USDH proposals have a lot of moving parts so best to simplify what we are looking for before the upcoming vote. For the long term growth of Hyperliquid we want our native stablecoin to do two things: 1. Maximize distribution of USDH (i.e. # of spot/perp markets, DeFi applications, and payment use cases that utilize USDH) 2. Maximize yield on USDH that is returned to the protocol (i.e. buybacks) All the other bells and whistles of these proposals can be safely ignored. Distribution A critical element of distribution is to have deep liquidity. That means you can move in and out of USDH in size, ideally from day one. This is a cold start problem but some issuers propose to solve it. The second component of distribution is the go-to-market plan for how to expand usage of USDH. The obvious dimensions to expand are HyperCore markets, HIP-3 markets, HyperEVM DeFi apps, cross-chain/off-chain/RWAs, and payments. Liquidity and usage bolster one another, but ultimately usage in applications is the most important long-term driver of distribution. Yield Stablecoins at scale are one the most profitable businesses in the world and Hyperliquid would like to capture as much of these profits as possible without limiting the growth of USDH. We want to see a strong commitment to HYPE buybacks, ideally for the AF, but not at the cost of growing the USDH pie. The strongest proposers here have an alternate revenue stream that can be used for growth so the lion's share of yield can be used for buybacks. Proposals vary in their yield amount, source of yield, and the associated risks. Standard risk frameworks apply here. --- Right now the frontrunners are Native Markets, Sky, Paxos, and Ethena. Native Markets are the hometown heroes in the Hyperliquid eco with the most expansive ideas on how to actually grow distribution natively using HIP-3 and builder codes. No prior experience launching a stablecoin, but in 2025 there are turnkey solutions (Stripe/Bridge). Yield presumably comes from t-bills and only 50% of yield goes towards buybacks with the other 50% going towards investment in growth and incentivizing builders. They are the favorite to win right now, if only because the OG supporters of Native are diehards and the other proposals will likely split the remainder of the vote. Sky (formerly MakerDAO) are multi-cycle veteran DeFi builders who have grown an $8B stablecoin that has seen many iterations. They have strong existing distribution across DeFi and RWAs, day-one multibillion dollar liquidity, and a commitment to 100% AF buybacks while still being able to credibly invest in growth. They also have the most diverse sources of yield (not just treasuries) and concordantly the highest rates (4.85%). The main drawback right now for Sky is lack of clarity on GENIUS compliance, which would hurt distribution long term. There is some time to figure this out (GENIUS doesn't go into effect until 2027), but I'd rather not wait until then — if they can share a clear path to compliance, they are a potential winner in my book. Paxos are the creators of BUSD and have launched the most stables and invested the most in compliance of any team. Pros are the experience/compliance, cons are that none of their stables have really gotten off the ground, so it's not clear what they'd do differently here to win distribution that they were unable to do for e.g. BUSD and PYUSD. Yield ~= t-bills with 95% buybacks (although not clear if from AF or returned to USDH holders). This is the least exciting proposal in my view. Ethena proposal came last and tries to combine the best elements of each: investment in HIP-3 markets / builder codes, potential for higher yield (presumably via cash & carry trades), engagement with HyperEVM defi, and a commitment to allowing community votes to determine the exact long term trajectory of USDH. 95% of yield goes to the AF (treasury rate to start) with clear KPIs to reduce that so that Ethena earns a larger share over time (minor point, but I would hope for the opposite; the share to the AF should go up over time). The proposal is very good but has the largest execution risk — the Ethena team is already managing USDe which is a very complex product with significant blowup risk if mismanaged (no it's not the next Luna, yes there are still significant risks) and it is still a relatively new project that hasn't experienced a real bear market. This is the framework we're using at Capital Sea to determine how we delegate our staked HYPE. Look forward to learning more in the coming day and finalizing our decision. Thank for your attention to this matter. Hyperliquid