The battle for yield has begun. How will emerging stablecoins challenge the billion-dollar profit monopoly of USDT and USDC?

Author: Duo Nine

Compiled by: Tim, PANews

The stablecoin market is changing, with USDT and USDC not returning the profits they generate to users, but keeping them for themselves.

This has provided an opportunity for other stablecoin competitors.

Let’s take a look at the following three project examples, with many more in the pipeline.

The current market share of stablecoins is approximately $250 billion, with USDT accounting for 62% and USDC for 24%. Together, they occupy 86% of the total market value of stablecoins.

What issues do they have?

Both USDT and USDC do not pay any returns to their holders. All dollar assets used as collateral are invested in U.S. Treasury bonds, which can generate an annual yield of about 4%, and all these returns belong to Tether and Circle, not the users.

You can imagine that in 2024, Tether became the most profitable company in the world, generating over $50 million in profit per employee, and by 2025, this figure has approached $60 million. This makes Tether the most profitable bank that actually exists.

But this is also a clear weakness.

Holders of the currency do not receive any benefits, and they will inevitably strongly demand the right to control these benefits. This presents an excellent entry point for other stablecoins that aim to share benefits with users. The following three cases can corroborate this viewpoint.

1.Resolv, USR—8.6% annual yield

Resolv has two key products.

• USR: A stablecoin fully backed 1:1 by Bitcoin and Ethereum.
• RLP: Resolve liquidity pool tokens

Annualized returns can be generated through the hedged positions of Bitcoin and Ethereum as shown in the text below.

USR has 168% of collateral assets as a guarantee, making the risk extremely low. Its biggest risk lies in the potential loss of its peg to the US dollar, but this situation has never occurred to date. An average annualized yield of 8.65% is twice that of the AAVE platform, making its performance noteworthy.

RLP is a token that accumulates value through returns and drives price increases over time. Its returns come from excess collateral being leveraged in the same market-neutral strategy. RLP has a high-risk profile, and if market conditions are unfavorable, the token price may also decline.

RLP acts as a buffer and protective layer for USR. RLP depositors bear higher risks in exchange for higher returns, while USR users are protected. This design mechanism is very fair.

Advantages of USR

• Yield superior to AAVE
• Fully backed by BTC and ETH
• High Transparency
• Protected by the RLP mechanism in adverse market conditions
• Zero minting and redemption fees
• Supports instant staking and unstaking without a lock-up period

Disadvantages of USR

• This service is only available on the Ethereum network, which may result in higher fees.
• Users must stake USR tokens to earn rewards.

2.Noble Dollar, USDN—4.1% annual yield

Noble Dollar is a product launched by m0, whose core feature is that users can earn a 4.1% yield on US Treasury bonds daily based on the USDN stablecoin they hold, without the need for locking or staking. In short, users’ wallets will automatically receive additional USDN every day, equivalent to a free airdrop.

Although the current use cases for USDN are limited, it is set to gain support in multi-chain ecosystems such as Ethereum and its layer 2 networks. Imagine the scenario of staking USDN on AAVE: users can not only earn a default base yield of 4%, but also earn an additional 4% to 5% in AAVE incentive rewards.

The potential applications of this digital dollar are endless. If this dollar is successfully implemented in the future, USDT and USDC may be affected.

Advantages of USDN

• Substantial returns backed by U.S. Treasury bonds
• High Transparency
• No staking required
• Daily Settlement Earnings
• You can purchase with fiat currency on their website.
• The native cross-chain bridge allows for easy transfer of USDC

Disadvantages of USDN

• Current application scenarios are limited (will be improved in the future)
• The yield is lower than competitors like Resolv.

3.infiniFi, iUSD—8.5% to 16% annual yield

InfiniFi is a new generation of “stablecoin” that offers different yields based on user interests and their risk preferences. To obtain 1 iUSD, 1 USDC must be deposited, which will be used to invest in diversified yield strategies.

If users want to withdraw USDC at any time for instant liquidity, the yield will be lower. However, if the iUSD lockup period is extended, the protocol can adopt more advanced USDC strategies to achieve higher returns. Although the risks increase accordingly, the higher yield may compensate for this.

The current interest rate for no lock-up period is about 8.5%. However, if users are willing to lock iUSD for 4 weeks or longer, the yield can reach up to 16.4%.

Overall, I do not recommend locking funds for weeks. This is because if a problem arises, you will be in a passive position. However, this practice is reasonable for stablecoin investments. To some extent, it is similar to the model of short-term bank deposits.

The operation mechanism of iUSD is as follows: Users lock iUSD for one to several weeks, which can provide protection for users holding iUSD in a liquid state (not locked). If an anomaly occurs in the system, users with the highest earnings will bear the losses first. This is similar to the model where Resolv RLP users provide protection for USR holders. Why is this mechanism crucial?

Imagine a scenario: everyone holding iUSD wants to withdraw and get their USDC back. However, only when there is sufficient liquidity can those holding liquid iUSD exit first.

If there is insufficient liquidity (due to a large amount of USDC being locked in various long-term strategies), iUSD may lose its 1:1 peg to USDC or incur losses. This is due to the potential additional costs of early withdrawal from the strategy that locks USDC for up to 8 weeks.

These losses will be primarily borne by users with the longest lock-up periods. In principle, this mechanism can maintain the peg of iUSD and protect holders of liquid iUSD. However, if the liquidation speed is insufficient, black swan events may still lead to fluctuations and decoupling of iUSD.

Generally speaking, as long as InfiniFi does not hold a large amount of USDC or suffer significant losses in its strategies, this type of risk is relatively low. However, if the DeFi protocol used in its long-term strategies (such as Ethena) is breached or drained of funds, the risks will explode. At that time, iUSD users who adopt the locking mechanism will suffer heavy losses, and may even lose their principal.

Advantages of iUSD

• Ultra High Yield Rate
• High Transparency
• The minimum yield tier can also have instant liquidity.
• The high-yield tier is the low-yield underpinning
• Suitable for different risk preference groups

Disadvantages of iUSD

• This is not a true stablecoin, but a receipt for USDC deposits.
• The risk of insufficient liquidity, meaning there is not enough USDC to meet redemption requests.
• Once liquidity dries up, iUSD may “depeg”.
• High-risk strategies may result in returns not meeting expectations or even capital losses.
• This product is linked to the potential risks associated with all DeFi platforms used to generate returns.

When investing in these new protocols, I recommend starting with a small amount of funds for testing and waiting until the bear market is over before investing large sums. These new types of protocols must undergo stress testing to complete market validation. Taking InfiniFi as an example, their protocol operates more like a hedge fund that absorbs user funds for investment.

On the other hand, it is crucial to pay attention to the development of these new tracks. Various protocol combinations not only provide diverse options but also allow users with different risk tolerances to achieve specified return targets at their comfortable risk levels through platter combination strategies.