Stablecoins have long been regarded as the "crown jewel of the cryptocurrency industry," with early developments primarily focused on algorithmic models. Projects like Ampleforth’s AMPL and Terra’s UST (LUNA) sought to eliminate reliance on dollar-denominated assets by creating encapsulated "dollar-pegged" stablecoins through algorithmic mechanisms. While both aimed to drive mass adoption of stablecoins in crypto and DeFi ecosystems—and eventually attract traditional off-chain users—their approaches differed significantly. Ampleforth aimed to create a native settlement unit for the crypto world, abandoning a strict 1:1 dollar peg, whereas TerraUSD (UST) sought to maintain a stable dollar peg to facilitate broader use in payments and as a store of value.
This year, with the emergence of Ethena, DeFi stablecoins have begun anchoring not just to price stability but also to "sources of yield." A new category of "strategy-backed stablecoins" is rising—these are essentially tradable tokens with a face value of $1 that bundle hedging strategies or low-risk yield products. For example, Ethena’s USDe functions like a fund share, generating returns through a delta-neutral strategy involving long stETH positions and short perpetual futures, with yields distributed to holders via sUSDe. Due to their structural similarity to hedge fund shares, such stablecoins are classified as securities by regulators like Germany’s BaFin.
When systematically analyzing the yield mechanisms behind stablecoins, we can categorize them into nine types: on-chain lending, real-world assets (RWA), AMM market-making, CeFi deposits, protocol savings rates (e.g., DSR), fixed-rate notes, derivatives hedging, staking yields, and strategy-aggregator vaults. In current market conditions, annualized yields from these channels generally range between 3–8%, though they can briefly reach double digits during special periods, such as USDC de-pegging or high funding rate environments.
Although many strategy-backed stablecoin projects may appear homogeneous on the surface, their core differences lie in three key dimensions: sustainability of yield structure, transparency of yield disclosure, and compliance foundations. Currently, RWA-based stablecoins like USDY and OUSG have a compliance advantage, having gained some regulatory acceptance, but their growth is limited by the structure of the U.S. Treasury market. In contrast, derivatives-linked stablecoins like USDe offer greater flexibility and yield potential but are more reliant on open interest (OI) in perpetual futures markets, making them more sensitive to market volatility.
In this trend, Pendle stands out as a key infrastructure beneficiary. By decomposing yield-bearing assets into fixed principal (PT) and floating yield (YT) tokens, Pendle has built an on-chain interest rate market, promoting the standardization of "yield spread hedging" and "yield transfer." As more stablecoin projects use Pendle to manage cash flows, its TVL, trading volume, and bribe mechanisms are poised for further growth.
We believe future strategy-backed stablecoins will evolve toward modularity, regulatory friendliness, and yield clarity. Projects with unique yield sources, robust exit mechanisms, and liquidity moats (ecosystem adoption) will form the foundation of the next generation of "on-chain money funds." However, these products may still face regulatory challenges and potential classification as securities.
Understanding Strategy-Backed Stablecoins
Yield-generating stablecoins leverage various channels to produce returns, including lending protocols, liquidity mining, market-neutral arbitrage, RWA-based U.S. Treasury yields, structured options products, basket-of-stablecoin strategies, and stablecoin staking yields. Below, we summarize some of the key strategies and their current implementations.
We will dive deeper into innovative interest rate channels and their catalysts to assess future prospects.
On-Chain Lending Markets
The borrowing rates for USDC on Aave V3 Ethereum Mainnet are often considered the "benchmark rate" for on-chain lending. In the current low market sentiment, lending activity has significantly declined, keeping rates around 2% since the beginning of the year.
