Paxos has updated its proposal to issue USDH, the planned stablecoin for decentralized exchange Hyperliquid, adding strategic support from PayPal and new payment integrations with Venmo and Xoom. The move strengthens its competitive edge in the heated race to power Hyperliquid’s stablecoin ecosystem.
PayPal Backs Hyperliquid with $20M Incentives
In its latest announcement, Paxos revealed that PayPal has committed to supporting the Hyperliquid ecosystem. This includes:
- Listing the HYPE token within its ecosystem.
- Offering free on- and off-ramps for USDH.
- Supporting USDH and HYPE for PayPal checkout.
- Integrating USDH into Venmo and Xoom, expanding its reach into payments and remittances.
- $20 million in incentives directed to grow Hyperliquid’s adoption.
This collaboration could position USDH as one of the first stablecoins with mainstream payment integration, giving it a strong advantage over competing bids.
Revenue Model Tied to Hyperliquid’s Growth
Paxos also introduced a performance-based revenue model that aligns its success with that of Hyperliquid:
- Paxos earns nothing until $1 billion in total value locked (TVL) is reached.
- After $1B TVL, Paxos receives 1% of fees, scaling gradually up to 5% at $5B TVL or higher.
- Any fees collected are held in HYPE tokens, ensuring vested interest in the ecosystem.
- In the early phase, up to 80% of funds are allocated to ecosystem development, later stabilizing to 25% as TVL grows.
This model ensures that “Paxos only wins if Hyperliquid wins,” creating a transparent, incentive-aligned structure.
The Assistance Fund and Buyback Mechanism
Part of the fees generated will flow into Hyperliquid’s Assistance Fund, a protocol-owned treasury used to:
- Market-buy HYPE tokens.
- Provide insurance for the ecosystem.
- Support long-term sustainability.
This buyback and insurance mechanism strengthens Hyperliquid’s token economy while providing additional security for users.
Competitive Landscape
The battle for USDH issuance is intensifying, with multiple firms competing:
- A coalition led by MoonPay, Agora, and Rain submitted a rival proposal.
- Stripe-backed entities have also joined the race, though some warn of potential conflicts from vertical integration.
- Ethena Labs became the sixth bidder, proposing USDH backed by its USDtb stablecoin, tied to BlackRock’s BUIDL fund.
This competitive environment underscores the growing importance of USDH in shaping the future of decentralized stablecoin adoption.
Key Takeaway
With PayPal, Venmo, and Xoom integrations, Paxos has positioned its USDH proposal as the most mainstream-ready option, offering real-world payment utility alongside a performance-based incentive model. If approved, USDH could become one of the first stablecoins with mass adoption pathways beyond crypto trading, potentially reshaping the intersection of DeFi, payments, and stablecoin regulation.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.