The Chopping Block: USDH Bake-off—Native Markets, Validators & the “Beauty Contest” Debate - Ep. 903

Unchained

Hyperliquid’s USDH ticker set off the most dramatic “RFP” in recent memory. The crew breaks down why Native Markets ran away with validator support, whether the process was theater or strategy, and how the Bake-off became a marketing masterstroke—and potential leverage on Circle. We dig into Polymarket odds, the last‑minute Paxos bribery allegation (denied), and what this means for future “native” stables on Solana, app chains, and beyond.

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. This week, we’re joined by Guy founder of Ethena as a special guest, as a single ticker (USDH) sparked a weeklong spectacle: Hyperliquid’s “Bake-off” to award the USDH stablecoin brand. Native Markets surged ahead as validators signaled support, Paxos rallied late with partners and incentives, and Ethena ultimately withdrew. Was this always a vibes‑based beauty contest, or a deliberate move to pressure Circle and re‑route bridge yield? We parse the incentives, the governance, and the market microstructure — and peek at what happens if every big chain/app tries the “native stablecoin” playbook.

Show highlights🔹 Hyperliquid RFP, Explained — Validators signaled early; stakers could migrate; the USDH “ticker” confers no explicit fee rights, yet bidders offered huge economics.

🔹 Why Native Won — “Vibes-based beauty contest”: homegrown team fit the HL ethos; speed, alignment, and community trust trumped external credentials.

🔹 Paxos Allegation — Late claim of validator bribery surfaced; Paxos denied; no receipts provided; underscores governance fragility to extra‑protocol incentives.

🔹 The Real Prize — Bridge control & yield capture (+ tail‑risk management) mattered more than a brand: even a “just a ticker” beachhead can evolve to real economics.

🔹 Masterstroke Marketing — The public Bake-off dragged every major issuer onstage, boosting HL mindshare and potential leverage in any USDC negotiation.

🔹 Open vs. Closed — If you want a native team, say so; calling it an “RFP” for service providers while preferring insiders created dissonance and drama.

🔹 Odds vs. Votes — Polymarket odds rapidly converged on Native despite splashy rival bids—perception and validator reality diverged from Twitter takes.

🔹 Issuer Margins Compress — Public bids commoditize stablecoin issuance; expect 5–15 bps “asset‑manager” style economics unless you’re Tether‑scale.

🔹 App/Chain Rent Wars — Who captures the float? Apps, wallets, and chains will increasingly demand economics for distribution; UX and liquidity fragmentation loom.

🔹 Liquidity Gotchas — Forcing a nonstandard stable can impair quotes vs. USDT pairs elsewhere; exchanges risk killing their golden goose to save a few bps.

Hosts⁠

⭐️Haseeb Qureshi, Managing Partner at Dragonfly

⭐️Robert Leshner, CEO & Co-founder of Superstate

⭐️Tarun Chitra, Managing Partner at Robot Ventures

⭐️Tom Schmidt, General Partner at Dragonfly

Guest

⭐️Guy Young, Founder & CEO of Ethena Labs

Disclosures⁠⁠

Timestamps

00:00 Intro

01:27 Hyperliquid USDH Stablecoin Proposal: Setup & Stakes

03:25 USDH “Bake-off”: Native Markets vs. Paxos, Ethena, Frax

06:21 Early Signals, Rumors, and Bribery Allegations

13:33 Validator Decisions, Community Reactions & Market Fallout

28:53 Polymarket Odds & Onchain Sentiment

29:47 Liquidity, Bridge Yield, & Market Microstructure Explained

31:46 Hyperliquid’s Strategic Playbook

34:28 Governance Design

37:45 Stablecoin Ecosystem

39:25 Exchange Liquidity Challenges, Maker Behavior & Fee Dynamics

55:28 Final Takeaways & Lessons for Chains, Exchanges & Issuers

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