AAVE also launched its native stablecoin, GHO, which is backed by over-collateralization and derives its interest from market borrowing demand. While most major stablecoins can earn interest on the platform, they must be lent out, limiting capital efficiency. Currently, GHO’s borrowing rate fluctuates between 2–4%, heavily influenced by market cycles. During bull markets, these rates can surge to 10–20%, but overall, they are highly volatile and lack stability. In such high-volatility scenarios, Pendle can be used to pre-exchange this interest for upfront liquidity. 👉 Explore yield optimization strategies
RWA Markets (Primarily U.S. Treasuries)
The RWA-based stablecoin market is gradually growing, with a total current size of $5.9 billion. **Ethereum dominates this space, accounting for over 80% of the market share.** Among Treasury-backed stablecoins, BlackRock’s BUIDL leads with a 32% share (approximately $1.9 billion), followed by Circle’s USYC ($490 million) and Franklin Templeton’s BENJI.
BUIDL, for instance, is pegged to $1 but functions more as a fund share tracking short-term U.S. Treasuries, cash, and overnight repurchase agreements rather than a daily payment stablecoin. Users can subscribe with USDC or USD, with each BUIDL token representing $1 of principal, and yields are distributed via monthly rebases. Early participants include Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks.
BUIDL’s supply is growing rapidly, though the minimum subscription is $5 million. As of May 1, 2025, 48 clients have participated, with total assets under management (AUM) reaching $2.47 billion. According to Ondo Finance, the product offers an annual percentage yield (APY) of around 4%, aligning with current 3- to 6-month U.S. Treasury rates.
Ethena’s USDtb is an innovative product built on top of tokenized funds like BUIDL. Unlike Ondo’s OUSG or BlackRock’s BUIDL, USDtb is freely circulating. Its AUM is approximately $1.43 billion, and it has established deep liquidity partnerships with exchanges like Bybit.
Overall, the RWA-based stablecoin market is expanding quickly. If U.S. regulations eventually permit "yield-bearing stablecoin" models, the potential market could theoretically align with the $6 trillion dollar money market fund industry.
However, in the short to medium term, U.S. Treasury rates face downward pressure. Since stablecoin demand is currently driven more by yield than actual payment needs, money fund-based strategies may see contracting returns. Long-term, however, this sector holds strong growth potential.
Native "Savings Rates" for Collateralized Stablecoins
The Dai Savings Rate (DSR), initially introduced by MakerDAO, has evolved into the SSR (Stablecoin Savings Rate) module in Sky.money. This allows USDS holders to earn a share of protocol profits as annualized yield, with interest accruing per block, no lock-up periods, and zero fees for deposits and withdrawals.
Yields are generated from profits made by MakerDAO/Sky.money. To encourage broader USDS adoption in DeFi, Sky.money incentivizes users by allocating a portion of protocol revenue to the USDS savings rate, currently around 4.5% APY.
This is essentially a protocol-dividend stablecoin model. During market downturns, Sky.money may redirect earnings that would otherwise bolster its native token to instead promote USDS usage, potentially weakening token price support. In bullish conditions, sharing token profits to foster protocol growth can be a reasonable strategy that ultimately boosts token value. However, this model requires Sky.money to possess significant influence to truly establish USDS as a widely accepted unit of account—a challenging yet ambitious goal.
Derivatives Hedging and Staking Yields
Derivatives hedging yield (also known as delta-neutral yield) is generated by constructing positions that hedge price direction risk (delta) to profit from funding rates or futures-spot price differentials. Perpetual futures are the primary instruments used. Several representative projects employ this strategy.
For example, Ethena’s USDe and USR both utilize delta-neutral approaches. USR, as a follower, currently attracts users with higher promotional yields, though it fundamentally operates similarly to Ethena.
According to Defillama data, Ethena’s stablecoin market capitalization declined notably after its airdrop, down about 20% from its peak. This is largely due to decreasing USDe yields and highlights a broader "financial Lego" dilemma: stablecoins often lack real-world demand and essentially function as fund products engaging in funding rate arbitrage.
