Paxos Updates USDH Proposal with Support from PayPal and Venmo
Stablecoin issuer Paxos has revised its proposal for USDH, the anticipated stablecoin of decentralized exchange (DEX) Hyperliquid, by incorporating backing from PayPal and Venmo.
In an announcement made on Wednesday, Paxos shared its updated proposal from Saturday regarding the issuance of USDH. The company noted that “PayPal has committed to supporting the Hyperliquid ecosystem” through the listing of the HYPE token, providing the new stablecoin with free on and off-ramps, and offering support for both USDH and Hyperliquid (HYPE) at PayPal checkout.
Additionally, PayPal plans to supply $20 million in incentives devoted to the HYPE ecosystem and integrate USDH within its payment application, Venmo, and the money remittance service, Xoom. Paxos also indicated that its regulatory status in the European Union would permit its stablecoin to circulate there, “ensuring that USDH can scale globally.”
The update aims to align the issuer’s interests with those of the Hyperliquid ecosystem, asserting that “Paxos only wins if Hyperliquid wins.” According to Paxos, “Paxos takes nothing until we reach $1B in TVL and stays capped at 5% post $5 billion [total value locked] TVL.” The firm added, “Any fees earned by Paxos through this milestone will be held in HYPE tokens.”
Fee Structure and Ecosystem Development
Once the $1 billion in TVL is reached, Paxos begins to earn 1% of the fees, with this percentage gradually scaling up until it hits 5% at a TVL of $5 billion or more. In the early stages, up to 80% of the funds are allocated to ecosystem development. However, as the TVL grows, this percentage decreases to 25%, subsequently redirecting more resources to Hyperledger’s Assistance Fund treasury.
The Assistance Fund operates as the protocol-owned treasury that receives platform revenues and fees, which are then employed to buy back HYPE tokens. It serves as a buyback and insurance fund for the ecosystem.
Competition in the USDH Stablecoin Space
This update emerges amidst competition among several firms vying to issue USDH. On Monday, a coalition of crypto companies, including MoonPay, Agora, and Rain, presented a joint proposal.
They opposed a proposal from an entity indirectly controlled by the financial giant Stripe. Agora CEO Nick Van Eck cautioned that Stripe’s vertical integration created “clear conflicts.”
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On Tuesday, Ethena Labs became the sixth contender for Hyperliquid’s USDH stablecoin. The team behind USDe and USDtb proposes to back USDH with its USDtb stablecoin, which is associated with BlackRock’s BUIDL fund.
