Hyperliquid’s Payday

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Protocols increasingly internalize previously leaked stablecoin revenues. The first interest payment on Hyperliquid’s USDC supply is set to arrive this Saturday, October 3rd. This follows the mid-May announcement by Coinbase and Circle that places USDC as an aligned asset on the platform. Coinbase and Circle both staked HYPE tokens and committed to paying out 90% of cost-adjusted interest revenue from all of the native USDC sitting on Hyperliquid.

The first payment period started roughly a month ago on August 26th and came to a close a few days ago. Hyperliquid currently has $7B of USDC sitting on its platform. Up until a month ago, this supply was generating upwards of $100M a year in revenue for Circle, and as a result Coinbase, who holds a revenue sharing agreement with the issuer of USDC. As is the case with Hyperliquid, many protocols are looking to diversify their revenue streams beyond fees and internalize T-bill revenue captured by stablecoin issuers.

Lighter, another decentralized perpetual futures platform, had beaten Hyperliquid to the punch when it comes to USDC revenue sharing. Since the deal’s announcement in February of this year, USDC supply on the platform has decreased sharply from just above $900M to around $630M today. While the details of the revenue share have not been publicly disclosed, the deal allows Lighter to internalize some of this otherwise leaked revenue.

While some protocols opt to strike revenue sharing agreements with incumbent stablecoin issuers, some prefer to roll out their own stablecoins or use white-label services. Companies like Bridge and Ethena allow protocols to easily create their own branded stablecoins for usage on their platforms. Polymarket moved deposits into its own USDC-backed stablecoin, pUSD, which positions it to capture yield on the close to $500M in deposits on the platform. Phantom, a crypto wallet, rolled out its own stablecoin, CASH, issued by Bridge, which allows apps that originate CASH to capture their portion of the yield the stablecoin generates.

Some chains have also taken a similar approach. MegaETH launched with its own stablecoin, USDM, which uses the T-bill yield from its supply to cover sequencer fees and buy back the chain’s native token with any excess revenue.

Taken together, these deals point to the same shift throughout the industry. Protocols and apps with leverage are able to internalize “easy” revenue that was once captured by stablecoin issuers such as Circle. Across Hyperliquid, Lighter, and Polymarket alone, that’s roughly $8B of deposits positioned to earn somewhere between $250M and $300M a year in T-bill yield that used to accrue almost entirely to the issuer. 

The appeal of this revenue is that it depends far less on activity than trading fees do. Trading fees are highly cyclical and while stablecoin flows are too, they are stickier than pure trading activity. T-bill yield, however, is still correlated to the broader market. Yields that are uncorrelated with both crypto and rates are slowly showing up onchain. OnRe tokenized reinsurance premiums and packaged them into a stablecoin, ONyc, yielding close to 11% annualized. Kamino introduced an institutional commodity yield vault, which brings commodity trade financing onchain, aiming to yield around 8% annualized. 

These products carry their own risks however, where catastrophic weather conditions or cargo fraud can wipe out returns. While stablecoin reserves cannot be held in such products, the propagation of offchain yield onchain allows for muted cyclicality and can keep capital onchain rather than letting it leak out.

— Toma 

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