Sky, the decentralized finance protocol formerly known as MakerDAO, has submitted a proposal to manage Hyperliquid's native stablecoin USDH, leveraging its $8 billion balance sheet and B- credit rating from Standard & Poor's. The proposal comes as multiple companies compete for control of one of the most valuable contracts in decentralized finance, with Hyperliquid holding $5.5 billion in USDC deposits representing roughly 7.5% of that stablecoin's total supply.

What to Know:

• Sky offers 4.85% returns on USDH holdings and $2.2 billion in instant redemption liquidity through its established infrastructure
• Hyperliquid processed nearly $400 billion in trading volume last month, making the stablecoin management contract highly lucrative
• Validators will vote September 14 between Sky and corporate rivals including Paxos, Frax, Agora, and Native Markets

The Competition Heats Up

The contest reflects broader tensions between traditional finance and decentralized protocols as they vie for control of cryptocurrency infrastructure. Hyperliquid has invited multiple issuers to compete for USDH deployment rights, with validators scheduled to decide September 14. The Hyperliquid Foundation will abstain from voting.

Sky's seven-year operating history sets it apart from newer competitors.

The protocol holds the distinction of being the first decentralized finance platform to receive a credit rating from a major agency. Its proposal emphasizes financial stability through established systems rather than experimental approaches.

The company promises 4.85% returns on all USDH held on Hyperliquid, a rate exceeding current Treasury bill yields. Revenue from these operations would fund HYPE token buybacks and contribute to Hyperliquid's Assistance Fund. Sky also pledges $2.2 billion in instant redemption liquidity through its Peg Stability Module, designed to give institutional traders confidence in large-scale transactions.

Corporate Challengers Present Alternative Models

Other bidders have structured their proposals around different value propositions. Paxos, a regulated stablecoin issuer, has committed 95% of reserve earnings to HYPE buybacks while offering zero-fee USDC migration services.

Frax positions itself as community-focused, promising a wrapper model where 100% of Treasury yield flows directly to users rather than being retained by the issuer. This approach contrasts with traditional models where issuers keep significant portions of generated revenue.

Agora brings institutional backing through partnerships with State Street, VanEck, and MoonPay.

The company emphasizes neutrality and has pledged 100% of net revenue toward HYPE buybacks.

However, Native Markets faces community skepticism due to its alignment with Stripe's Bridge platform and potential conflicts involving Stripe's Tempo blockchain and ownership of wallet provider Privy.

Ethena has also indicated interest in submitting a proposal, further crowding the field. Each competitor offers distinct advantages, from regulatory compliance to yield generation capabilities.

Financial Terms and Technical Infrastructure

Sky's proposal includes a $25 million "Hyperliquid Genesis Star" program modeled after Spark, a token farming mechanism within Sky's ecosystem that has attracted over $1 billion in total value locked. This initiative aims to bootstrap decentralized finance activity on Hyperliquid and potentially draw billions in additional deposits.

The protocol has committed to migrating its native buyback engine, which generates more than $250 million in annual profits, onto the Hyperliquid platform.

This migration would integrate Sky's proven revenue mechanisms directly into Hyperliquid's infrastructure.

Sky's Peg Stability Module represents a key technical advantage, providing institutional-grade liquidity management. The system has operated successfully for years, handling large redemptions without significant price disruption. This track record appeals to validators concerned about maintaining USDH stability during market stress.

Understanding Key Crypto Financial Terms

Stablecoins are cryptocurrencies designed to maintain stable value relative to reference assets, typically the US dollar. Total value locked measures the amount of cryptocurrency held in decentralized finance protocols, indicating user adoption and trust. Yield farming allows users to earn returns by providing liquidity to cryptocurrency platforms.

Peg Stability Modules help maintain stablecoin price stability by allowing users to exchange tokens at predetermined rates. Credit ratings in decentralized finance remain rare, making Sky's B- rating from Standard & Poor's significant for institutional adoption. Buyback programs involve purchasing tokens from the market to reduce supply and potentially increase value for remaining holders.

Validator voting represents how decentralized networks make governance decisions. Token holders or designated validators cast votes on protocol changes and partnership proposals. The September 14 vote will determine not just USDH's technical implementation but also Hyperliquid's strategic direction.

Implications for Market Structure

The competition highlights evolving dynamics between decentralized and traditional financial institutions. Victory for Sky would strengthen decentralized finance's position in cryptocurrency infrastructure, while success for corporate bidders might signal institutional finance's growing dominance.

Hyperliquid's decision carries implications beyond immediate financial terms. The chosen partner will influence how users interact with the platform and what services become available. Integration with established traditional finance companies could accelerate institutional adoption but might compromise decentralization principles valued by cryptocurrency communities.

Closing Thoughts

The September 14 validator vote will determine whether Hyperliquid aligns with Sky's decentralized approach or selects from corporate alternatives offering different risk-reward profiles. The decision affects not only USDH's structure but also the broader question of whether cryptocurrency infrastructure will be controlled by decentralized protocols or traditional financial institutions with blockchain ambitions.