hyperliquid’s native stablecoin USDH. Led by Max Fiege, a Hyperliquid investor, along with MC Lader and Anish Agnihotri, the group portrays itself as the most integrally tied to Hyperliquid’s ecosystem.
Their proposal includes minting USDH on HyperEVM, committing half of interest earnings from USDH reserves to HYPE token buybacks, and dedicating the remainder to ecosystem growth initiatives such as HIP-3 markets and HyperEVM applications.
USDH reserves would be supported by cash and short-duration US Treasury bonds. Offchain reserves are initially to be managed by BlackRock, while onchain reserves are overseen by Superstate through the Stripe-owned Bridge.
This reliance on the Bridge system has attracted some critique due to concerns about a potential single point of failure. Additionally, Agora founder Nick VanEck questioned if Stripe’s broader ambitions might conflict with Hyperliquid’s interests.
Max Fiege has acknowledged such scrutiny and expressed their commitment to proving their capabilities despite being a new team.
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