Stablecoins on the Bitcoin Network

2024年6月24日

Introduction

Stablecoins have become essential in the cryptocurrency landscape, offering a stable alternative to the volatility of digital assets. While Ethereum is known for its extensive stablecoin ecosystem, Bitcoin also hosts a growing variety of stablecoins through different protocols and innovations. Here’s a look at some notable stablecoins on the Bitcoin network and the significance of borrowing and lending against them.

USDh and sUSDh 

Hermetica's USDh is a synthetic dollar backed by Bitcoin, designed to operate on both Bitcoin Layer 1 and Layer 2. This stablecoin enables users to hold and earn yield on dollar-pegged assets without leaving the Bitcoin ecosystem. It's fully backed by Bitcoin and provides a stable, interest-generating option within the Bitcoin network. USDh is currently still in development. Its mechanism works very similar to Ethena (USDe) on Ethereum but on Bitcoin.

  • Bitcoin-backed: USDh is made up of Bitcoin

  • Synthetic dollar: USDh tracks the USD price using Bitcoin coupled with a short futures position

  • Yields up to 25%: Stake USDh, receive liquid sUSDh, start receiving rewards from funding payments immediately

Nakamoto Dollar (NUSD)

BAMK.fi offers the Nakamoto Dollar (NUSD), a synthetic dollar protocol on the Bitcoin network backed 1:1 by Ethena's USDe with its first iteration. BAMK.fi also introduces the Bitcoin Bond, a savings instrument denominated in dollars, enabling users to save and earn within the Bitcoin ecosystem.

USDRIF

USDRIF is a stablecoin within the RSK (Rootstock) ecosystem, which is a smart contract platform merged with the Bitcoin blockchain. USDRIF is pegged to the US dollar and is backed by RIF tokens and other assets. This stablecoin is designed to maintain an unchanging value while leveraging the security and decentralization of the Bitcoin network through RSK.

Liquid Tether (L-USDT)

Issued on the Liquid Network, a Bitcoin sidechain, L-USDT is pegged to the US dollar, providing the stability of Tether while benefiting from the enhanced features of the Liquid Network, such as faster transactions and greater privacy. The Liquid Network is designed to facilitate secure and efficient transfers, making L-USDT an attractive option for users looking for fixed value and improved transaction capabilities within the Bitcoin ecosystem.

Dollar on Chain (DoC) 

Dollar on Chain (DoC) is a Bitcoin-backed stablecoin created on the RSK (Rootstock) platform. It is designed to maintain a 1:1 peg with the US dollar, providing stability and predictability within the volatile cryptocurrency market. DoC is part of the Money on Chain protocol, which aims to bring the benefits of DeFi to Bitcoin users.

Stablesats

Stablesats, developed by Galoy, offers a solution for Bitcoin volatility without creating new tokens. This system provides USD stability within the Bitcoin ecosystem using Lightning Network technology.

Key Features:

  • Synthetic USD using Bitcoin derivatives

  • No new token creation

  • Lightning Network compatible

  • Dual BTC/USD accounts in one wallet

  • No traditional banking integration required

How It Works: Stablesats leverages perpetual inverse swaps in the Bitcoin derivatives market to hedge against price fluctuations, effectively creating a USD-pegged value within a Lightning wallet.

Benefits:

  • Fully Bitcoin-collateralized

  • Lower fees than traditional banking

  • No stablecoin issuer dependency

  • Seamless Bitcoin and Lightning integration

Considerations:

  • Derivatives market reliance

  • Potential regulatory implications

The Importance of Borrowing and Lending Against Stablecoins

Stablecoins have become a cornerstone of the cryptocurrency ecosystem, offering stability amidst the volatile nature of digital assets. Borrowing and lending against stablecoins is particularly significant for several reasons, enhancing their role within both centralized and decentralized finance.

  • Stability: Stablecoins are pegged to fiat currencies, providing a stable value that protects borrowers and lenders from the volatility inherent in cryptocurrencies like Bitcoin and Ethereum.

  • Liquidity: Stablecoin lending protocols offer high liquidity, enabling users to quickly borrow or lend assets without worrying about price fluctuations.

  • Hedging: Borrowers can use stablecoin loans to hedge against market volatility, locking in a stable value for their crypto assets.

  • DeFi Integration: Stablecoins are widely used in decentralized finance (DeFi) platforms, facilitating various financial services such as trading, staking, and liquidity provision.

Lending Protocols offering Stablecoins

Compared to other lending protocols, stablecoin loans are particularly significant due to their inherent safety of the stable underlying asset. For instance, platforms like Aave and Compound, which primarily operate on Ethereum, see a large volume of stablecoin lending due to the predictability of returns and reduced risk.

Ethereum-Based Protocols:

  • Aave: Aave allows users to earn interest on deposits and borrow assets, with stablecoins like USDC and DAI being highly favored for their stability and predictable returns.

  • Compound: Compound facilitates lending and borrowing of assets, with a significant portion of its market comprising stablecoins. This setup ensures predictable interest rates and reduced volatility risk.

Bitcoin-Based Solutions:

  • Liquidium: A pioneering protocol on the Bitcoin side that offers stablecoin loans, allowing users to borrow Bitcoin against their stablecoin holdings. This protocol enhances liquidity and provides an additional financial tool for Bitcoin users.

  • Ducat: Ducat has a stablecoin called UNI which is backed by Bitcoin. Users can deposit Bitcoin and mint UNI against the Bitcoin collateral.

  • Zest Protocol: Provides decentralized and transparent lending and borrowing services using stablecoins and Bitcoin.

The Bitcoin network hosts a diverse range of stablecoins through various protocols and platforms, each with unique features and benefits. These stablecoins enhance Bitcoin's utility beyond being a store of value, facilitating transactions, savings, and investments within the Bitcoin ecosystem. As Bitcoin continues to evolve, its stablecoin offerings will likely expand, providing more options for users seeking stability in the digital currency world.

Borrowing and lending against stablecoins remain significant due to their stability, liquidity, and integration into DeFi platforms, making them an essential part of the crypto finance landscape.

Liquidium 是领先的点对点比特币借贷协议,它使用由 Layer-1 Bitcoin 上的 PSBT 和 DLC 启用的 Ordinal Inscriptions 作为抵押。通过比特币第一层上的 PSBT 和 DLC 启用。