Ethena Labs has formally submitted a proposal to operate Hyperliquid’s native USDH stablecoin, positioning itself as a leading contender in the competition to shape the protocol’s stablecoin infrastructure. The bid emphasizes institutional-grade backing through USDtb reserves linked to BlackRock’s BUIDL tokenized money market fund, signaling a major step toward fusing traditional finance with decentralized markets.

Ethena’s USDH Proposal: Backed by USDtb and BUIDL

At the core of Ethena’s proposal is a plan to launch USDH with 100% collateralization in USDtb, a stablecoin that itself is fully backed by BlackRock’s BUIDL fund via Securitize. This structure, Ethena argues, delivers unmatched security, transparency, and institutional legitimacy.

Robert Mitchnick, BlackRock’s head of digital assets, welcomed the integration, stating:

“We are excited to enable Ethena’s USDtb, which is 100% backed by BUIDL and uniquely positioned to offer institutional-grade cash management as well as on-chain liquidity to Hyperliquid users.”

This endorsement highlights how the partnership could bridge institutional capital with Hyperliquid’s rapidly expanding DeFi ecosystem.

Revenue Sharing and Community Alignment

One of the most notable aspects of Ethena’s bid is its revenue-sharing model. Ethena has pledged that at least 95% of net reserve revenues will flow back to the Hyperliquid community through HYPE token purchases and other contributions.

The proposal also outlines community-driven governance, with validator milestones and future votes shaping how revenues are deployed. Additionally, Ethena has committed to covering migration costs for USDC-to-USDH pairs, ensuring a smoother adoption process if trading pairs are redenominated on the core exchange.

Guardian Network for Security

Security is central to the proposal. Ethena suggests the creation of an elected guardian network drawn from Hyperliquid validators to oversee USDH operations. This network would hold authority to:

• Freeze compromised funds

• Reissue tokens in the event of incidents

• Resolve critical protocol emergencies

Ethena envisions a distributed security model, where trusted third-party teams — potentially including LayerZero — could be integrated into the guardian set if approved by the community.

This approach aims to strike a balance between operational efficiency and decentralized oversight, minimizing the risks typically associated with centralized stablecoin issuers.

Future-Ready Reserves: Beyond USDtb

While the current bid seeks approval solely for USDtb as the reserve asset, Ethena has signaled flexibility. The proposal allows the community to revisit the reserve structure later, potentially incorporating USDe or hUSDe as additional collateral types.

Such adaptability ensures that USDH remains competitive in an evolving stablecoin market, while the initial reliance on USDtb guarantees institutional-grade security at launch.

Ethena’s Track Record With Stablecoins

Ethena highlights its operational track record as evidence of readiness. According to the proposal, the team has processed over $23 billion in mints and redemptions across USDe and USDtb with zero downtime.

The integration of USDtb into BlackRock’s BUIDL and plans for issuance through Anchorage Digital Bank under the GENIUS regulatory framework further bolster Ethena’s credibility. Together, these elements underscore Ethena’s ability to deliver a stablecoin solution that balances on-chain efficiency with traditional finance safeguards.

Competition From Other Bidders

Ethena is not the only player vying for the opportunity. Other groups, including Paxos, Agora, Frax, Sky, Bastion, and Native Markets, have also expressed interest in providing USDH infrastructure.

The Hyperliquid community and validator set will ultimately decide the winner, with criteria centered on:

• Capacity to handle demand

• Security posture

• Economic contributions to the ecosystem

Ethena’s combination of institutional partnerships, proven stablecoin operations, and community-first revenue sharing could give it an edge in this competitive race.

Expanding Liquidity and Ecosystem Integration

Beyond the reserve mechanics, Ethena’s proposal outlines several ecosystem initiatives. These include supporting Hyperliquid’s HIP-3 markets, expanding collateral options, and providing additional liquidity via Ethena-affiliated products.

Partnerships with Based, Liminal, and Unit are also highlighted as strategic collaborations to enhance market depth and improve trading conditions on Hyperliquid.

If successful, Ethena’s program could strengthen Hyperliquid’s position as a leading DeFi hub by boosting liquidity and incentivizing long-term community engagement.

Transparency and Custody Plans

Ethena has proposed deploying USDtb natively on HyperEVM, ensuring seamless integration with Hyperliquid’s smart contract layer. Securitize would extend tokenization services directly to Hyperliquid, while Anchorage Digital Bank is identified as the likely custodian for reserves.

To reinforce transparency, Ethena has committed to public, segregated wallets for on-chain reserves. This move aims to build confidence among both retail and institutional users, differentiating USDH from opaque centralized stablecoins.

What’s Next for the USDH Selection Process?

The decision on USDH’s operator rests with the Hyperliquid community, with validators playing a key role in the final vote. Given the crowded field of bidders, Ethena’s success will depend on whether its institutional-grade approach resonates more than competitors’ proposals.

If approved, Ethena’s USDH could mark one of the most significant intersections of Wall Street-grade financial infrastructure and decentralized stablecoin innovation, potentially setting a new standard for stability, governance, and community alignment in DeFi.