The minting process for funding rate-based stablecoins (Δ-neutral stablecoins) involves:
- Buying an equivalent amount of spot assets (or LSTs).
- Opening a short position of the same notional value in perpetual markets.
Thus, each stablecoin minted represents approximately $1 in spot assets plus $1 in notional short positions, meaning the minting capacity is theoretically limited by the open interest (OI) in perpetual markets.
According to Coinglass, the total OI for ETH across major exchanges is approximately $20 billion. Under conservative estimates, USDe’s market上限 is around $4 billion.
If we consider the total OI across all tokens, the market size for contract rate-based hedging strategies is approximately $120 billion. Conservatively, such strategies could capture about 20% of this market, or $24 billion.
Thus, the total addressable market for perpetual hedging strategy-based stablecoins is estimated at $24 billion. For USDe, focused primarily on ETH, the potential market size is between $4 billion and $8 billion. With USDe’s current minting volume at approximately $4.6 billion and declining, it appears to be approaching its growth ceiling.
Strategy Aggregator Vaults
Projects like Idle Best-Yield on Ethereum and Polygon deploy automated strategy systems that dynamically reallocate positions based on on-chain arbitrage opportunities to maximize stablecoin yields. Similarly, Hyperliquid’s HLP can be viewed as a strategy-backed stablecoin yield pool, earning returns primarily by taking counterpositions to retail traders. These multi-strategy models offer higher yields but also come with increased risk exposure.
Caution Regarding Structured Products
It is crucial to exercise extreme caution with these stablecoin types, as they essentially represent subscriptions to hedge fund shares. As highlighted in Binance’s introduction of LDUSDT, it is not a stablecoin but a new margin asset designed for users subscribed to Simple Earn USDT flexible savings products. It is a wrapped version of USDT that can be used as margin in contracts while earning yield from Binance’s Simple Earn module, which depends on the platform’s lending market.
Ethena’s USDe represents an innovative form of strategy-backed stablecoin. Overall, the rise of these stablecoins reflects a shift toward conservatism in crypto markets but also marks progress. Unlike the previous generation of subsidy-driven stablecoins, current models rely on diverse, organic strategies to generate real yields, offering greater sustainability. However, after removing points or token airdrop subsidies, their APYs do not significantly outperform Treasuries.
Moreover, DeFi’s synergistic potential remains underutilized, with stablecoins still primarily used in "financial Lego" internal plays rather than driving real large-scale adoption. Getting exchanges to list these synthetic stablecoins is a critical step toward mass Web3 adoption. Ethena has made relatively fast progress here, with trading pairs listed on Bybit and Bitget, and a strategic partnership with Gate.io. However, results are still modest, with USDE/USDT’s global 24-hour trading volume remaining below $100 million.
Overview of the Stablecoin Landscape
The current market features numerous strategy-backed synthetic stablecoins, each deriving interest from various underlying strategies, as illustrated in the landscape overview.
Most interest sources for popular stablecoin projects can be categorized into the strategies mentioned earlier. However, it is important to note that reported TVL figures may be inflated, and some projects may have special arrangements with large holders, so readers should exercise caution. Ultimately, these stablecoins closely resemble hedge fund share subscriptions and carry legal risks of being deemed securities.
In terms of market share, U.S. Treasury-based stablecoins occupy a larger segment, and their large-scale implementation heavily depends on legal frameworks and banking system support, making them relatively more promising. Other strategies—such as lending rates, restaking yields, contract-based risk-free rates, and protocol revenues—face clear ceilings, and participation should be approached moderately.
Innovative Approaches to Interest Rates
Below are some conceptual ideas for entrepreneurs:
- New Asset Utilization: Bitcoin, with its multi-trillion dollar market cap, serves as a bridge between TradFi and Web3. Building a stablecoin system that引入 Bitcoin-based native interest rates could face lower adoption barriers than other public chains. However, challenges remain due to Bitcoin’s underdeveloped ecosystem. One could start off-chain, for example, with BTC contract rate arbitrage, though this still falls within the strategy-backed hedge fund paradigm.
