Hermetica, a Bitcoin-backed stablecoin platform, is bringing its synthetic dollar, USDh, onto the Stacks (STX) Bitcoin Layer 2 (L2) network, as disclosed to Finbold on Wednesday, September 25.

With the expansion, USDh becomes the first Bitcoin-backed stablecoin to integrate into the rapidly growing Stacks ecosystem.

Dylan Floyd, CEO of Bitflow, shared his excitement about the launch:

“USDh has all the attributes we’re looking for in a stablecoin: Fully bitcoin-backed, capital efficient, and a sustainable crypto-native yield. At Bitflow, we’re excited to launch new pools for USDh in our AMM DEX and bring deep stablecoin liquidity to our users. Thanks to our aggregator, USDh can be swapped with every other SIP10 token on Day 1.”

The role of USDh in Bitcoin DeFi

By providing a stable, dollar-pegged coin backed entirely by Bitcoin (BTC), USDh allows users to generate up to a 25% yield while staying within the Bitcoin ecosystem.

Unlike traditional stablecoins tied to fiat currencies, USDh gives users complete control over assets without involving party financial institutions.

Jakob Schillinger, CEO of Hermetica, emphasized the importance of this integration, stating:

“In order for us to scale Bitcoin, we need a thriving ecosystem of Bitcoin L2s. With the launch of USDh on Stacks, we’re bringing a crucial piece of infrastructure to one of the leading Bitcoin ecosystems. We’re excited to now offer Bitcoin-backed yield and a liquid dollar asset that will be instrumental in scaling Bitcoin DeFi on Stacks.”

Tapping into the stablecoin market potential

While the global stablecoin market has reached a value of $160 billion in the past five years, Bitcoin’s immense $1.3 trillion market cap remains largely untapped.

Currently, decentralized finance (DeFi) protocols leverage only 1% of Bitcoin’s value, revealing a massive $360 billion opportunity.

Hermetica seeks to seize this opportunity and offer a stablecoin that is not only backed by Bitcoin but also transacts seamlessly on Bitcoin’s L1 and L2 networks.

USDh’s peg to Bitcoin (1 USDh = 1 USD worth of satoshis) gives users a stable, dollar-linked asset without needing to leave the Bitcoin ecosystem.

Tycho Onnasch, CEO of Zest, commented on the importance of stablecoin liquidity:

“Stablecoin liquidity is the backbone of a robust DeFi ecosystem. With its capital-efficient design and full Bitcoin backing, USDh has the potential to become a central piece of the Stacks ecosystem. We are excited to bring USDh to Zest Protocol users, the leading lending protocol on Stacks.”

Peter Watson, CMO of Velar, added:

“The launch of Hermetica (USDh) on the Stacks network brings a much-needed stablecoin secured by Bitcoin. Backed by a solid team that believes in Bitcoin’s decentralized ethos, USDh offers a resilient asset for the ecosystem. Velar will be initially listing USDh on our DEX, offering users the option to hold a yield-bearing stablecoin, further enhancing its accessibility.”

The success of USDh

Initially launched on the Bitcoin Layer-1 Runes protocol, USDh amassed $2 million in Total Value Locked (TVL) during a private whitelist phase.

The demand for Bitcoin-backed stablecoins within DeFi is evident, as USDh is already integrated into platforms like Liquidium and MagicEden.

Stacks is getting ready for a major upgrade in September 2024, including 5-second block times and full Bitcoin finality, which are expected to drive DeFi growth.

The inclusion of USDh is thus an important milestone for the platform and Bitcoin-backed financial tools in general.