In a groundbreaking development in Bitcoin-native decentralized finance (DeFi), Hermetica has announced the launch of USDh, the first synthetic dollar backed by Bitcoin with a promising yield of up to 25%. Set to debut in June, this innovative financial product aims to redefine liquidity and investment strategies within the Bitcoin ecosystem.

USDh Set to Transform Bitcoin DeFi with a Staggering 25% Yield Starting June

According to Cointelegraph, Hermetica has created the first Bitcoin-backed synthetic US dollar with yield-generating capabilities, marking the latest milestone in Bitcoin-native decentralized finance (DeFi).

The new synthetic dollar, USDh, will be released in June and will offer users payouts of up to 25%, according to a statement shared with Cointelegraph by Hermetica.

According to Jakob Schillinger, founder and CEO of Hermetica Labs, the new synthetic dollar will allow Bitcoiners to hold and earn a yield on their US dollars without relying on the banking system or being exposed to non-Bitcoin-related products.

"USDh will play a pivotal role in bringing increased liquidity and new use-cases to Bitcoin DeFi, allowing Bitcoiners to trade, lend, and transact in a dollar asset that is fully backed by Bitcoin," Schillinger informed Cointelegraph.

Hermetica is a Stacks-native DeFi protocol for Bitcoin that is part of a more significant movement called Bitcoin DeFi (BTCFi). This movement intends to provide DeFi features to the world's first blockchain network.

The introduction of the first Bitcoin-backed synthetic dollar comes two months after Ethena's USDe debutedwith a 27.6% yield for investors, raising significant concerns about the protocol's viability.

USDh Promises Sustainable 25% Yield Amid High Returns in Bitcoin Futures Markets

Similar issues may arise with Hermetica's USDh, given the 25% annual percentage yield (APY) is significantly higher than the 20% yield offered by Anchor Protocol on TerraUSD (UST) before the algorithmic stablecoin issuer Terra's collapse in May 2022.

Hermetica's CEO says the yield is sustainable and based on future funding rates. Schillinger explains:

"This Bitcoin-native yield fluctuates with the market's demand for long leverage. Our backtest data from January 2021 to March 2024 shows an average APY of 11.71%. In the 2022 bull market, the annual return was 26.11%."

Schillinger stated that the demand for Bitcoin futures will keep the USDh yield stable:

"The yield is sustainable due to the structural demand for long leverage in the Bitcoin futures markets."

More protocols add utility and DeFi features to Bitcoin, the world's most secure blockchain network. Schillinger believes introducing Ordinals was one of the most significant catalysts for BTCFi.

"We believe Bitcoin DeFi will match and eclipse the size of Ethereum DeFi in the next 5 years. We're already seeing months where Ordinals trading volumes are higher than volumes for Ethereum and Solana NFTs combined. With over $1T in latent BTC capital, Bitcoin DeFi is primed for explosive growth," he said.

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