- Novel Strategy Applications: Theoretically, any arbitrage strategy could become a yield source for "stablecoins." Examples include on-chain MEV, implied-realized volatility (IV-RV)偏差, cross-term volatility arbitrage, GameFi yields, EigenLayer AVS security fees, or even DePIN device revenues. These could be integrated into stablecoin interest mechanisms, creating new models.
However, these remain strategy-backed synthetic stablecoins rather than traditional asset-pegged stablecoins. Their market capacity is limited by the feasibility and scale of their underlying strategies. Currently, most relevant markets are still small. Long-term, as DeFi expands, this sector holds growth potential, especially since many strategies are highly crypto-native and can acutely reflect on-chain market changes.
Pendle: Beneficiary of the Stablecoin Evolution
Fixed-rate mechanisms offer innovative yield solutions, providing users predictable returns similar to zero-coupon bonds in traditional finance. In TradFi, zero-coupon bonds are issued below face value and redeemed at par at maturity, with investor profit coming from the difference. In DeFi, Pendle has introduced a similar mechanism by tokenizing future yields of yield-bearing assets, enabling users to:
- Lock in fixed returns by holding principal tokens until maturity.
- Speculate on yield changes by purchasing future yield tokens.
- Enhance capital efficiency by selling future yields for immediate liquidity while retaining principal ownership.
Pendle is a DeFi protocol specializing in yield tokenization, allowing users to split yield assets into PT and YT tokens for trading. Essentially, Pendle creates a market for trading these interest rates themselves, providing hedging tools for the yield strategies behind stablecoins and thereby forming fixed-rate markets.
During the previous LRT boom, Pendle’s token price experienced significant volatility around EigenLayer’s token launch. However, with the rise of "strategy-backed stablecoins," Pendle’s TVL has surged. It is solidifying its role as the core "rate exchange layer" for such assets: stablecoin issuers can use Pendle to sell future yields for upfront risk hedging, while speculators and asset managers can buy or market-make these yield streams. As more Δ-neutral and RWA hybrid yield coins emerge, Pendle’s TVL, trading volume, fee revenue, and vePENDLE ecosystem continue to grow. It currently holds a near-monopolistic lead in this niche.
Frequently Asked Questions
What are strategy-backed synthetic stablecoins?
Strategy-backed synthetic stablecoins are tokens pegged to $1 value that generate yield through various on-chain and off-chain strategies, such as delta-neutral hedging, RWA investments, or lending protocols. They aim to offer stability while providing returns to holders.
How do delta-neutral stablecoins like USDe work?
Delta-neutral stablecoins maintain a market-neutral position by combining long spot asset holdings with short perpetual futures positions. This hedges against price volatility, allowing the strategy to profit from funding rates or basis trades without directional market exposure.
What are the risks associated with yield-bearing stablecoins?
Key risks include regulatory uncertainty (potential classification as securities), dependence on sustainable yield sources, smart contract vulnerabilities, and market limitations like perpetual futures OI caps. Transparency and compliance vary significantly across projects.
How does Pendle contribute to the stablecoin ecosystem?
Pendle enables yield tokenization, allowing users to trade future yield streams separately from principal. This provides fixed-rate yield options, enhances capital efficiency, and offers hedging tools for stablecoin projects and investors.
Can RWA-based stablecoins scale significantly?
Yes, RWA-based stablecoins like those backed by U.S. Treasuries have high scalability potential, theoretically aligning with the multi-trillion dollar money market fund industry. However, growth depends on regulatory clarity and banking integration.
What is the future of strategy-backed stablecoins?
The sector is expected to evolve toward modular designs, clearer yield attribution, and better regulatory compliance. Projects with unique yield sources, strong liquidity, and robust ecosystems are likely to lead the next wave of adoption.